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Manufacturers ask Pawlenty to help shore up businesses
by Bill Catlin, Minnesota Public Radio
October 3, 2003

Gov. Pawlenty said the state would try to help businesses "if we can get breathing room in the budget." (MPR Photo/Bill Catlin)

Executives from Minnesota's manufacturing industry gave Gov. Tim Pawlenty their wish list for state government during three separate roundtable discussions. The governor was looking for ideas on how to shore up an important part of Minnesota's economy. The high-paying sector has lost nearly 48,000 jobs since the start of the recession in 2001.

Maplewood, Minn. — The governor held sessions in Mankato, Moorhead, and the St. Paul suburb of Maplewood. Executives from about two dozen firms were invited to each. Before the governor arrived at the Maplewood session, the group worked toward a list of top priorities.

The high cost of business in Minnesota came in first; issues like taxes, workers compensation insurance, and regulation. Second was the way Minnesota calculates corporate income tax. Some states tax based only on the portion of a company's sales that occur within the state borders. It's often called "single sales factor." Minnesota taxes are based on property and payroll as well.

"If you are capital intensive in the state of Minnesota, or you are headquartered in the state in Minnesota, you are penalized by having that capital and human capital in the state," according to Katie Kohlmann of Golden Valley-based General Mills. "We currently pay four times more in the state of Minnesota proportionately than our competitors that are from single sales factor states."

Wisconsin recently chose to shift towards single sales factor. Kohlmann said several other states have enacted the policy as well, including Iowa, Nebraska, Missouri, and Illinois. Pawlenty was sympathetic, but said the change would cost Minnesota tax revenues.

"It's not going to be easy to do in these times of budget shortages, but I think in terms of economic development and job growth, it's coming up frequently enough, where it has people's attention. Hopefully it has people's attention, if we get some breathing room in our budget it's something we can and should consider," the governor said.

Several executives recalled President Bush's decision to create an undersecretary for manufacturing and pressed for a similar focus on the sector in state government.

"Who do we go to in this state when we want to discuss these issues? Who's there to help us? Who's there to convince us not to go to Sioux Falls? I mean, where is the help from the state? Who's working for manufacturing?" asked Ron Lowry of Dayton Rogers Manufacturing in Blaine. "We need somebody on our side, and even fighting the global issue. The global issue is big. That is a state issue because all of us are losing a lot of work globally."

Pawlenty told the group to look to Matt Kramer, commissioner of the Department of Employment and Economic Development.

The forum was intended to focus on issues the state can control, but Lowry wasn't the only one to bring up global competition. Low cost manufacturers in China have been a substantial concern among Minnesota firms.

Dan Berdass of Bermo recalled a presentation from a Chinese manufacturing company executive who spoke to a group of Minnesota manufacturers.

"He said his goal is to wipe us out. And I guess I don't know if the governor wants to hear a story like that or not, but I think it's important that we all know that this is the competition we're up against," said Berdass.

Pawlenty told reporters afterwards that three main themes emerged at the roundtables: health care costs, workforce preparation, and the cost of doing business in the state. He said the administration will continue to seek input from businesses as it prepares a package of jobs initiatives for the next legislative session.

"One thing that's going to be [in the package] for sure is some effort to try to contain health care costs, because it's going up 20 percent a year for many of these businesses and for government and we can't sustain that and we've got to find a better way to do it," the governor said.

He said the health care proposals will rely on the recommendations of a study panel he has convened, headed by former U.S. Sen. Dave Durenberger.

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