Economic outlook still bad

Minnesota’s economic outlook has gone “from pitch black to very dark,” a state official told members of a House division April 21.

Dan McElroy, commissioner of the Department of Employment and Economic Development, told lawmakers the economy is showing faint signs of improvement — but also cautioned that the slight improvements mask grim realities in some parts of the state.

“I’ve been asked if I see any light at the end of the economic tunnel. My response is, ‘No. I see some evidence that there may be light bulbs being unwrapped,’” McElroy told the House Higher Education and Workforce Development Finance and Policy Division.

McElroy said the number of initial unemployment insurance claims in the state had dropped slightly since January, and said national trends with some indicators like orders for manufactured goods are showing early signs of improvement. However, he noted the state unemployment rate reached 8.2 percent in March, the highest it’s been since 1983.

Several division members used the hearing as an opportunity to voice criticism of McElroy and his department. Rep. Tim Mahoney (DFL-St. Paul) faulted DEED for not having a comprehensive economic development plan for the state.

“What is the state of Minnesota doing to help our state get out of this? … Because I’ve been trying to find that out all session and I just don’t have the answer I’m looking for just yet,” Mahoney said.

McElroy countered that although there is no “single document” guiding economic development policy, Minnesota has numerous programs to grow industry and help unemployed workers find jobs.

Republican members defended McElroy, arguing that recent job losses in the state have more to do with Minnesota’s high business tax rates. Rep. Bud Nornes (R-Fergus Falls) criticized DFLers for proposing tax increases to help fix the budget deficit.

“One of the things we can’t do is add more fees and taxes to our businesses in the state — the job providers. That’s the least we can do to help the situation,” Nornes said.

Division Chairman Rep. Tom Rukavina (DFL-Virginia) rejected that argument, and criticized Gov. Tim Pawlenty and his administration for not doing more to directly address the state’s unemployment situation. He would like to see a wage subsidy program similar to one that worked in the early 1980s, and argued corporate tax cuts proposed by Pawlenty would accomplish little.

“This whole concept that when you cut taxes it trickles down and creates jobs is a bunch of B.S.,” Rukavina said. “We’ve had dismal job creation under Gov. Pawlenty, and that’s a fact.”