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New DEED commissioner on Greater Minnesota’s economy and implementing ‘massive’ new spending

MinnPost interviewed Matt Varilek on Monday about his views on the economy in Greater Minnesota, child care, broadband, South Dakota, fraud in grant programs and more.

DEED Commissioner Matt Varilek, center, and Gov. Tim Walz, right, shown during a statewide workforce tour at Buhler Inc. in Plymouth.
DEED Commissioner Matt Varilek, center, and Gov. Tim Walz, right, shown during a statewide workforce tour at Buhler Inc. in Plymouth.

Matt Varilek is fortunate as the new commissioner of Minnesota’s Department of Employment and Economic Development to have internet that is fast enough for him to have remote meetings at home in rural Benton County.

But not everyone in Greater Minnesota has that ability, which is why delivering broadband across the state is a passion of his. It’s also a monumental task. His office will oversee the distribution of more than $750 million in state and federal funds to subsidize broadband infrastructure.

Broadband expansion is just one of several high-profile assignments DEED will be responsible for in the next few years. Another is carrying out Minnesota’s new paid family and medical leave law, which is expected to need about 400 new state workers to administer the program.

Varilek was appointed in May by Gov. Tim Walz, taking over the agency from Steve Grove, who left the Walz administration to become CEO and publisher of the Star Tribune. 

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Varilek was president of the Little Falls-based Initiative Foundation, a philanthropic nonprofit that awards grant money and lends cash for economic development and other causes in central Minnesota. There are six independent initiative foundations around the state aimed at helping Greater Minnesota, though Varilek only led the one in Little Falls.

Before that, the new commissioner was the chief operating officer of the U.S. Small Business Administration in Washington, D.C., a high-ranking position in an agency that helps companies with loans and other financial help. He also dabbled in electoral politics by running for Congress in South Dakota in a failed 2012 campaign against Republican Kristi Noem, who is now the state’s governor. 

As commissioner, Varilek will also oversee plenty of grants and other spending approved both from the state’s massive budget surplus earlier this year and from the federal government. That cash is often directed to workforce development and other economic initiatives.

Varilek, one of only a few commissioners with Greater Minnesota ties, steps into the role while the state enjoys a low unemployment rate but faces challenges ranging from a labor shortage to racial inequities to lack of affordable child care.

MinnPost interviewed Varilek on Monday about his views on the economy in Greater Minnesota, child care, broadband, South Dakota, fraud in grant programs and more.

This conversation has been edited for length and clarity.

MinnPost: What do you think are the biggest economic challenges facing particularly Greater Minnesota? Are any issues particularly salient in Greater Minnesota that aren’t as big of an issue in the metro?

Matt Varilek: Many of the challenges are similar in nature throughout the state, although maybe the solutions need to be tailored to where we’re talking about. So for example, I feel like the top economic issue on DEED’s agenda, and probably every employer, is workforce development. And that is most certainly a challenge in the metro as well as in Greater Minnesota. But who you are drawing from, what kinds of jobs predominate in any given location, that all does vary by location. 

I think the issue of child care is a top one that I certainly care about in this role as DEED commissioner and we’re excited to work on. And it’s something that I’ve worked on in my previous role when I was at the Initiative Foundation, and that is probably a good example of difference in terms of what the interventions and solutions need to be.

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The more sparse population in Greater Minnesota, you could say, makes the economics of a center harder to make work than maybe in a place with more folks. And so the in-home child care, maybe, takes on slightly greater significance in Greater Minnesota. Another example that matters to all of us and where we work on it everywhere, but which has a slightly different character in Greater Minnesota, is broadband. It’s certainly a passion of ours at DEED, and it’s a passion of mine as a guy who is working in Greater Minnesota right now and only able to do my remote meetings thanks to having good broadband where I happen to live.

MP: There was a lot of money put into child care this year, Child Care Assistance Program (subsidies), retention payments for workers, that sort of thing. There is often a debate over what best helps in-home child care providers. Do you think there’s more the Legislature needs to do, or are there any specific things on child care you feel would be particularly helpful for those smaller in-home providers?

DEED Commissioner Matt Varilek
DEED Commissioner Matt Varilek
MV: Part of how we operate, that I’m most familiar with, is through intermediaries. For example, some of the funding that goes through the Initiative Foundations. DEED would provide funds to one of those local intermediaries and then they would use the funds to get local employers together along with early educators, along with any other interested parties, maybe bring some strategic planning to the table and figure out what we particularly need in this location. Maybe we have a 24-hour employer and no one’s offering 24-hour care. Maybe we have a church that’s willing to provide space at low cost and we can kind of build around that asset.

Maybe we have a business that’s willing to establish a facility on site with preference for their employees, but maybe open it to others as well. And so then what resources can we bring to bear once we have a plan that folks have coalesced around? And then of course, DEED also has some resources when it comes to construction of facilities, etc. There isn’t necessarily a universal solution. Certainly whatever we can do to change the economics of the industry because it’s just such small margins for the operators and providers, even though it looks really expensive to parents.

MP: You’re coming in at kind of an interesting time. The Legislature did so much last year, they’ve got a lot less money this time around, and maybe it’s a shorter session with a lot less appetite for major changes. What more does the Legislature have to do or should they do?

MV: We’ll probably have some proposals for maybe adjustments, clarifications, technical changes, etc., to policy. And we’ll have a few supplemental budget requests that probably make it through the process for some targeted areas. But for the most part, the scale will be reduced and we are focused on implementing the massive biennial resources that were steered to us in the last session. 

MP: DEED — and a lot of state government — is doing more and more it seems with grants to nonprofits for workforce development and other initiatives along with running its own programs. Do you bring any philosophies or strategies on grantmaking, and do you think anything needs to change with how we’ve been doing it in Minnesota? Also wondering in light of the Feeding our Future (fraud) scandal

MV: In a lot of cases, like in the economic development domain and the workforce development domain, we are grantmakers. … I really do see the value of relying on those intermediaries, at least in the cases where we currently do it.

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And granted, I say this as someone who used to be one of those intermediaries, so I’ll admit that I’m not a neutral party, I suppose, just based on my history, but we need to have a certain amount of humility as public officials about what we know and what we don’t know. We can’t be grounded in the details of every individual circumstance in every community, in effect, no one can. But we have community-based organizations, community-led organizations, organizations whose boards are drawn from the folks that they seek to serve, and whose staff of course are as well. Boy, that multiplies the local knowledge that we’re able to rely upon when we’re trying to get stuff done.

Then when it comes to executing it effectively, you refer to Feeding our Future, and that is certainly something that we always have in mind and lots of other people have in mind as well when it comes to us making sure that we are conducting our grantmaking with integrity, making sure that we’re not allowing for abuse of funds as occurred in that case, because every taxpayer dollar is precious to us. On the other hand, we also have urgent challenges out in the world, and so there’s no benefit to us unnecessarily gumming up the work, slowing down the process and adding more layers of process than are necessary. And so we’re always trying to walk a tightrope between getting money on the street quickly and also with high integrity.

MP: This is a broader economic question, but since you’re leading economic development in the state, a lot of Republicans talk about our permitting and regulatory environment. Do you feel that environment, as somebody who was working outside the Legislature, is too stringent or a burden and should anything be done about it?

MV: I have started to hear since I began the job three months ago about that being an issue in some cases. And I would say I’m still learning about it, and it’s one that DEED plays a role in but other agencies do as well. And so I am looking forward to learning more about whether there are parts of the process that would be worth examining. 

But meanwhile, I would say our goal is, within the existing process, to try to move things along as quickly as possible just so the businesses are getting answers and they know what they’re dealing with. Because you’ll often hear businesses say, ‘Just give me certainty and then I’ll deal with that accordingly.’ And so whatever the process is that we are operating within, we want to try to deliver that certainty and timeliness of response.

MP: As a follow-up to that, one thing I found interesting at the Legislature this year is a few of their major regulatory moves … like there was a cumulative impact of pollution law, there’s an odor management law, an (air) toxics law, various things that the Legislature passed this year where they would say this only applies to the seven-county metro area and not to Greater Minnesota. Or this applies to the seven-county metro plus Rochester and Duluth. I saw that as a political compromise between Greater Minnesota Democrats who weren’t super excited about it and metro-area Democrats.

Do you feel like that’s a good philosophy of lawmaking for the state of Minnesota, that we have this sort of two-state setup on some of these things?

MV: I would not call myself an expert on what some of those examples are, to the extent that they’re outside of DEED’s domain. And at the same time, I think in general, it’s not inappropriate to craft policy that reflects different realities in different places. We are all Minnesotans and I have a ‘One Minnesota’ job, and yet on the topics we talked about earlier, like broadband and child care and workforce development, there are some differences in the way that the challenges manifest and what the solutions ought to look like too. So I don’t think it’s necessarily wrong to have policies that reflect that reality.

MP: I did want to ask you a broadband question. You all have an incredible amount of money coming your way to hand out from the federal government and from the Legislature. Broadly, do you have any thoughts on coming into office and having to handle hundreds of millions of dollars and finding the way to connect some of these hardest-to-reach places? 

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MV: It’s a fantastic situation to be in that we really have significant resources now to invest thanks to this being a bipartisan priority at the national level and then here in Minnesota as well. In fact, it’s obviously such a priority that the Legislature has established a more ambitious goal in terms of the speed that we wanna hit to consider the job accomplished. We’re excited to be doing that.

MP: The state has leaned pretty heavily into subsidizing the fiber-optic cable side of things, seeing it as more reliable and faster than some emerging technologies (that can be cheaper) like fixed wireless and satellite like Starlink. There is certainly a robust debate out there about where the state should go. Do you have a philosophy on that? Some Republicans have suggested the state buy people a Starlink subscription and be done with it. 

MV: I have my opinions as someone that uses broadband, but I also am smart enough to know that there are experts who are engaged in that debate. And I always want to have my ears open to findings and reflections from those experts. But for now we’re gonna carry on with the plans as they exist under the direction of our, I think, highly regarded Office of Broadband Development.

MP: I would love to hear those opinions, even if you’re hearing from the experts, too.

MV: Well, what I’m saying is if we get findings deviating from the fiber direction that would make more sense, we will listen to that. But that’s not the direction that I’m hearing from the experts that we talk to.

MP: You ran for Congress in South Dakota. Certainly it’s a state with very different views on lots of things, but the business and economic development environment is one of them. Do you think that there’s anything Minnesota could or should learn from South Dakota?

MV: I’m proud to be a Minnesotan by choice, and the policies that they’re adopting in South Dakota really do present quite the contrast with Minnesota, where our governor and lieutenant governor have said we are working hard to make this the best place in America to raise a family. And we are feeding our children at breakfast and lunch in schools, and we are providing college for lower-income people so that it will be at no cost to them. 

And we are investing in housing and our broadband and paid family medical leave, all of these things that make Minnesota such an attractive place for workers and that make it a place where we are taking care of each other and investing in our future. And yeah, that presents a contrast with a lot of our neighbors and I think it’s a favorable contrast for Minnesota. 

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