Back in January, both the new governor and the new Legislature made “Jobs, jobs, jobs” their rallying cry, only to see divisive budget politics quickly overwhelm their top priority.
But in reality, some little-noticed job-friendly measures did get through the legislative process.
And now Gov. Mark Dayton says he is making job creation his priority. He plans to launch a jobs tour next week and says he will “go anywhere, call anybody, do what I can.”
Republican legislators, too, talked about their new efforts – unveiled Thursday under the name Reform 2.0 – to make government more friendly to businesses and job providers.
Governor says jobs key to fiscal stability
Dayton, discounting the effect that volatile stock prices would have on individual state economies, told reporters last week that he believes that employment levels are the most important factor for Minnesota’s fiscal viability.
“Stock prices are a measure but, in and of themselves, aren’t as significant as the number of people working and creating jobs and having jobs and paying taxes,” Dayton said. “That’s a real source of concern, and that’s why I’m going to focus in the weeks ahead on ‘jobs, jobs, jobs.’ “
Minnesota’s jobless rate shot up 0.4 of a point to 7.2 percent last month as the state lost 19,800 jobs, fueled largely by the three-week state government shutdown.
The August report should be back on track, but with all the ongoing concern about the weak economy, Dayton is getting ready to unveil new jobs-related initiatives.
Before he does, here’s a look at recent legislative actions and at some of the economic development tools the Dayton administration already has in place.
Although its jobs impact is likely short-term, Dayton’s $497 million bonding bill — passed as part of the special-session compromise to end the state government shutdown — is probably the single most powerful economic engine available now.
Such a bill could create more than 14,000 jobs, especially in the struggling construction industry, according to Dayton administration estimates. Most agree the bill is about three-quarters “shovel ready” projects.
DEED Commissioner Mark Phillips, who has worked with construction giant Kraus-Anderson, has seen the impact of industry unemployment up close. The construction industry provides about 5 percent of the jobs in Minnesota, but construction workers make up roughly 30 percent of the state’s unemployed.
Phillips said in an interview he’s happy to get back to work after haggling with Republicans over the $250 million jobs bill all session, especially with the opportunity to implement some new policy areas that received funding increases.
Although DEED did sustain a small overall cut, Phillips said, the department received $3 million in new funding for the Minnesota Investment Fund, the first increase since 2005. The investment fund provides grants of up to $500,000 “to help add new workers and retain high-quality jobs on a statewide basis,” according to the department.
Workforce development initiatives — which received a 5 to 10 percent cut — will distribute $35 million over the next budget cycle to help hard-to-train workers, those with mental disabilities and laid-off professionals looking to change careers, among others.
Another increase came in the form of $2 million in new money for a redevelopment program that leverages other funds to help clean up contaminated sites for business development.
DEED also received authority from the Legislature this session to establish a loan guarantee program, which allows businesses access to the capital they need to expand if they can’t secure a loan from a private bank. The department is applying for federal funding to begin the program since it didn’t receive any legislative aid this time around.
To Scott Martin, president of the Minnesota Economic Development Foundation, the loan guarantee program is perhaps the most useful of any DEED initiative.
“The issue of access to capital from the state’s perspective is: If banks can’t fill all the needs of small businesses, how can state government — and the other organizations like them — … work together to make sure that small businesses get the financing they need when they need it, in partnership with banks?” Martin said. “That was probably the single most significant, at least in my mind, job creation initiative that the Legislature passed this year.”
But, Martin said, despite that bright spot, Minnesota’s economic development initiatives are typically ineffective. Other states have much larger budgets than Minnesota’s $250 million allotment, so there’s only so much officials can do.
“The budget has just been slashed and the amount of meaningful funding available in programs that have an opportunity to help in job creation are pretty much barebones if they even exist anymore,” he said. “So, bottom lines is, I think expectations have to be realistic because when you don’t have tools, there’s not a whole lot you can do.”
Overall, state economic development officials agree, at least in part, with Martin’s assessment. The countless racino proposals over the past decade aimed at boosting Minnesota’s economic development efforts without increasing taxes or general fund spending are perhaps the best example of that recognition.
“When they mentioned racino, I said, ‘I don’t know if you want to do a racino, but if you do one, I’d as soon get the money’ – money for improving employment and the economy,” Phillips said.
For some, however, sunnier spots exist within Minnesota’s economic development package. Margaret Anderson Kelliher, president and CEO of the Minnesota High Tech Association, considers the session success in that regard.
The former House speaker said the much-touted data center tax relief provision and funding for the Minnesota Science and Technology Authority are two great examples.
“I think as far as high-tech jobs and knowledge work — jobs of the future — in a very difficult session, this session turned out pretty well,” she said.
A provision in the tax bill allows large data storage centers to be exempt from sales taxes on equipment and computer software, as well as electricity. The goal for lawmakers and technology advocates is to spur growth and investment in Minnesota from companies who are already interested in our state’s chilly climate, which makes it easier to cool giant computer systems.
Funding for the Science and Technology Authority and increases in the Research and Development tax credit also set “Minnesota on a course to be able to grow and attract entrepreneurs to create more jobs in the state,” Kelliher said.
But to Kelliher, the most impressive work going on in the technology sector to spur job growth comes from collaboration between cities, business partnerships and the state and federal governments.
“The most encouraging things happening are really around coordination in Minnesota for really all being on the same page,” she said. “I don’t actually see disappointment right now, either in how state government is doing this or how others are doing it.”
Katie Clark is looking for a different a sort of partnership to spur economic development. As executive director of the Minnesota Trade Office, Clark heads a subset of DEED dedicated to helping small businesses expand into foreign markets.
But before July’s special session ended, Clark and her employees didn’t know if they would be able to return to their jobs. Under the GOP budget, the entire office would have been shuttered as part of the spending cuts necessary to close Minnesota’s budget gap.
“We definitely went through a time of uncertainty, and for the staff that are in the office, it was a stressful time,” Clark said. “I think everyone now is coming together and now we get to do the fun part, which is actually do our work.”
Exports are booming for Minnesota businesses. In 2010, manufacturing exports — helped by strong sales in Asia and Canada — jumped 17 percent to $17.2 billion. “Exports are definitely a bright spot of Minnesota’s economy,” Clark said.
The Trade Office offers training services to companies for a small fee to help them begin exporting. Now that funding is secure, the department is also implementing a strategic planning process to increase exports over the next biennium and into the future.
Through a partnership with the Brookings Institution and a number of local partners, the Trade Office is also helping to examine the Minneapolis-St. Paul metro area (which accounts for 80 percent of Minnesota’s exports) and search for ways to improve trade and business connections internationally.
But perhaps the brightest spot for Minnesota’s bourgeoning exporters is Dayton’s planned trade mission to South Korea and visit to Japan, which make up two of the state’s largest export markets.
“Japan and the Republic of Korea are two important markets for Minnesota businesses with the potential for further growth,” Dayton said in a statement. “The goal of the trade mission is to make contacts and build relationships that will help Minnesota companies increase exports to that part of the world and create more jobs for here.”
Japan and Korea, which together bought about $1.5 billion in Minnesota products last year, mark the state’s third- and sixth-largest export markets, respectively.
Clark said the governor’s trip to Korea in late September would help open doors for small businesses that would not otherwise be able to arrange meetings with business leaders and political officials. In Japan, Dayton will ceremonially welcome Japanese business leaders to Minnesota for the 2012 Midwest U.S.–Japan conference.
Although the trip is still in the planning stages, Clark said more would be scheduled.In her many conversations with Dayton, the governor has made exports a key area of focus for his administration, she said..
The governor’s interest and Clark’s zeal are a perfect fit, and that’s why her goal for the end of this budget cycle is so lofty.
“I hope that our state’s exports have doubled,” she says with a laugh. “That would be amazing. I hope that we see a drastic increase in exports from Minnesota, and I hope that we see as a result, jobs created here in Minnesota.”