Political trio visits Minnesota bankers at convention

Northwestern Financial Review, Jul 15-Jul 31, 2003 by Bengtson, Tom

Three elected officials brought a big dose of political heft to the opening session of the Minnesota Bankers Association annual convention in St. Paul. Gov. Tim Pawlenty, U.S. Rep. Mark Kennedy and Minnesota House Speaker Steve Sviggum told the 100-plus bankers in attendance that progress is being made toward positive change.

"When you are in times of war, near-recession and mass layoffs, you can't have a budget that goes up in spending by 14.4 percent," Pawlenty said of the budget he inherited. "We had to slow things down, and that is what we did. We are talking aggressive reform and reorganization within several state departments."

Pawlenty said Minnesota will remain "one of the most generous states in the nation," and said savings will come from a number of areas, including the methods state agencies use to purchase things.

Pawlenty said the $4.5 billion budget deficit was much greater than the $1.9 billion deficit that was predicted when he was running for office a year ago. The deficit represented an increase in spending by 14 percent, while revenue was projected to increase by 4 percent to 6 percent. The legislature eventually agreed to a budget that increased spending by $1.6 billion or 4.4 percent. "This is a state that has a spending problem," Pawlenty said. "We are growing the budget more slowly. People and institutions need to spend within their means."

Pawlenty said, however, "there is room for optimism." He said consumer confidence is growing, and that unemployment levels in Minnesota are below the national average. Minnesota, he said, needs mid-level jobs and, he said the state is setting up enterprise zones to encourage business growth in target areas. "These zones will ignite capital investment and job growth," Pawlenty said, citing examples in Pennsylvania where the concept has been tried. He also said the state is "uniquely positioned" to take advantage of its stature as a leader in medical technology.

Pawlenty said his greatest fear is homeland security. "This is what I worry about with respect to our economy," he said. "I worry about how fragile the economy is with respect to domestic terrorism. I want to make sure the state remains vigilant."

Sviggum amplified Pawlenty's positive message. "The $4.5 billion deficit was a major issue and there were some very difficult decisions to make. As a result of the decisions, I can tell you, the sky is not falling, we are not going to become Mississippi," he said. "We are spending $1.3 billion more in the next biennium than we did in the last." He said education was a priority, and noted that there will be no reduction in the amount of money that goes to classrooms. He also said funding levels for programs that aid people with disabilities or people in nursing homes will be retained. College students will have a greater pool of grant and scholarship resources to tap, although they will see their tuition rise.

"It is absolutely imperative that government change," Sviggum said. "It is only special interests that want the status quo. This year, we changed government, and we will continue to do so."

Sviggum reported that no legislation detrimental to banking was passed this session. "There was privacy legislation passed in the Senate, but it didn't have a chance in the House," Sviggum said. Efforts to pass predatory lending legislation also failed. "This year," Sviggum summarized, "the house served as a wonderful block for you." Signaling out Neil Fruechte, president of Roundbank in Waseca, he said: "I guarantee we will always be there for you."

On a national level, Rep. Kennedy said the recently enacted tax relief efforts are designed to recharge the economy. With tax relief passed, he said the next major initiative for the U.S. House is a medicare reform package that includes a prescription drug benefit. The goal of medical insurance legislation, he said, is to give people more options, "because one size does not fit all."

Kennedy, who sits on the House Financial Services Committee, listed a number of committee accomplishments for the year, including action on FDIC reform, interest on business checking, Check 21, regulatory relief and Internet gambling. He said one of the last major initiatives is the renewing of the Fair Credit Reporting Act.

In an interview, he said the committee wants to find a balance between innovation and unfair competition with respect to industrial loan companies.