Minnesota business getting more comfortable with Gov. Tim Walz

Some Republican legislators gulped when the DFL Gov. Tim Walz proposed a $2 billion capital-spending bill focused on fixing roads, bridges and renovating frayed-edge public facilities from Albert Lea to International Falls.

It's the biggest ticket in the so-called off-budget legislative session that began last week. A year ago, the Republican-led majority in the Senate spurned Walz's proposed 20-cent gas tax, a 70% proposed hike that would have been the first since 2008. Walz, who would have settled for less, now wants to fund more than $200 million in local road and bridge projects in the bonding bill.

That's attractive to many Republicans who will get infrastructure improvements and happy contractors and laborers in their districts.

"We'll honestly aspire to get close to that," Sen. Dave Senjem, R-Rochester, chairman of a key Senate committee, said in January.

And there's some indication that Republicans, who typically try to keep a capital-spending bill under $1 billion, will find common ground with Walz on a $1 billion-plus bill that also will mean construction jobs while interest rates remain at historic lows.

Charlie Weaver, head of the Minnesota Business Partnership (MBP) and a former Republican legislator, said the leadership of the state's 100-plus largest companies appreciates Walz's upbeat approach and willingness to listen. The Partnership and Walz are close on MBP's top priority: expanding state scholarships for quality-rated preschools for needy kids, so that more Minnesota children arrive ready for kindergarten. The business lobby prefers that to state-funded preschool for all, regardless of need. And they are right about that.

Many business people also like that Walz appointee Jodi Harpstead, former CEO of Lutheran Social Service and a onetime Medtronic executive, is making headway as a fresh-start commissioner cutting red tape and dysfunction at the huge Department of Human Services.

Walz, a teacher and retired Minnesota Army National Guard sergeant is no business patsy. He has been closely allied so far with the state teachers' union. But he draws less private animosity than DFL Gov. Mark Dayton, who publicly sniped at business interests and raised taxes on the highest-earning Minnesotans.

Last week, Walz cordially gave and took during a convocation with Doug Loon, president of the Minnesota Chamber of Commerce. To be sure, there are differences over how to spend or save this fiscal biennium's projected $1.3 billion surplus. The chamber seeks tax cuts for small business and full conformity with the federal tax code, remade in 2017 by President Donald Trump and a Republican-led Congress. Walz indicated Tuesday that he and legislative leaders expect to include the provision that would allow small businesses to deduct the cost of equipment in a year.

"I think it matters," Walz said. "Especially in ag country. It's been tough. These are the types of things I think do make sense."

Many businesses complain about state spending. However, DFL legislators and even some business leaders acknowledge that local chambers and business lobbyists often vie for state-funded facilities, programs or local sales-tax expansions that benefit them.

Finally, despite cries of fiscal promiscuity by lower-tax aficionados, state spending has been pretty flat over the last 20 years as a percentage of a growing economy. From 1999 through 2018, the general fund grew at an average annual pace of 4.15%. The state economy grew at an average annual rate of 4.08% in that period.

Minnesota legislators hammered out two-year spending in the state's general fund of $48.3 billion, a compromise Walz agreed to. That translated into spending growth of 3.5% in fiscal year 2020 and 1.6% in 2021, according to Minnesota Management and Budget in 2019.

Minnesota, which can improve in the smart-taxation, innovation and efficiency departments, must balance its two-year budget by state law.