Duluth News Tribune, May 20
Hard to knock ND for targeting Minnesota
That didn't take long. Gov. Mark Dayton and legislative leaders hadn't even finished hammering out the details of their taxing and spending plans late last week when Minnesota's neighbors to the northwest, North Dakota, made a bold play to steal away business and jobs.
The Greater North Dakota Chamber put up the first of what it promised would be a series of billboards promoting its friendlier business climate. "NORTH DAKOTA OPEN FOR BUSINESS" read the billboard that went up Thursday along the interstate in Moorhead, Minnesota, a border city like Duluth.
Minnesota shouldn't be surprised.
"In a substantial way, we raised the price of doing business in Minnesota this legislative session," Minnesota Chamber of Commerce Senior Vice President Bill Blazar told the News Tribune Opinion page a day after that first billboard was erected. "(What Minnesota lawmakers did) creates, in this economy, opportunities for other locations and other states. Businesses are very cost-conscious . and more mobile now than ever. They know they have choices."
The tax policies of this year's DFL-controlled Legislature — endorsed by the governor, also a DFLer — reminded Blazar of the pre-recession policies of the early 1990s. "The policies (from) then don't work now," he said.
The Legislature was expected to approve more than $2 billion of tax increases before adjourning today, including one of the highest tax rates in the nation.
"If you're a small business and filing your business taxes through your personal returns, as so many businesses do, it's a huge hit for your bottom line to be in Minnesota," North Dakota Chamber President Andy Peterson told the Opinion page. "We looked at what was going on in St. Paul and said, 'Oh, my.'"
Oh, sure, it's easy for North Dakota to talk, right? Its oil boom fuels rapid economic growth and the nation's lowest unemployment rate.
But the economic benefit of massive oil reserves is only the frosting on the cake, insisted Peterson, the former director of policy and education for the Duluth Area Chamber of Commerce.
"It's not the cake," he said. "The cake is the business climate we have," with low tax rates, pro-business laws, and a favorable regulatory environment. "Our state government is very, very approachable. You put those things together and you have a really good recipe for success."
Peterson sees a far different climate across the border.
"Minnesota's economy expanded by 2 percent last year, but you guys are proposing to spend 7 percent more," he said. "The numbers don't add up, and you're going to tax everyone for that increase.
"And then you'll be wondering why businesses won't want to invest or expand in Minnesota," he said. "Minnesota is an island at the moment. You've got to think differently."
Until Minnesota does, neighboring states will try — and will succeed at — stealing away industry, businesses and jobs.
And they'll be as bold and unabashed about it as a sign on the highway as bright as the sun and as large as a three-car garage.
St. Cloud Times, May 20, 2013
Voters left to analyze decisions with few details; process was mostly behind closed doors
The sausage-making part of Minnesota's effort to build its biannual budget is largely done now.
Sadly — but as usual — much of that process occurred behind closed doors. ... Really, the only choice voters now have is to spend the next two years determining if the flavor of that sausage is worth the price they will pay for it. It should be an interesting taste test, to say the least.
It appears DFL Gov. Mark Dayton will get mostly what he wanted — a state budget that spends about 7 percent more than the current plan. While the big winners appear to be education and property tax relief, this board has long stated a 7 percent increase is too much.
Given the rebounding (but still soft) economy, the spending side of the ledger needed to focus on filling a projected $627 million shortfall in 2014 while holding overall state spending to the amount of increases projected in state revenues during the budget cycle. Estimates put that amount at about $1 billion.
Instead, Dayton made good on his (and other DFLers') campaign promise to "invest in Minnesota" by increasing taxes on the rich. A 2 percent income tax hike on the wealthiest 2 percent of Minnesotans will generate the bulk of the additional $2 billion the budget requires. Also tapped are an increased tobacco tax and corporate tax loopholes.
Still unclear, though, are what happened to an array of other proposed increases such as sales tax on certain business-to-business transactions, fee hikes and various surcharges. At one point, the latter two items were to yield $300 million.
Minnesota's wealthy and its business owners could have fared much worse. Not in the mix are "blink-on" surcharge on the super-rich, a broader sales tax and expenses from raising the minimum wage.
Prior to this session, Dayton's administration worked diligently to create a state budget plan that fostered long-term stability and offered substantial reforms. His initial idea of a broader and lower sales tax, including applying it business-to-business, drew too much opposition so he retreated to the basic budget plan being adopted.
Admittedly, he got no help (and lots of heat) from Republicans all session, but such is the nature of Minnesota politics the past decade.
Ultimately, he and the DFL Legislature will be enacting a budget that offers little structural reforms and simply relies on higher taxes to cover ever-expanding costs.
Is that palatable to most of us? We'll know on Election Day, 2014.
St. Paul Pioneer Press, May 18
Minnesota Legislature: Growing government
With political control in the hands of one party for the first time in decades, Minnesotans had a historic legislative session in store. Democrats delivered that.
"If you were going to design a session with a goal to push businesses out of Minnesota and create disincentives for new business to come here, they succeeded in doing that," said Charlie Weaver, executive director of the Minnesota Business Partnership, which includes the CEOs of the state's largest companies. "Overall, this session will be remembered as one where nearly every Minnesotan will pay more."
One word sums up Bill Blazar's reaction to the 2013 session, and ours: Why?
Lawmakers had a $627 million budget shortfall to deal with, said Blazar, who works for the Minnesota Chamber of Commerce. "Why are they raising taxes by more than $2 billion?"
"Why not hold the line?" asks Kim Crockett of the Center of the American Experiment, noting that Minnesota already spends more than peer states on K-12 education, higher education and health and human services.
There's concern about how tax increases will impact decisions and business behavior going forward, said the Minnesota Chamber's Laura Bordelon, noting the state's April unemployment report, which showed the loss of 11,400 jobs.
There's also concern about tax policy that's "not particularly good for the integrity of the revenue system," Mark Haveman, executive director of the Minnesota Center for Fiscal Excellence, told us.
They "put a lot of chips" on the corporate income tax, which is the most volatile of state tax structures, he said, something that is "not good for competitiveness" in a state with one of the nation's highest corporate and individual income tax rates.
It's not a particularly good session for accountable government either, Haveman told us, because "there's lots of hidden taxation, a lot of distortion of tax prices."
Property-tax relief efforts, he said, amount to "spending $400 million to insulate taxpayers from the true cost of local government."
Minnesota 2020 executive director John Van Hecke has a different perspective. He told us the session will remembered for setting funding priorities that are "actually going to make people's lives better."
Small business succeeds best, he maintains, "when people have money in their pockets. Stimulating the economy has an amazing downriver impact on business profitability. You don't grow the economy through austerity."
The session, he said, puts Minnesota "back on the right track" after 10 years of "disinvesting in education, in communities, in people" with public policies that "directed resources away from the kinds of investments that have traditionally made Minnesota strong."
In education, he cites increases in "base funding" or per-pupil dollars. The commitment "says we trust school boards, trust teachers, trust superintendents and principals to make choices for the strongest future possible."
Weaver takes issue: "They put more money into schools, but with no accountability. They threw money at the problem with no reform."
Of particular concern, he said, are eliminating the basic competency requirement for a high-school diploma and reductions in teacher evaluation and testing.
"This Legislature and the governor chose go back to the past," said Blazar. "Their solution is to raise taxes and put more money into programs that have been around forever and nobody frankly knows if they will work."
How will the session be judged?
We'll get a formal reading as soon as next year when voters weigh in on Election Day on whether or not House members did a good job.
Other measures might take longer. "If you look over the next five years on where businesses locate in this country and where Minnesota businesses expand, that will tell the tale," Weaver said.
What lawmakers are doing is "showing people the door," Crockett told us. "We're growing government at the cost of the health of the entire state."