Optimism rising among rural Minnesota manufacturers, except when it comes to health care

Optimism rising among rural Minnesota manufacturers, except when it comes to health care
MinnPost.com | By: Chuck Brown June 15, 2011

I feel a strong kinship for rural Minnesota business owners, having enjoyed a corporate career that included managing a manufacturing firm in Olivia, the Corn Capital. I'd like to think I can feel their pain.

And the pain that I felt at a recent southern Minnesota economic conference was mostly centered around health-care bills paid to other private and nonprofit entities, not nearly so much around taxes and government regulation.

The conference on manufacturing and bioscience in Greater Minnesota was held at Jackpot Junction Casino Hotel in Morton, Minn., and was sponsored by the Southern Minnesota Regional Competitiveness Partnership, a consortium of regional economic development nonprofits.

Much of the program dealt with the general and current state of manufacturing and was keynoted by Bob Kill, president and CEO of Enterprise Minnesota. Kill presented the 2011 findings of his organization's annual comprehensive survey of Minnesota manufacturers. The good news is that the results, especially when compared to surveys from the two previous years, reveal companies that have weathered a very serious recession and are now anticipating improved prospects.

About 40% expect expansion
Generally, manufacturing execs showed increased confidence about the financial future of their firms over 2009 and 2010. About 40 percent expected expansion, compared to 26 percent and 8 percent in 2010 and 2009, respectively. In 2009 the expectation for continued recession was 56 percent. That dropped to 19 percent in 2010 and 9 percent in 2011.

Executives expect similar improvement in gross revenues, profitability and capital expenditures.

But that's not to say everything's coming up roses. Any exec worth his or her salt will guard against unbridled optimism and keep a wary outlook for storms ahead, and that's just what business leaders did when asked to rank a number of potential concerns.

And their No. 1 concern was the cost of health-care coverage. Currently at 71 percent, that worry has increased over the past two years and also exceeded the second ranked concern – government policies and regulations – by 10 percentage points. And even that understates the weight of the health-care issue.

Kill followed his survey findings with a panel of four Greater Minnesota manufacturers whose companies range in size from a single shop with a few dozen employees to a Fortune 500 food processor. Despite the vast difference in the size of their companies, their remarks were quite similar. And their comments and feedback from focus groups, published along with the survey data in a book-length report, made it clear nobody is happy with the current state of employer-provided health care.

Ever-increasing health costs
Most comments described ever-increasing costs and reduced benefits. Some are self-insuring. Some are going from defined-benefit to defined-contribution plans. Some are completely dropping the benefit, leaving employees to fend for themselves. And companies with significant export business worry about their competitiveness with foreign companies not burdened with health care. That's because in almost all the nations that compete with us, their governments provide universal low-cost health coverage and the result is a lower overall economic burden for health.

Although the consensus from Minnesota employers seems to be that the current health-care situation is bad, and that the future looks even worse, there were surprisingly few negative comments on the Affordable Care Act, given its high ranking (58 percent) as a concern.

The reform effort is mostly viewed with uncertainty and skepticism, though there wasn't much of the baying about socialism and government takeovers we've grown to expect from the Tea Party. These are practical folks, more concerned with what works than ideology, and for now there are just too many unknowns.

Manufacturers are a resourceful bunch, and they take obvious pride in having managed their companies through a tough recession, but there is something intractable about the health-care issue. It defies the usual management tools, and even seems immune to business cycles, growing through boom and bust alike, calling into question whether this knotty problem can be solved by market forces alone.

Firm hands, but huge questions
These tough and resourceful business leaders had all gotten through the recession with strategically planned belt-tightening, and the inescapable image from the conference was that of captains of industry with a firm hand on the tiller, having steered their companies through troubled waters and now adding sail.

But when it comes to health care, we were left with these huge questions. Can these captains of industry find their way through the health care shoals without a broader public option? Will the Affordable Care Act eventually help, or will it be scuttled? Can we get beyond platitude deep thinking to find workable solutions? If you're a Minnesota manufacturer, mind the helm and stay tuned.

Chuck Brown is a former manufacturing business manager and former City Council member from Olivia, Minn. He also is a senior policy fellow on rural issues for Growth & Justice, a Minnesota policy research organization that advocates for expanded prosperity through smart public investments in education, health and infrastructure.