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Promoting Minnesota and Its Business Climate

June 18, 2013 By Lee Egerstrom, Economic Development Fellow

Secretary of State Mark Ritchie might not be running for a third term in the 2014 elections, but that's not stopping him from campaigning. He’s taking official Minnesota data on the road with campaign-like zeal to show Minnesotans that their state business climate—while still mending—is alive and getting well.

“This much is certain,” Ritchie said in an interview. “Whatever I do after office, I’ll be promoting Minnesota.”

As secretary of state, his office keeps official data on a number of key business indicators. Ritchie said he’s amazed at how so many different organizations and business leaders measure and analyze data, and how they come to different conclusions.

“People just accept what others say without going to where there is data,” he said. “What’s missing is benchmark data.”

There’s been a rash of recent reports, some praising and some chastising Minnesota’s business climate or its entrepreneurial environment. Minnesota 2020 noted in May that the state either has the fourth best business climate in the nation, or has the fifth worst, depending on which national ranking system you read. The Washington-based Good Jobs First research group looked at nine such ranking reports and concluded they were “politicized grab-bags of data.”

The Washington think-tank cited flawed studies that statisticians say use “spurious correlations” to draw desired conclusions. Since April, Ritchie has been busy working to correct the record after the business media reported a finding that Minnesota ranked last in the nation for 2012 per capita business startups. That conclusion doesn’t square with business filings at his office.

“I guess I’m surprised to hear prominent business people repeat these findings without checking to see what’s factual,” he said.

The methodology involved in forming the recent entrepreneurial assertions became the determining factor, Ritchie said. At issue is a report using extrapolations from Census Bureau household data, and then estimating entrepreneurial activity. It did not use actual startup data collected by Secretaries of State in the various states.

An April Star Tribune report cleared some of the confusion in comments from former state economist Tom Stinson. He pointed to Minnesota’s low unemployment rate as an influence on entrepreneurship, and how business failure rates offset business startups.

Ritchie said Minnesota’s national leadership in hosting Fortune 500 companies, providing employment for thousands of entrepreneurial and creative people, also holds back startup activity. But that still doesn’t explain the absence of benchmark data that his office collects every month for every year, and how Minnesota’s business startups keep growing.

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Looking at other Midwest states with diverse economies, Ritchie said Minnesota had more startup business filings registered in 2012 than neighboring Wisconsin. Minnesota startups (60,829 filings) looked favorable when compared with Ohio (88,068 filings), despite Ohio having more than twice Minnesota’s population (11.54 million to 5.38 million).

With every passing month, and nearly every week, more conflicting news about Minnesota’s business climate and entrepreneurship keeps rolling out. For instance, business media reported on June 12 that Minneapolis was ranked the nation’s fourth best city for female entrepreneurs. The article also noted that Forbes magazine recently saluted Minneapolis as 12th on its list of “Best Cities for Female Founders.” That same day, the 24/7 Wall St. blog ranked Minnesota as fifth among the “States with the Fastest Growing Economies.” North Dakota, with its booming energy development and small population, was rated No. 1.

Archived offerings from the Wall Street bloggers, meanwhile, didn’t locate Minnesota among the Top 10 or Bottom 10 of states on two other similar measures – States with the Most Government Benefits and States Spending the Most on Education. Being run-of-the-mill here probably doesn’t advance Minnesota’s business climate. Ritchie said he’s been speaking to business groups such as local chambers of commerce around the state, beating the drum for Minnesota’s strengths that includes its business climate.

In that message, he says Minnesota can stop doing some things that harm business growth and development. He lists shifting taxes onto property, sales taxes and fees, among them. He also tells business people to stop allowing or using disparaging remarks about small and new firms, or allowing misrepresentation of Minnesota’s real business climate.

Finally, he tells them to stop saying or doing things that damage the collective “Brand Minnesota.” The brand image comes from Minnesota having highly ethical people, highly educated and hardworking people, creative and innovative people and enterprises, and from being a state that is “welcoming to the world.”

These latter elements will keep creative and entrepreneurial people walking into the Secretary of State’s office to file papers of incorporation.

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