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The Brain Trust: Dan McElroy, Department of Employment and Economic Development

Dan McElroy’s forebears left their names on Minnesota – literally.

His grandfather, Frank D. McElroy, was the sixth president of Mankato Normal School, which is now called Minnesota State University-Mankato, and there’s a building – McElroy Hall – named after him.

McElroy’s late father, David McElroy, was president of Northern States Power in the 1970s, and an interpretive center at Wild River State Park in Chisago County along the St. Croix River now bears his name.

“He was the leader at NSP when they donated the land for Wild River State Park,” the younger McElroy explains.

The commissioner of Minnesota’s Department of Employment and Economic Development, a self-described policy wonk, has made his own mark on Minnesota politics and government in a career that includes serving as a suburban mayor, GOP state representative and in several posts in Gov. Tim Pawlenty’s administration.

McElroy, 60, first got into local government in Burnsville at a time when his suburban city was experiencing tremendous growth.

The city grew from 2,500 people in 1960 to about 17,000 people a decade later. By 1980, Burnsville had a population of 35,000.

McElroy, who owned a travel agency, became interested in the city’s debate in the early 1980s to change its charter to adopt a ward-based political system more like those in large cities.

“That got me interested in questions of how can we best govern our community, and in the principle of proximity – that those govern best who govern closest to the people,” McElroy says.

McElroy grew up in south Minneapolis and graduated from DeLaSalle High School in 1966. He got a B.A. in history from the University of Notre Dame.

Soon after college he returned to the Twin Cities, and in 1979 he bought a travel agency, which he and a partner built into one of the larger agencies in the state. McElroy sold the agency to Northwestern Travel Service, and remained as president of their leisure division for a few years.

In 1984, he started a company that does database management, software development and consulting for travel agencies. He operated that company until 2002, when Gov. Tim Pawlenty appointed McElroy as his commissioner of the Department of Finance.

McElroy can drop legions of statistics in the course of a casual conversation. He cites budget numbers and employment statistics the way other people remember the score of yesterday’s Twins game.

For all of the politics and elections that McElroy has been at the center of during his career, he says his passion is public policy issues.

“I don’t come to this because I love elections. I come to this because I love policy,” McElroy says.

He was elected to the Burnsville City Council in 1982. He became mayor in 1986.

Burnsville continued to grow while McElroy was mayor. He says with pride that the city didn’t have a levy increase for eight consecutive years under his leadership.

While he was mayor, he started to get interested in broader public policy issues. When GOP Rep. Connie Morrison retired in 1994, McElroy ran for the seat for the Republican Party and won.

At the end of his first biennium at the Legislature, McElroy was named co-rookie of the year along with former DFL Rep. Matt Entenza by their House colleagues.

“I took some advice: Ask lots of questions in committee. Don’t talk much on the floor, but if you do say something, have it well prepared,” McElroy says.

He adds that legislators talk more on the floor now that sessions have become photographed and televised.

McElroy spent eight years in the House; for the first four years, he was in the minority and for the next four he was in the majority. He became chairman of the Jobs and Economic Development Finance committee.

As a legislator and consultant, he billed about 2,500 hours and handled the campaigning and duties that accompany being a legislator.

“It was a 100-hour-a-week period of my life,” McElroy says.

He has worn many hats in Pawlenty’s administration. He served as finance commissioner for a little more than a year when the state experienced a $4.5 billion budget shortfall. Pawlenty then tapped McElroy as his chief of staff during a time when a budget showdown between Pawlenty and DFLers in the Legislature resulted in a partial government shutdown.

Pawlenty then made McElroy a senior adviser to assist on some of the innovation initiatives for state government that Pawlenty had been pursuing, like the Drive to Excellence program.

McElroy became DEED commissioner in January 2007.

Having been a mayor and legislator, McElroy was aware of some of the programs DEED offers. But he acknowledges he had a lot to learn when he took over the department, which was created earlier this decade with the merger of state agencies handling economic development and workforce development.

While the organizational aspects of the merger are complete, McElroy says the agency is still fusing the cultures of the two former agencies.

DEED entered the merger with a one-sentence mission statement to help individuals, businesses and communities achieve economic success. McElroy says those three things are inextricably linked.

“We’re blessed with a variety of programs. The strategy is we help individuals, businesses and communities through addressing work force opportunity, community support and business support.”

DEED operates 47 Workforce Centers throughout the state that help connect people to jobs. In 2008, about 94,000 individuals visited the centers. Many made numerous trips for job help.

The agency provides unemployment insurance, and runs a dislocated workers program that helps people find their next job.

The Job Skills Partnership provides grants to educational institutions that work with businesses to train existing employees.

There are also several programs that provide business development. Among them are the Minnesota Trade Office and the Job Opportunity Building Zones (JOBZ) program. DEED is a partner with the U.S. Small Business Administration in nine small business development centers in Minnesota that at any given time are helping about 3,500 small businesses.

In the community assistance arm of DEED, several programs are available for communities to apply for money to clean up contaminated areas for redevelopment. DEED is also part of the Public Facilities Authority that finances water treatment and other projects.

DEED’s work has come into the spotlight since the state’s economy has tanked. McElroy realizes the seriousness of the state’s economic situation – and understands why the spotlight is trained on the agency he’s head of.

“When we report numbers, like unemployment numbers, those aren’t numbers, those are people. When the average unemployment rate is stated, it understates th e fact that for a family that has had a layoff, their unemployment rate may be 100 percent,” McElroy says.

McElroy is on the hot seat right now. In 2008, DEED grappled with rising unemployment and statistics indicating that Minnesota for the first time in decades is lagging the nation in job growth.

“There’s pressure from the economy for us to do a really good job and to concentrate on our work and make sure we have the right strategy,” McElroy says.

One reason for Minnesota’s slump in job creation is the state’s “overexposure” to industries that are connected to housing, McElroy says. Since the housing bubble burst in 2006, Minnesota has lost about 26,000 jobs directly related to the housing downturn. Firms from plywood plants to window makers to mortgage originators have shed jobs in their Minnesota operations, McElroy says.

Large employers in the Twin Cities like Northwest Airlines and Ford Motor Co. have also shed jobs.

On the bright side, jobs in financial services unrelated to mortgages have been growing, he says. So have education and some sections of the health care market.

DFLers in the Legislature have stepped up the political pressure on McElroy as the jobs situation has worsened. Senate Majority Leadership Larry Pogemiller, DFL-Minneapolis, has said several times recently the state needs new leadership in the area of jobs.

McElroy sees the criticism as signaling a debate that will unfold in the legislative session, and welcomes the fight.

“I think we have the right strategy and I love a good public policy debate,” McElroy says. “Sen. Pogemiller and I have had them over the years and we will continue to have them.”

McElroy notes a couple of efforts the state is making to improve the job situation.

The Public Facilities Authority has increased its financing for sewer and water plant projects. In a normal year, the PFA would do $350 million in projects. This year it will do $450 million.

Minnesota is one of few states that have work force development funds paid for by surcharges on the unemployment insurance tax. DEED is allocating $5 million more than it normally does for the work force centers by spending the balance that is normally kept in the fund, McElroy says.

He also notes that projects from bonding bills passed in 2007 and 2008 are proceeding.

Pawlenty in October announced five proposals that will be in his budget to foster green jobs. Taking an idea from Sen. Ellen Anderson, DFL-St. Paul, Pawlenty is proposing green tax exempt zones similar to the JOBZ program.

Another idea Pawlenty is pursuing comes from Sen. Tom Bakk, DFL-Cook, and this one is a tax credit for insurance companies that invest in local Minnesota businesses. Pawlenty will also bring back the angel tax credit for venture capital that was proposed in 2007.

McElroy is also working with officials in Wisconsin as they try to share services. Pawlenty and Wisconsin Gov. Jim Doyle this week announced a plan to save money by working together. McElroy has had talks with his counterparts in Wisconsin about helping with the unemployment insurance system.


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