A robust bonding bill and restoration of the homestead market value credit should top the to-do list for state legislators, who head back to work next week. Tackling those issues could do the most to revive the state’s moribund economy.

Unemployment and under-employment are rampant on the Iron Range, but the construction industry has taken the biggest blow. After a substandard year in 2011, the general forecast for 2012 calls for more of the same. The McGraw Hill Construction forecast for 2012 predicts that construction starts will be near $412 billion, four percent less than the forecasted level for 2011.

An abundance of housing stock in a depressed real estate market bears most of the blame. But eight years of meager investment in Minnesota’s infrastructure under Gov. Tim Pawlenty also took a toll on construction workers in the state.

There’s no lack of work to be done. Roads and bridges across the state are in need of repair or replacement and numerous projects at colleges and universities have been put on hold due to the state’s budget crisis. Building up the state’s infrastructure also ensures a stronger future for the state and makes sure the resources are ready when businesses are ready to expand or open in Minnesota.

Gov. Mark Dayton clearly shares that view, proposing more than $700 million in statewide investments that will also create more than 21,000 short-term jobs.

Even so, lawmakers are likely to differ over the size of the bonding bill. Although the Minnesota Management and Budget Office says the state has enough resources to permit a $775 million bonding bill in the 2012 session, the GOP lawmakers in charge of the Legislature’s two Capital Investment committees disagree. They suggest a possible bonding bill between $400 million to $450 million. We side with the governor’s view.

Meanwhile, lawmakers also should seek to restore the homestead market value credit, which is being phased out as part of the budget deal to end a government shutdown. The homestead credit reduced property taxes by as much as $304 a year for homes valued below $414,000.

Republicans, who promoted the measure, replaced the credit with the homestead market value exclusion. Under the new program, a portion of a homestead is excluded when taxes are calculated. But the savings to taxpayers are not as great and local governments no longer receive any state money to make up the difference. The net result is fewer services and/or higher local property taxes. Elimination of the credit has been especially brutal on businesses, which have had to take up more of the slack. Overall, Minnesotans will pay $413 million more in property taxes this year than last year, according to the nonpartisan House research office.

Rural Minnesota suffered the brunt of the damage. Property taxes to be paid this year climbed an average of 3.1 percent in the Twin Cities but the average increase elsewhere is 8.7 percent, according to a recently-released House study.

Elimination of the tax credit furthers Minnesota’s march toward being one of the most regressive tax states. A study by Minnesota 2020, a progressive, non-partisan think tank, found that the increase in property tax regression was far greater in Minnesota that in most other states. During the seven-year span from 2000 to 2007, Minnesota’s rank among the 50 states in property tax regression plummeted from 26th to 42nd. The distinction ultimately harms the state’s overall business climate, which has tumbled to 43rd in the nation.

Several lawmakers, including our local legislators, have made restoring the homestead market value credit a priority this session, but admitted it will be tough sledding. When you cut hundreds of millions from the state’s budget, you can’t just restore it without finding replacement funding. So expect another battle on income taxes with an emphasis on the state’s richest one percent, who see a smaller percentage of their income extracted for taxes than the middle class does.