Art Rolnick, HHH Institute, U of M, Nov. 19, 2010-- The best employment and economic stimulus plan

Turning to the state legislative priorities, a participant asked Rolnick what strategies he feels the legislature should pursue this session?

“You can’t do much in the short run,” Rolnick said. “Look what happened with the Federal government with the stimulus—it’s very difficult to turn an economy that needs to make fundamental changes in short order.

“This (early childhood education) is the most effective employment and economic stimulus plan. You want to see new buildings and new employment—go look at New Horizons on University Avenue. These are buildings, these are jobs. But more importantly it is the long-term return that warrants this investment.”

John James, former State Revenue Commissioner, Sept. 17, 2010--Change business taxes so you tax market exploitation more than production

The goal of structuring taxes to encourage business growth is to arrange it so that Minnesota is a business center exporting to rest of the world.

James said he does not support eliminating the corporate income tax.  He would replace the state business property tax, and eliminate sales tax on many business inputs, by enacting a business activities tax. He cautioned tough love for business: “I think everybody must pay their fair share, and business should be included in that.”

A participant asked James how he proposes states could capture Internet sales tax? There is a federal commission now on that topic, he noted, and one possibility would be a 5 percent federal sales tax on all Internet commerce. This has actually been an issue that predated the Internet—television and catalogs raised it. There have been efforts among commissioners and representatives of industries to come to agreement but they never get there.

Bill Blazar, Minnesota Chamber of Commerce, July 30, 2010--Minnesota will not regain its lost jobs until 2014--Blazar said that the chamber believes it will be until 2014 that Minnesota gains back all the jobs lost in the economy. “That’s what makes this recession so unique,” he said. This is a tough one to pull out of. But the businesses that have reached into the global market have the best outlook. The good news is that the world’s economy is strengthening.

 Bill Blazar, Minnesota Chamber of Commerce, July 30, 2010--Those companies weathering the recession best have customers outside the United States--The companies that are doing the best right now—that are climbing their way out of the recession—are those that have clients outside of the United States. Those that are not doing well are those with clients exclusively in the United States, and are particularly those reliant on construction. Glass, for example. Minnesota has a large cluster of industries around glass that are being reduced.

“The challenge is that to be competitive in a global economy than to be competitive in the United States alone.” First a company has got to get whatever their product is to a global market, and even if they are shipping bits and bites they must compete with wages and working conditions. The competitive pressures are very difficult.

Blazar illustrated his point with a story of a software company that used to do all of its work in Minnesota, then opened a new facility in China. They reported that the workers in China were just as efficient as in Minnesota, but at much less cost. A while later they opened another facility in India, and observed that the workers there were more educated and more efficient than the Chinese at a comparable cost. Recently they opened a newer facility in Indonesia, and said they are proving even better workers, at the lowest cost yet.

Bill Blazar, Minnesota Chamber of Commerce, July 30, 2010--Be like Target: more for less--Why should public services be any different? “I think that when people look at state and local government they think about Target: they want more for less.” They are very value conscious. I was talking with a CEO recently who said he won’t go into Macy’s without a coupon. That is what we have come to expect as a society.

Redesign is partly the responsibility of the governor, Blazar said. On the back end, a governor may redesign processes to measure outcomes and base choices off of the results. On the front end, they may direct agencies to align priorities and use competitive sourcing.

Dan McElroy, commissioner, DEED, May 14, 2010--There is no button that government can push to jump-start the economy--“Recessions are cycles,” McElroy said, and he is comfortable that we will come out of this. Art Rolnick said to him, “You know, there is no button government can push.” It is a combination of liquidity, confidence and time. Liquidity started this mess with the credit crunch and high oil prices. Consumer confidence is key to keeping the economy churning.

Clustering of like-industries is important to the state. “A key is the size and willingness of the workforce to work.” A member commented that the core economy of Minnesota has been said to run from St. Cloud down through the Twin Cities, to Rochester? “Some of the new projects have been outside of that area,” he responded. Part of the reason why Faribault has done so well is that it has had good partnerships with local government; it’s rural enough that land is cheap but metro enough that there are a lot of workers.

The legislature is making efforts: The jobs bill passed this session included an angel tax credit and there was an increase in R&D tax credit from 5% to10%.

He said that he is a realist on the economy. “Over the long term I’m optimistic. The unit of geography is the Midwest; we have the strength of a very strong workforce from educational and cultural points of view; strong wind and water; strong position in the middle of the continent.”

A member commented that it seems to him to be inconsistent to be optimistic—that Minnesota has been dropping relative to other states.

 Dan McElroy, commissioner, DEED, May 14, 2010--Is Minnesota's economic position dropping?--“No, the data doesn’t support that,” McElroy responded. “It is not as bad as people say it is.” He alluded to the role of the media in pushing this message and commented that “The Star Tribune is way off.”

Minnesota has gone from 18 to 21 Fortune 500 companies, “the greatest number per capita, by a lot.” Students continue to be at the top in ACT and SAT scores. The state will need to pay attention that it remains a place of innovation.

“The one I worry most about is growth in personal income—the energy states have blown us away; smaller states with large energy resources.

Responding to the public perception that Minnesota is not competitive, McElroy said that there are ways to improve competitiveness—comparative tax rates between C-corps, for example. “We’ve done some smart things about the R&D tax credit; foreign investment credit. Ernst & Young says we’re around 18^th in smartness of our tax structure.”

 Dan McElroy, commissioner, DEED, May 14, 2010--Minnesota’s economic appeal is weaker than it should be--Minnesota does not make the finals with the location consultants used by major companies when they are considering a re-location or development. Those consultants do not have Minnesota on the top of their list.

He told a story that after one conservation technology company located a 160,000 square foot facility here, Deloitte remarked, “We’re just shocked. Minnesota’s not an attractive state. Minnesota’s not a right to work state (http://tinyurl.com/yc59dx) and utility costs are high. But this company wanted to come “because of the strength of the glass cluster.”

The time frame on the environmental review process is too long and utility costs are going to be an issue. “The decision to be early into renewables was a good decision over the long term, but will cost more now.”

Minnesota’s workers comp rates are higher than Western states, but this may not be all bad, McElroy said. “We provide better benefits and we have more generous unemployment pay. Culturally I don’t think we’re ready to (or want to) change them.

 Dan McElroy, commissioner, DEED, May 14, 2010--How well is Minnesota being marketed?--“You’ve read a lot of good news that I haven’t seen before,” a member commented. “Consumer confidence depends on information. What are you doing to publicize the state’s strong points?”

McElroy said that he gives 150 or more speeches per year—spends a lot of time with the media. “It’s hard to get good news on the front page.” Minnesota won a competition for a plant, and he called their HR executive to ask what it was that closed the deal. “She said it is our workforce—hard working, honest, innovative.” It’s hard to make that a news story.

Dan McElroy, commissioner, DEED, May 14, 2010--Minnesota’s future economy--We cannot rest on our laurels, he followed. We are competing now on labor with countries in the developmental stage of their economies. We have got to lead by staying ahead on innovation.

 Dan McElroy, commissioner, DEED, May 14, 2010--State's main economic producers identified--A member asked where Minnesota makes its living—doing what, selling to whom—and what are the major movements in those areas?

McElroy responded that the big industry clusters continue to be manufacturing (high-tech, glass, building components); health care and medical device; two heritage industries—agriculture and food processing, retail and distribution is enormous; transportation including the port of Duluth and rail roads.

Financial services continues to be healthy as well: “US Bank, Wells Fargo, TCF didn’t do a lot of stupid things” leading up to the crash.

 Dan McElroy, commissioner, DEED, May 14, 2010--Possible change in the economy in the future--Where is the change going to be?

There may be pickup in alternative energies. “Offshore wind potential in Lake Superior is amazing.” Visual impact and ice issues are going to be challenges, but he emphasized that the potential in the water far surpasses anything on land. This can be a new sector for growth. And, biofuels: Liquid biofuels will also benefit from Minnesota’s high tech and agricultural cluster.

“Companies and entrepreneurs come to Minnesota for the cluster strength. We don’t have the financial incentives others have, but we do have diverse industries and a strong labor market.”

Dan McElroy, commissioner, DEED, May 14, 2010--Strategies for economic development--McElroy’s office has four strategies for economic development:

1.                  Help Minnesota businesses stay and grow

2.                  Help entrepreneurs develop businesses here

3.                  Help existing businesses become more productive and competitive here

4.                  Help business relocate here

“Think of economy in terms of layers.” The industrial revolution affected the foundational manufacturing layer. As layers get more productive it makes room for more layers; others build on top. Minnesota has got to recognize that more and more, other economies  may  be doing the first layers. We can stay ahead by being the highly productive and innovative in both existing and in new industries.

Elizabeth Kautz, president, U.S. Conf. of Mayors, April 2, 2010--Metropolitan areas are powerhouses--“I have been very interested in metro issues because metro areas are powerhouses,” Kautz said. “There are 362 metro areas in country. They account for 90 percent of labor production and 86 percent of total jobs. Of the world’s 100 largest economies, 40 of them are in the U.S.” The Minneapolis/Saint Paul metro region is the 14^th largest in the US.

“We were motivated to start the Regional Council of Mayors because no one was addressing regional issues Kautz said. “I asked an executive at a Fortune 500 company how they pick new sites to locate their businesses. He said they send people out—site selectors—that look at a variety of indicators. So I went out and talked with one of these site selectors and they said the Minneapolis/St. Paul metro area was not on their radar.”

The Minnesota Regional Council of Mayors, which Kautz said she and the mayor of Minnetonka co-founded, is working with the Itasca Task Force, a Minnesota organization of CEO's of major companies. The goal is retain jobs, create jobs and to attract new businesses and jobs to our metropolitan area.        

 Elizabeth Kautz, president, U.S. Conf. of Mayors, April 2, 2010--The Metropolitan Council is not the right body for business development--Responding to a question about the Metropolitan Council, Kautz said, “The council, right now, is the planning organization; but sometimes they reach into areas on which they have no expertise. The Regional Council of Mayors believes that working with our business sector is the best way to work on job creation, it is businesses who create jobs.

The Metropolitan Council needs to focus on their mission.  Economic development is not part of their mission.  

Elizabeth Kautz, president, U.S. Conf. of Mayors, April 2, 2010--The state needs more concerted efforts at economic development and advocacy--How many counties does the conference of mayors consider to be the metro? “13.” Good for you, a member commented. “We also did a leap frog and reached out to Rochester and St. Cloud. Worked with McKinsey, Brookings to look at where our strengths are as a state: medical services, distribution and finance.”

What metro areas are doing well when you work around the country? “Denver, Pittsburgh, Charlotte, Austin.” What are the lessons to be learned? “You have to have an economic development entity that really focuses on the issue of marketing who we are. We had this discussion at the last task force—who belongs to this entity? It should be public/private. You need to have cities and counties in the mix. So: Looking at transportation corridor, looking at tax structure.

We’ve talked a lot about a state-level planning commission, a member observed. You’re in the business of doing this with local government and business. What barriers are you facing about getting people to work across boundaries to do this work? “We see these groups as stakeholders. But we really need to focus on getting this mission accomplished and getting this entity established. We say that the other groups—their mission is different. They would have an economic development mission, but it’s not their core so it gets lost. We need to retain and grow what we have here—and attract more.

There is a new permanent entity, the Itasca jobs taskforce. “It’s going to be public/private, pay to play. 90 percent of the state discussion is about the services.” What about the revenue side? “I come from a business background and you need to look at both sides of the legislature. Don’t demonize business, because they’re the ones creating the jobs. We’re all in this together.”

Paul Mattessich, executive director, Wilder Research, April 9, 2010--  Competitiveness--On international corporations, and the decline in the state’s appeal: What is it that these corporations are feeling Minnesota is missing; how are we not competitive? “I personally in, Wilder Research, have not looked at that question. I’m going to write it down because I’m interested in that question of business decisions.

Paul Wagner and Chip Langen, Minnesota Wire,  March 19, 2010--An "unfriendly" state for business—“Minnesota is an unfriendly state for business across the board,” Laingen said.  Minnesota is a beautiful place to live and raise children. His kids attend the newest high school in Minnesota in Woodbury. Our quality of life isn't sustainable in the long run. Amenities are deceptive; they don't provide value on their own merits. You need business, technology and entrepreneurs.

 Paul Wagner and Chip Langen, Minnesota Wire,  March 19, 2010--Characteristics of an unfriendly business atmosphere--Laingen outlined three reasons affecting the state's business:

                        (a) high individual and corporate taxes

                        (b) the state doesn't invest in high technology in any way

                        (c) absence of collaboration among parties that should be working together

 Paul Wagner and Chip Langen, Minnesota Wire,  March 19, 2010--De-emphasis on defense industries--Control Data, Sperry Univac, Honeywell were all big in defense here, but no more. Interestingly, we do have a large number of smaller plants that affiliated with major national defense-oriented companies, such as Lockheed Martin. Those companies have plants all over the nation. But Minnesota lacks political and governmental leadership to compete with states such as New York and Pennsylvania.  Moreover, our tax climate and cost of living don't provide us with any advantage.  Wagner said he recently visited with a dozen other CEOs, all of whom said they'd expand elsewhere, not in Minnesota. These CEOs all are good friends of his from his youth.  They still hunt and fish together.

Paul Wagner and Chip Langen, Minnesota Wire,  March 19, 2010--Minnesota rewards fairness, not risk--Laingen cited a case years ago where the University of Minnesota ran a test project that rewarded budgetary savings; if a department achieved its mission, and saved money at the same time, it was given a portion of the savings to spend on anything it wanted.  Employees were highly motivated; everyone inside was happy with the result. But others were concerned about equity and fairness, so the idea was halted.

 Paul Wagner and Chip Langen, Minnesota Wire,  March 19, 2010--Failure to think regionally--A tremendous opportunity exists for a high-tech corridor from Fargo to Minneapolis to Milwaukee to Chicago, Laingen said.  Minnesota would need to think regionally and get its governmental-business environment more in line with states like Wisconsin. "But we're hopelessly out of sync," he said

Paul Wagner and Chip Langen, Minnesota Wire,  March 19, 2010--Positive movement toward helping business is evident--Laingen cited a couple of legislators now working for change in state policies toward business--including a proposed angel-investor tax credit for encouraging new entrepreneurs.  He also cited positive recent contacts with legislative leaders on this issue because there are some who are waking up to the impending crisis of the loss of Minnesota’s technology leadership.

Lori Sturdevant, Star Tribune columnist, June 5, 2009--Importance of bio-tech developments--“The bio-tech investments at the University of Minnesota will be remembered as the greatest thing of this decade,” Sturdevant said.  The Governor’s unallotment may put pressure on the project. With higher education one of the Governor’s target areas to balance the budget, it could be difficult to provide funding for the project.  It was suggested the Civic Caucus might plan a session specifically on the bio-tech development

Fred Zimmerman, University of St. Thomas, March 20, 2009--Nurture the better companies--Rather than bailing out losers, Zimmerman said the nation might better nurture the better production companies like John Deere. 

Fred Zimmerman, University of St. Thomas, March 20, 2009--Industries seeking plant locations naturally seek lower-cost locations--It's going to be extremely unlikely that any sensible manufacturing company will seek a new location in larger cities like Minneapolis, Pittsburgh or Cleveland because of anticipated higher costs, plus more uncertain quality of some public services in areas like law enforcement, education, and health, Zimmerman said.  It's more likely that such companies will go to smaller urban areas like Fargo or St. Cloud or to counties on the fringe of the metro area.