The Politics of Business in Minnesota

The Politics of Business in Minnesota

With just over a year left in his second term, we ask Governor Mark Dayton questions currently on the mind of business.

Mark Dayton has been the 40th Governor of Minnesota since 2011. His tenure has been substantially marked by legislative gridlock, partisan acrimony with occasional bursts of accomplishment, particularly in substantially raising the state’s minimum wage and taxes on top-end earners. Five consecutive legislative sessions with divided government have diminished progress, though the state’s finances remain stable and some small forward movement has been made on deferred road spending. He also notably vetoed legislative efforts to impede metro area cities from creating their own wage and benefit requirements for employers.

Still, Minnesota’s economy remains the most resilient of its region, unemployment is low and public satisfaction with Dayton’s administration is high, according to the Minnesota Poll. As he was preparing for court battles with the House/Senate majority and his final legislative session, TCB sat down with Dayton at the Governor’s residence to discuss his policies and agenda, from a business perspective.

TCB: Did you have any reluctance vetoing the minimum wage preemption bill?
Gov. Mark Dayton: I certainly had reservations. But real wages have dropped in Minnesota by a little over 1 percent in the last 12 months, so there are a lot of workers who are not realizing the economic gains being achieved (in the rest of the economy). Our present minimum wage of $9.50 an hour is $19,000 a year. The federal poverty level for a family of four is $24,500. So if you lock it in at $9.50, you’re consigning 150,000 workers in Minneapolis alone to sub-poverty incomes, and that feeds a lot of the problems we deal with every day.

Q Do you have any concerns about a patchwork of minimum wages across the metro area?
We’ll have to see. So many people talk about local control, [but] when local control is being exercised they want to preempt it.

Q Would you support higher minimum wages restricted to the parts of the state that have substantially higher costs of living?
That’s something that should definitely be considered; $9.50 an hour creates a vastly different standard of living in Minneapolis than Ada.

Q You’ve supported subsidies for some business ventures in the state, such as a proposed Louisiana-Pacific siding facility on the Iron Range. What’s your demarcation line on where the state should subsidize and where it shouldn’t?
It’s very competitive with other states offering subsidies. Now, there are studies that have shown they are not effective, but the reality is that a company like Digi-Key, interested in expanding in northwestern Minnesota, is a huge economic benefit to the region. When I was DEED [Department of Employment and Economic Development] commissioner, we looked at costs versus the economic gains of employment and tax collections.

Q But if studies show they are not effective . . .
You can argue it either way, but it’s not a perfect world. Cliffs Mining has announced they’re going to develop a new facility in Ohio; $300 million in incentives. Their Republican governor is happy as can be. Incentives do make a difference.

Q So your criteria is a net economic benefit?

Q It seems like the legislative control of metro area transportation funding has become a political football imperiling consensus needs of the metro region. Should the metro area control its own infrastructure revenue and spending?
The Legislature is increasingly leaving it to the counties. Hennepin County is going to have to finance Southwest light rail, and Metro Transit will need a fare increase because the Legislature has pulled back its support or is not even providing support. I think it’s unwise of the legislative leaders to be underfinancing public transit in the economic engine for the rest of the state. The metro area generates revenues that benefit the rest of the state in school aid, local government aid, county program aid. It’s enormous.

Q Does Ada really care how dollars are spent in Edina? Should their legislators have any say?
I’ve been involved in state government for 40 years, and there’s always been a friction over transportation, but it’s really been inflamed in recent years for political reasons. They’ve been led to believe that the billion dollars to Southwest light rail would be going to roads and bridges all over Minnesota, but it’s not true; it’s not either/or. It’s been destructive. It’s going to stifle economic growth for the entire state. But we’re so far behind in funding transportation, and when you have a scarcity situation it’s easy to pit people against each other.

Q The regional and state Chambers of Commerce consistently rank mobility and infrastructure as priorities, but their chosen party [the GOP] doesn’t act. Why?
I don’t know. CNBC ranked us the fourth-best state for business. The reason we’re that high is due to infrastructure, transportation, education . . . those are public investments and they benefit everyone, including business. But if the highways are inadequate and they can’t get their employees to work, they’re going to look someplace else. Similarly, with education, the quality of the Minnesota workforce is typically the No. 1 reason why businesses say they are going to locate or expand in our state. So if we diminish the quality of education we are slitting our own economic throat.

Q Investment in the university system is also now fraught with controversy. What’s your attitude about the system today?
In fiscal 2012, state support for higher ed was at the lowest level since 1981. We’ve reversed it, but we’ve only restored about half. Minnesota State is even more severely affected because their only sources of income are state funds and tuition. It’s gone from one-third [of operating costs] paid by tuition to two-thirds. In this last session, with a $1.5 billion surplus, there was only a very slight increase in funding for higher education, which is senseless when you think of how vitally important that is to our economic future. Similarly, capital investments have lagged behind. We could have a $1 billion bonding bill spent on the improvements all those campuses need to be world-class and competitive. I beat my head against the wall. Talk about penny-wise and pound-foolish—we’re short-circuiting our future.

Q The state has a net outflow of young people. What’s the state’s role in workforce development?
Creating an environment where young people are going to want to live—quality of life, affordability, amenities, sports teams and recreational opportunities. All of those together make a difference. Tax levels are a consideration, but it’s also quality of public education. We need to recognize our virtues and continue to make investments. It’s also important to note that our workforce is growing because of immigration; that’s our economic fuel.

Q What aspects of the legislative reforms to public education would you like to see changed in a special session?
I support the reforms in teacher licensure [that allow non-teaching professionals with real-world expertise to obtain teaching credentials]. We need people to come into the profession mid-career . . . [but under the new rules] permanent [hire] doesn’t require a teaching degree. Overall to have a standard of training and proficiency [a teaching degree] is important to our quality control.

Q With the removal of obligatory seniority-based layoff?
Right, [going forward] they have to negotiate it. I’m OK with that. We need more consistent teacher and principal evaluation to do it correctly.

Q Do you see a path to making health care accessible and affordable, and perhaps relieving employers of the obligation, given the federal chaos?
It’s a fifth of our GDP, so you have huge economic stakes.

Q It’s also a disproportionately large portion of our state economy.
Yes. And one of the best growth opportunities we have. I’m a walking poster board for the Affordable Care Act. I’ve had two spinal surgeries, a hip reattachment and prostate cancer surgery. The amount of what medicine can treat has expanded significantly. So the needs will grow. We need to be more efficient and cost-effective, but someone has to pay for it.

Q Is there a sense that our national/state institutions are failing or is it simply a failure of political will?
There are no saints in politics. There’s a lot of political courage if you can achieve the end result. But if it’s health care, what is the right thing, and for whom? The complexity of these problems, and the intractability, overwhelms government. It certainly isn’t avoidance.

Q What works better from a public policy standpoint: divided government or one-party rule?
[Chuckles.] There are tradeoffs. We are dealing with big, intractable problems, health care being one. And people’s estrangement from government and distrust of government is greater than ever before. And then when [government] doesn’t produce quick improvements, they react against the incumbent party. Everyone’s point of view is reinforced by the media they select. People’s tolerance for government is limited. If you get one-party control the expectations are very high. If there’s not tangible improvement, whoever’s elected will be swept away [in] the next go-round.

Q Would your son Eric make a good mayor of Minneapolis?
He doesn’t live in Minneapolis.

Q Well, that’s easily rectified.
I think he’d be an excellent mayor, an excellent civic leader. He’s very smart, he’s willing to take on big ideas. He thinks big and he’s running a very successful business. Fortunately, both my sons inherited their mother’s good looks and intelligence. Andrew just came back from two years working for the mayor of San Francisco and is coming back here to launch a new venture. They’re both committed to public service and in their own way making this community a better one, and I’m very proud of both of them. Now if they can get beyond the burden of what I’ve done to the Dayton name, they have a future.

Q You wouldn’t dissuade them from politics.
No, not at all. My father secretly hoped I would go into Dayton’s, I think, but he basically said “Do something worthwhile” and he’d support whatever that is. He used to say “The only thing worse than a bum is a rich bum.” So [they feel the duty] to be engaged and feel that sense of responsibility, given how fortunate our family is, of giving something back, that their mother and I have instilled in them.

Q You’ve spent time on the issue of opportunity and equality in the black community. It seems like we’ve made so little progress in half a century despite a lot of government activity. What hasn’t worked here in Minnesota and, more broadly, America?
Well, you’re talking about very complex and difficult problems and years of history ingrained collectively that you’re trying to reverse. And we’re dealing in Minnesota with a fairly sudden diversification of our population. The complexion of Minnesota is now the [complexion of the] world, which has created challenges for people accustomed to seeing everyone look like them. In the education and social service systems, most of the professionals are white. And understanding the needs of people from other places is something we’re having to catch up to.

And then you’ve got the basic inequities. The achievement gap is a reflection of kids who are poor, kids are homeless, in broken homes, in the midst of gang warfare. You go back to the minimum wage—if people can’t earn a middle-class [income] through their work they are going to look for other means. So the economic disparities and deficiencies are a huge impediment to improving race relations. In pockets of North Minneapolis there’s no hope, no family culture, no culture of educational attainment. Breaking those cycles [is impossible] if you can’t offer a pathway.

I have a friend who teaches third grade at a charter school, and she takes her [students] to college to show it to them. Because none of their parents have been to college. None of them have any sense that college is something that they can aspire to. Someone needs to instill in them “if you get a college education you’re going to be successful. You’re going to have these things that you see on TV and the like.” It’s so circular, and it’s within the loop of family and history; and then you add the real prejudices that exist and the manifestations of that and it’s very difficult. It’s a very alarming situation.

I think the way President Trump has inflamed the us/them divide is very destructive. If we don’t make it better it’s going to get worse, and then I really fear for the cohesion of our state, our communities and ultimately our country. If I look into the future for my kids and grandkids I say that’s really No. 1 for what we’ve got to turn around. We have to bring everyone into the mainstream of American society and the American economy. And have everybody again be able to achieve the American dream. We haven’t done nearly as well as we must in order to make that possible. tcbmag

Adam Platt is TCB’s executive editor.