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Professor: State economy looks ‘good,’ but …

Andrea Parrott//January 13, 2015

Professor: State economy looks ‘good,’ but …

Andrea Parrott//January 13, 2015

Although a St. Cloud State University economics professor expects Minnesota’s economy to grow 3 to 3.5 percent in 2015, he says the state faces some challenges including filling openings for skilled workers and potential limits in bonding for public infrastructure.

“The No. 1 thing you will hear from people in central Minnesota right now is, ‘it’s so hard for us to find a qualified worker,’” King Banaian, interim dean of St. Cloud State’s School of Public Affairs, said in a talk Monday to members of the American Council of Engineering Companies of Minnesota chapter.

Banaian is co-author of the St. Cloud Area Quarterly Business Report. Since 1999, the publication has surveyed St. Cloud area businesses to assess the business climate. According to the last survey of 2014, about 46 percent of respondents expected to see an increase in business activity in six months. In that same time frame, about 31 percent expected to have difficulty “attracting qualified workers.”

Finding skilled workers and job training are among the priorities at the Capitol this legislative session. While the manufacturing sector has received a lot of attention for its shortage of skilled workers, engineering firms are also struggling to fill positions, Alliant Engineering President John Dillingham said after Banaian’s presentation.

Such shortages can stymie employment growth, Banaian said.

Another challenge the Legislature may face has to do with certain capital investment guidelines from Minnesota Management and Budget. According to those guidelines, the amount of tax-supported outstanding debt, or bonds already issued, cannot exceed more than 3.25 percent of the state’s total personal income, said Kristin Hanson, assistant commissioner for debt management at MMB, in a separate interview.

The November 2014 debt capacity forecast, released in December by MMB, shows the state could spend $700 million in general obligation bonds before reaching 3.25 percent of its personal income. The $700 million is a 10-year average that estimates how much the state can spend in general obligation bonds, said MMB communications director John Pollard.

The guidelines, however, are just that — guidelines, he said. Legislators are not required to follow them. They could choose to spend more than $700 million and find a way to pay the additional costs.

Although a potential ceiling in general obligation bonds could affect public investment in roads, highways and bridges, Banaian said the Legislature could pay for such projects from the projected $1 billion state budget surplus.

Despite the potential challenges, he has a generally favorable view of the state’s economy. “The economy looks good,” he said. “In fact, it looks quite good. Not great, but good is good.”

His take appears to match a consensus among Minnesota businesses. A December 2014 Mid-America Business Conditions Index by Creighton University placed Minnesota second in economic growth among a region consisting of nine states.

Minnesota manufacturers agree, according to a survey conducted by the Minnesota Department of Employment and Economic Development and the Federal Reserve Bank of Minneapolis. Fifty-two percent and 42 percent of respondents, respectively, expect increases in product orders and staffing levels.

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