Business confidence in Minnesota: Some have more than others

Fear and uncertainty?

Not at Bellcomb Technologies, a New Hope manufacturer where CEO David Hartwell decided in January 2009 to not cut any of the firm's 100 workers and even made some efficiency-improving investments.

The maker of lightweight, heavy-duty paneling for trucks, commercial spaces and clean rooms also redoubled sales efforts. Something's working. Bellcomb expects a 30 percent increase in sales this year, compared with a flat 2009.

That makes Hartwell more optimistic than most of the 350 businesses surveyed recently by the Minnesota Chamber of Commerce.

Nearly 30 percent of responding companies said the state's economy was improving. But a similar percentage said it was worsening. Fewer than 20 percent said they were more profitable so far this year than last year. And 30 percent said they were less profitable.

"Some statistics suggest that Minnesota may be turning the corner and starting our economic recovery," said chamber President David Olson. "But the [annual "Business Barometer" survey results] demonstrate that this perception is trumped by the reality of a lack of business confidence."

Business owners and managers, Olson said, "want to invest in Minnesota, but there continues to be too much uncertainty in government policy at the state and federal levels for those investments to be made. It's imperative that policymakers take steps to place Minnesota employers on a competitive playing field."

•Sixty-four percent said the cost of health care coverage and state taxes were the biggest impediments to adding employees.

•Nearly 55 percent said health care and 39 percent said taxes and spending were the key issues for the next governor to address, as they have been since the survey's inception in 2004.

•Slightly more than 40 percent of all employers said Minnesota is emerging more slowly than other states from the recession.

"If you ask business what keeps them from creating more jobs, they say taxes," said Todd Rapp, an executive with public affairs firm Himle Horner, which analyzed the survey results. "If you ask, 'What do you want the Legislature and governor to work on?' it's health care, which rises above taxes.

"In both cases, I think they don't like the uncertainty because they don't know what's going to happen with Minnesota property and income taxes and they don't yet know the impact on their businesses of federal health care reform. It makes them unsure that we're climbing out of the recession fast. And it makes them hesitant to add employees and make capital investments."

On taxes, Minnesota would be in better shape if the next governor adopts the recommendations of Gov. Tim Pawlenty's 21st Century Tax Commission, which said we should expand the sales tax to clothing, food and consumer services, and lower the overall rate. Pawlenty ignored the recommendations. But experts say it would be fairer and would take out some of the volatility of relying solely on taxing consumer goods. We also should phase out the corporate income tax, which eventually is paid by consumers anyway, and consider raising the income tax rate back to the 1998 level on Minnesota's highest-earning families at $250,000 and up.

Nearly two-thirds of the state budget is consumed by education and health services- related spending, including the cost of covering employees, the elderly, indigent and uninsurable. Health care spending in the public and private sector is growing at an unsustainable rate.

We're all going to have to take some pain to get through this period without breaking the public bank.

Of course, a little more good news would help. Some confidence, investment and hiring, such as that underway at Bellcomb, also would bring in more tax revenue through a faster-growing economy that employs more workers.

Hartwell, 54, is a hardheaded optimist with an innovative product line. He just bought a vacant building in Golden Valley to expand manufacturing. Hartwell, who is Bellcomb's single-largest shareholder, also is hiring factory workers who are paid $11.50 to $25 an hour with benefits.

Bellcomb, which was founded in 1989, produces stronger panels and facings that weigh less than traditional material because they use technology from the aerospace industry.

Hartwell is not naive. He expects the economy to grow very slowly for another nine or so months before it picks up speed in 2011. He bemoans how hard it is to get even a well-secured loan for a proven business from banks.

"But we're not looking at falling off the cliff the way the economy seemed in early 2009," he said. "We're going to bump along."