Many of Minnesota's manufacturing firms are nervous about the potential impact of marijuana legalization and changes to drug-testing laws, according to a key annual survey of industry leaders.

Even more manufacturers are worried about providing mandatory paid leave benefits and the cost of a new payroll tax.

"Small and very small manufacturers, in particular, fear that they lack the resources to cope with the new laws," Bob Kill, CEO of Enterprise Minnesota, said Thursday. "When they hurt, we all hurt, and communities suffer."

The industry-supporting group's annual State of Manufacturing survey found once-prominent inflation and supply-chain concerns have been replaced by headaches over legislative mandates.

"This is the first time in the 15-year history of the survey that specific government actions so directly affected the challenges that Minnesota manufacturers already faced," Kill said.

Manufacturers remain confident, if not entirely upbeat.

The number of company leaders who have confidence in their financial futures ticked up to 86% — which is the 15-year average. And about as many are confident they could withstand an economic downturn in 2024.

Despite this optimism over their financial outlook, Rob Autry, founder of polling firm Meeting Street Insights said, "Half of manufacturing executives we spoke with felt the business climate in Minnesota had gotten worse."

The poll surveyed 400 Minnesota manufacturing executives in August and September. The annual checkup gives a close reading on an industry that accounts for 13% of Minnesota's GDP and 11% of the state's employment.

Business owners say "attracting qualified workers" is the key to growth and the top issue they face. Yet for the first time in several years a majority of firms said they were not hiring; smaller businesses reported fewer open positions than larger corporations.

Video remarks from U.S. Sen. Amy Klobuchar and U.S. Rep. Pete Stauber both touched on the industry's persistent labor shortage at Thursday's State of Manufacturing event in Brooklyn Park.

The Minnesota Republican representative said more youth need to be encouraged to pursue manufacturing careers, while the Minnesota Democratic senator said immigration reform should also be part of the solution.

Most manufacturers told pollsters they are increasingly focusing on work-life balance to attract new hires in addition to good pay. Larger companies were far more likely to promote career growth and benefits as well.

Businesses in several Minnesota industries have voiced concern cannabis legalization will limit an already-thin applicant pool as many of their jobs still require marijuana testing for safety reasons. Sixty percent of state manufacturers said they are concerned about cannabis in the workplace and perceived limits on being able to regulate it.

All employers can ban on-the-job use and possession of pot. In many cases employers are no longer allowed to screen job applicants for marijuana or randomly test employees for it. Several categories of jobs and "safety sensitive" positions do still allow testing for marijuana before and during employment, and some jobs like trucking are still federally required to test for marijuana.

Minnesota's new paid family leave and sick and safe time requirements drew the most scorn, though, with 77% of business leaders concerned there is no small-business exemption.

"I think what manufacturers are really concerned about is the state government coming in and telling them what they need to do," Dawn Loberg, a business development consultant at Enterprise Minnesota, said.

Heather Braimbridge-Cox, CEO of Windings Inc. in New Ulm, said the ban on non-compete agreements puts her company in a bind since the aerospace manufacturer deals with so much sensitive intellectual property.

"We do expect continued improvement," she said. "It shouldn't be so difficult for us to navigate these new laws."