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Business community eyes legislative surprise
by Jeff Horwich, Minnesota Public Radio
November 4, 2004

Despite all the attention given to a presidential election, for many in the business community state legislative races are of greater interest. On that front, this week's election yielded a major surprise. At least 13 seats in Minnesota's House of Representatives will shift from Republican to DFL control. The once solid Republican majority is now hair-thin. What's a state economy to make of this?

St. Paul, Minn. — Maybe it was the strong showing of Democrats turning out to vote for John Kerry in Minnesota. Maybe it was backlash against the last legislative session, which left reams of legislation on the table. Either way, no one expected the Minnesota House to very nearly switch hands on Tuesday.

	Bill Blazar

Long-time lawmakers like Bill Kuisle, R-Rochester, Bill Haas, R-Champlin, and Jim Rhodes, R-St. Louis Park, went down to DFL challengers. For Bill Blazar, senior vice president with the Minnesota Chamber of Commerce, losing these familiar faces is the hard part.

"Some of them were experts on health care and others experts on transportation, and others experts on the way state government is organized," Blazar says. "I respect the public's decisions, but we did lose some very capable and very knowledgeable legislators in the process."

That said, Blazar is not worried for his members, which include 3,000 businesses across the state. After all, he says it's not as if the previous Legislature made much headway on the issues at the top of their list: Rising health care costs, investment in transportation, and the cost of workers compensation insurance.

Lawmakers under Governor Pawlenty did attend to one item on the business agenda: Keeping taxes in check. Blazar is optimistic that will continue, even with 13 new DFLers in place.

I think the situation is very critical at the state level in terms of state finances. And at some point people need to say, 'Wait a minute, we need more funding for the schools.' - Economist Andrea Lubov

"They didn't win by saying they were going to go to St. Paul and pick everybody's pocket," Blazar says. "They said, 'I'm going to St. Paul and I'm going to make progress on health care, and I'm going to make progress on education, and I'm going to make progress on transportation.'

"That message sold, and sold well, because to a certain extent the voter contrasted it with what happened in the 2004 session," Blazar says.

At least one local economist sees a potential watershed in Tuesday's result. Andrea Lubov works with the economic consulting firm Anton, Lubov and Associates in Minneapolis. She says lawmakers will find themselves with little choice but to raise taxes in the next session, and the influx of DFLers will enable that.

"It has to, it just has to," Lubov says. "I think the situation is very critical at the state level in terms of state finances. And at some point people need to say, 'Wait a minute, we need more funding for the schools, this Northstar Rail is going to add a big deal for alleviating some of our congestion on the highways. The governor's proposal to say no new taxes to everybody but the Indians in terms of the casinos doesn't make any sense.'"

Perhaps in keeping with the theme of transportation -- which comes up over and over in talking with economists and business-people about the change in the House -- Lubov has a metaphor for the shift: For Pawlenty and the Republicans, she says, the days of "my way or the highway" are over.

	Ed Lotterman

Former Federal Reserve Bank economist Ed Lotterman, now teaching at the University of Minnesota, isn't so sure. He says a narrower majority in the House could increase the willingness of Republicans to compromise -- especially on funding for transportation. But where that funding comes from will remain a tough question. Lotterman does not expect a shift on the question of taxes.

"If businesses fear increased taxes, that's not any more likely than it was before the election because Pawlenty is there," Lotterman says. "And while the House is more narrowly divided, clearly the Democrats don't have the votes to push through any major tax increases -- and certainly not enough to override any kind of veto."

More gridlock or less? New taxes, or will lawmakers hold the line? Whatever happens, the calculations now look different for when the Legislature convenes in January.

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