Rural economic development at the Legislature: SEED lost in the weeds


For the most part, Governor Pawlenty’s SEED proposal didn’t germinate in the past Legislative session.

SEED stands for Strategic Entrepreneurial Economic Development, a plan put forth by the governor and the Minnesota Department of Employment and Economic Development (DEED) to revamp ways that Minnesota assists entrepreneurs and communities with economic development. Many of the SEED proposals were similar to recommendations made by Minnesota 2020 in a June 2007 report, “Chasing Smokestacks, Stranding Small Business.”

But 2008, with a state economy in recession and mounting state budget deficits, was not a good time for political leaders at any level, and their allies in nonprofit organizations and associations, to seek new programs or even new approaches to maintaining the status quo.

For instance, in a stalemate with the governor, the Legislature kept alive the widely criticized JOBZ program that aims to stimulate economic development by subsidizing plant construction and relocation with tax breaks to large companies. Opponents of JOBZ had hoped to kill the program; the Pawlenty administration proposed expanding it. The compromise: keep it as it was.

Some of the SEED objectives can be accomplished administratively, using existing resources, said Mark Loftus, director of business and community development at DEED. For instance, DEED has established an Office of Entrepreneurship internally that can better marshal information and resources for people starting new businesses.

The Legislature did provide some additional money for programs that can prove fruitful in the coming year, however. Among these droplets of fresh public plasma was $400,000 to assist entrepreneurs do research and development through DEED’s Small Business Innovation Research program.

Some additional, albeit small amounts of state aid were approved that should help communities along the western state border to leverage their local development efforts, and a tax law change should encourage people to invest in “angel” funds . But falling through the cracks was grant money for the regional Minnesota Initiative Foundations that could leverage scarce state dollars with regional foundation money.

There will be changes to the JOBZ program made administratively, said DEED’s Loftus. That will come as the department implements recommendations made in a Minnesota Legislative Auditor’s report critical of the tax subsidy program.

All in all, not much came of economic development proposals as they fell victim to state budget problems. Some other helpful programs did come through the Legislative process that will help rural areas, such as the livestock investment program administered by the Minnesota Department of Agriculture.

And the biggest stimulus for the rural economy will undoubtedly prove to be the transportation bill that became law over the governor’s veto. It will create jobs for the weakened construction industry, and it will improve infrastructure for rural communities and entrepreneurs that need to reach markets in good times and bad.

Lawmakers and government officials alike should give a collective sigh of relief. It could have been worse. The end of the session should also serve as a wake up call for all involved to explore best ways to target scarce state resources in ways to help communities and prospective entrepreneurs create growth, jobs and a willing class of new taxpayers.