The plan is a major portion of Republican Governor Tim Pawlenty's budget balancing solution.
DFL House Majority Leader Tony Sertich of Chisholm said using the state credit card to solve the deficit is fiscally irresponsible.
"It's a tax increase with interest," Sertich said. "Minnesotans expect us to solve this deficit today, not in the next two decades."
But Governer Pawlenty told reporters before the vote that the borrowing plan makes the best of a bad situation.
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"We're not wedded to the tobacco bond idea," Pawlenty said. "If they have another way to come up with a billion dollars in cuts or otherwise that doesn't raise taxes, we'd love to hear what that is. And keep in mind, 15 states or more have already done it and the sky didn't fall in those states."
Pawlenty called a Senate plan to raise $2.2 billion in income taxes "a horrifically bad idea." He said a House provision that would eliminate tax deductions for everything from mortgage interest to organ donation expenses was "almost bizarre."
"They're going to be very disappointed if they send me bills that increase taxes," he said at a Capitol news conference. "They're going to get vetoed and they need to know that."
Early Friday, the House voted 69-62 for a state agency bill that would extend state employee health insurance to domestic partners, including same-sex partners, starting in 2012.
The bill would also slice into the ranks of gubernatorial appointees, eliminate the lieutenant governor's car and allow officials to sell naming rights to most state buildings, but not the Capitol. A move to strip the naming rights from the bill failed, as did a push to require voters to show photo identification before casting a ballot.
The House also passed an early childhood education bill, a bill that funds K-12 schools and a bill that finances state government.
The Minnesota Senate is expected to take up a tax bill today that would raise income taxes across the board.
(Copyright 2009 by The Associated Press. All Rights Reserved.)