By Lori Ehde
Minnesota Gov. Tim Pawlenty spent two hours in Luverne Monday morning talking about ways to strengthen rural communities.
Specifically, he outlined details of his proposal for Job Opportunity Building Zones (JOBZ), which would provide tools for outstate Minnesota to spur growth.
"The metro areas are thriving, but the rest of the state is being left behind," Pawlenty said.
"Hundreds and hundreds of jobs are leaving Minnesota to Wisconsin, northern Iowa, Sioux Falls and to North Dakota … Let’s stop the hemorrhaging and turn things around."
The Blue Mound Banquet and Meeting Center was filled with nearly 300 residents and political representatives from Rock County and the tri-state area.
Accompanying the governor at Monday’s meeting were Matt Kramer, Commissioner of the Department of Trade and Economic Development, Rep. Doug Magnus (Rock County’s representative in the House) and Mayor Glen Gust.
‘The whole enchilada’
The governor touted the JOBZ plan as the single most effective piece of legislation to save floundering outstate communities.
"This is the mother of all economic development incentives. It’s the whole enchilada," Pawlenty said. "If you can’t make it with this plan, you can’t make it."
Minnesota’s model would be patterned after successful programs in Michigan and Pennsylvania. Both states have created special "tax-free zones" that have succeeded in developing business and creating jobs.
It would establish qualifying geographic zones where for 12 years, residents wouldn’t pay income or property taxes, and businesses wouldn’t pay state and local sales tax, income tax or property tax.
"It’s a significant incentive," Kramer said. "It’s a powerful tool."
Pawlenty said the plan isn’t without controversy. "The income tax exemption is pretty controversial, because people ask me, ‘What about the wealthy people from Lake Minnetonka moving here to take advantage of a tax haven?’ My response is, ‘Great. I hope they do come and spend a lot of money while they’re here.’"
The point would be to attract businesses and jobs to areas of decline. High poverty, older housing and recent history of job loss would be indicators of such decline.
Under-utilized city infrastructure would be another qualifying point.
For example, a community with an unoccupied industrial park would be a perfect candidate, because the infrastructure is already there, but it’s not producing jobs or tax revenue.
Pawlenty said no single criterion could qualify or exempt a community from the JOBZ programs, because DTED would take a number of factors into account when determining which communities qualify.
According to the current verbiage of the plan, 10 outstate Minnesota zones would be selected, and Pawlenty encouraged any qualifying city to apply.
‘It’s a crisis. The state
of Minnesota is broke’
While the point of the governor’s visit was to talk about JOBZ, he dedicated part of the morning to a budget tutorial.
Minnesota’s deficit is second only to California’s, and it has the largest per-capita deficit of any state in the nation.
"I don’t think average Minnesotans have taken into account what this means for the state," he said.
"This is the worst budget deficit in the history of Minnesota — times three. It’s a crisis. The state of Minnesota is broke."
He said revenues are actually increasing at a rate of 7 percent, but spending is projected to increase by more than 14 percent for commitments already made.
One notable reason for increased spending is that healthcare costs for state employees has been rising by 10 to 20 percent per year.
Considering every state employee down to the local level, plus health care assistance for needy families, the state purchases half the healthcare services provided in Minnesota.
"It’s eating up more and more of our budget and we can’t keep up when revenues go up only 6 percent."
He said the answer to the deficit isn’t to raise taxes and allocate more funds, because that would only treat the symptoms, not the cause.
For example, school districts are losing per-pupil funding due to declining enrollment, and that, the governor said, is due to loss of jobs.
"People won’t stay if they don’t have economic opportunity," Pawlenty said.
The state lost 38,000 manufacturing jobs in the last four years, and raising taxes will only exacerbate that trend.
"We can’t continue to strangle the goose that lays the golden eggs in Minnesota," he said.
Everyone has to tighten belts – including ethanol producers
He said the severity of Minnesota’s budget deficit is going to require belt tightening for everyone.
The unveiling of his proposed budget cuts two weeks ago drew criticism statewide. Renewable fuels lobbyists, among his most vocal opponents, attended Monday’s meeting in Luverne.
The governor proposed eliminating $26.8 million in payments to 13 plants.
When ethanol representatives protested that they had invested money based on what was promised in subsidies, Pawlenty reiterated that everyone will need to give up something.
"When you get down to the lug nuts of balancing the budget, are higher profits for ethanol producers more important than money for other things?" he said.
"Or do you want to see local nursing homes and school districts get more money?"
Pawlenty said he has a long history of supporting renewable energy, and he complimented ethanol producers on their successes.
But he added that his research showed their dividends were quite generous, and that’s why his budget proposed trimming the producer subsidy.
"Given these choices, I thought maybe you guys could take a little less money this time around.
Everyone’s been promised money. School districts are figuring on funding, nursing homes are figuring on funding," he said.
"We’re at a fork in the road. These are the choices."
Reversing the trend
In addition to cutting the budget, Pawlenty said programs like JOBZ can spur development that will ultimately increase state revenues.
"Let’s get this bill passed this session and have these zones up and running this year," Pawlenty said.
Rep. Magnus is carrying the legislation in the House, and the Senate has yet to introduce its version.
There were concerns Monday about the likelihood of Luverne qualifying the JOBZ program and about existing small businesses benefiting from it.
Pawlenty said he hoped the plan would include a number of tools for tailoring the zone to specific needs.
He emphasized the success of the program, regardless of who’s approved, will hinge on the effectiveness and of local community leaders.
He said they’ll need vision like that of hockey legend Wayne Gretzky. "He said, ‘I don’t care where the puck is; I care where it’s going.’ He was able to see the playing field on the ice differently than other players," Pawlenty said.
The Luverne stop was one of several in the governor’s tour of outstate Minnesota in the past week.
He was in East Grand Forks Thursday, Jan. 23, and in Keewatin and Hibbing Friday.