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Can Minnesota learn from North Dakota's business model? Sure, if we strike oil.
As someone who grew up in oil sale country and spent two summers working oil rigs during college, I often cast a jaundiced eye over claims that combine "economic growth," "business-friendly regulatory and tax climate" and "oil and gas industry."
Chances are, the writer is about to praise a government that is only starting to enjoy its first oil and gas boom before all the social costs have come due. High paying jobs and environmental problems tend to get noticed first, but there are also housing shortages, crime, new demands of roads, schools and other public systems that cost money (which oil companies cover somewhat) and aggravation, which is almost completely paid for by the residents.
Earlier this month, I ran across a breezy opinion piece in the Duluth News Tribune titled, "A view from North Dakota: Minnesota can learn from North Dakota’s business model," that set off my radar. It began:
My move (from Duluth) to North Dakota and position at the state’s chamber of commerce has allowed me to better understand how and why North Dakota is capturing the nation’s attention with record economic growth and low unemployment rates.
There's nothing like a regular paycheck to allow you to better understand your employer's point of view. But when you promote it in the newspaper, it's a good idea not to get too far outside the facts.
The op/ed has since slipped behind the newspaper's paywall, but it was posted as a comment at Minnesota Brown if you want to read the entire piece. I thought it worth questioning, and wrote the following response, which the newspaper published:
How nice that the CEO of the North Dakota Chamber of Commerce wrote a column for his hometown paper to cheer on Minnesota businesses to imitate North Dakota — or else to simply move there.
Before anyone pulls up stakes for the greener grass across the Red River, let’s look closely at Andy Peterson’s business-climate claims.
He declared the impact of the oil and gas boom is overblown. Why, “only 25 percent of the state’s tax revenue” comes from that industry. Compare that to Minnesota, where mining produced 0.5 percent of the state’s tax revenue in 2011, and where taxes from all corporations kicked in 4 percent.
Peterson wrote, “Of the more than 24,000 jobs available in North Dakota, nearly 66 percent are outside of the oil-producing counties.” Of course they are. The top five counties had barely 20,000 people before the boom began. And consider all the other sectors that depend on oil and gas expansion: trucking, construction, hospitality and even education and health services. How many of those support jobs could find a foothold in the small towns near the oil patch?
Then there was the claim that “North Dakota is a national leader in manufacturing growth.” According to the Bureau of Labor Statistics, the state had a 12-month, 4.6 percent manufacturing growth rate as of April, definitely beating Minnesota’s 1.7 percent rate, but that’s off a small base. Minnesota has 305,500 manufacturing jobs while our neighbor to the northwest just crept over 24,000 in December — up a total of 1,000 jobs compared to 10 years ago.
Take away oil and gas, which has been growing at a 44 percent rate, plus all the employment serving that industry, and the North Dakota miracle looks like nothing to write home about.
The author also made it sound like North Dakota's friendly business and tax climate had induced Minnesota's Marvin Windows and Doors to open three plants North Dakota. While it's true Marvin has expanded in the state, the company itself hasn't made the claim that tax and regulatory concerns drove it there. Back in 2008, when Marvin announced a plant expansion in Grafton, ND, I suggested some other reasons it made sense for the company.
We wish North Dakota good luck with its oil boom. Severance taxes are a great way to export a state's tax burden. But when those state boosters make distorted economic comparisons with Minnesota (even if they're disguised as Minnesota Nice helpful advice), we'll be there to set the facts straight.