To: Mr. Thomas Borman
Chair, Governor’s Small Business Capital Access Task Force
Dear Mr. Borman:
Thank you for sharing with us the final report to Governor Dayton of the Small Business Capital Access Task Force. It should be posted on line (see “On the Web” below), because it is an excellent document.
The report suggests seeking legislative action to create a state tax credit that would parallel the Federal New Markets Tax Credit Program and would fund projects in low-income communities. Similarly, it recommends that there be established, with legislative approval, a Minnesota small-business revolving loan program. Both of these recommendations were no doubt informed by the community-building success of such groups as the Community Reinvestment Fund (crfusa.com) and the Metropolitan Economic Development Association (meda.net).
The task force recommends funding and launching the Loan Guarantee Trust Fund with money from a federal program, the State Small Business Credit Initiative, and creating a state-of-the-art gateway to doing business in Minnesota. Here I thought the task force could have referenced more of the work done by the Itasca Project (theitascaproject.com), the James J. Hill Reference Library (jjhill.org), and the University of Minnesota (umn.edu). But in general, these recommendations are well thought out and require either no legislative action or minimal funding.
One of the recommendations goes in the wrong direction: a “buy Minnesota strategy.” Governmental units at various times are replete with these kinds of proposals. As discussed in the task force report, this recommendation would require a joint effort by the Department of Employment and Economic Development and several economic development organizations, and would be based on an executive order from the governor. From a political point of view, such programs are always appealing; but from a business and economic point of view, the governor should say no.
The report notes existing programs run by the U.S. Small Business Administration. Especially notable is the detailed analysis of the restrictions on investments by Small Business Investment Companies, with suggestions for expansion and coordination. The subcommittee recommends the establishment of a “friendly capital” fund for Minnesota growth companies, but wisely suggests that the funding for such a fund come from large Minnesota corporations as founding investors.
The venture capital subcommittee recommendations are particularly detailed and merit serious consideration. Clearly, the chair of that subcommittee, Ed Spencer, who is chair of Affinity Capital Management, brought his many years of experience to bear in shaping these recommendations, which start by noting the challenges the medical technology industry faces with the Food and Drug Administration (FDA) approval process. Obviously, medical technology is a growth driver of significant size in Minnesota; and as a result, the federal political leadership of both parties has been proactive in attempting to make the FDA more responsive. Those efforts should be applauded.
The venture capital subcommittee also recommended the formation of a large Minnesota Growth Fund of $300 million to be funded either by institutional investors or a contingent tax credit program. But the key point is that the fund would be managed by an experienced fund manager, not by a state agency. This proposal is detailed and well thought out, and ought to be adopted by the legislature. There are a number of additional recommendations made by this subcommittee—most of them either in coordination with existing programs or requiring minimum amounts of state capital.
The recommendations from the tax subcommittee chaired by Myron Frans, currently commissioner of the Minnesota Department of Revenue, starts off noting that a sustainable state budget—free of accounting shifts and one-time budget-balancing strategies—would go a long way in establishing the kind of tax climate necessary for business growth. The subcommittee also calls for a comprehensive review of tax policy.
Additional recommendations include the revenue commissioner undertaking a systematic assessment of tax policy and tax compliance issues by having a series of listening sessions with small-business owners and communities on a statewide basis. This may sound commonplace, but I do not recall any previous administration actually doing this. In the past, tax policy and recommendations have generally been the result of staged legislative hearings. The recommendation to clarify the unitary business sales definition and to require full conformity with certain sections of the Federal Tax Code are again excellent and should be adopted.
Many task force reports are generated for political cover, and in reality, the covers are never opened by anyone who makes policy. They function primarily as dust catchers on shelves and doorstops in poorly maintained government offices. This task force report deserves a better fate. The governor should read it, and he should adopt many of these recommendations. It would be encouraging to hear him say that in his State of the State Address.
The task force has done its job. Let’s see if our political leadership can do theirs.
Vance K. Opperman,