Has Minnesota Lost Its Rural Voice?

Last month a policy colleague of mine from the Twin Cities contacted me and asked a question that took me back on my heels.  Specifically he asked if I could identify the creative voices and organizations developing new and innovative thinking to address the challenges and opportunities facing rural Minnesota.  He wanted to know who are the influential voices in the Minnesota legislature on rural policy issues.  And most importantly, if there were any organizations rising to the challenge of amplifying the “rural voice” as Minnesota becomes more and more urbanized.

While on the surface the question was rather simple and straightforward, my answer was anything but.  Rather the question reminded me that it was no more than a decade ago when there were many organizations that tried to fill that rural policy and advocacy void.  In fact, rural advocates were all around us.  Not that many years ago Minnesota hosted an annual “Rural Summit,” where rural residents, advocates and legislators would gather together to share ideas, discuss best-practices and develop ways to move our whole state forward.  And the legislature didn’t need any lectures from outsiders to help then better understand rural issues, as there was always a strong group of farmer-legislators from southern and western Minnesota and a strong contingent from northern Minnesota to keep their urban colleagues informed.  Unfortunately today the number of rural districts continues to dwindle and the last farmer left the legislator several years ago.

Today there are still rural organizations and advocates, but without question our collective rural voice is fragmented.  Concerns about rural health care are advocated by the Minnesota Rural Health Association; the concerns of rural towns and cities are addressed by the Coalition of Greater Minnesota Cities; and likewise, concerns of rural school districts are addressed by the Minnesota Rural Education Association.  But if it is true that the whole can be greater than the sum of its parts, then where are the organizations that facilitate these voices and help unify and amplify their message?  Equally important might be the question, are such organizations even needed?

Personally, I was always struck by the reality that with such a large and diverse rural land mass that Minnesota never had a state office or state agency that was dedicated to addressing rural development or rural policy issues.  For example in Illinois, the Governor’s Rural Affairs Council which is headed by Lt. Governor Sheila Simon recently completed a two-year effort to create a new rural development policy for the state.  Working with regional universities the Governor’s Rural Affairs Council is now in the process of implementing the recommendations from their recently completed study.

Similar examples can be found elsewhere.  For many years the Texas Office of Community and Rural Affairs served as a focal point for the development of rural policy and the distribution of federal funds through the Community Development Block Grant Program.  Today, the recently renamed Texas Department of Rural Affairs not only distributes the CDBG funds to rural communities, but also houses the State Office of Rural Health and the distribution of federal funds to rural hospitals as well.  Similar to its neighboring state of Illinois, the Indiana Office of Community and Rural Affairs is also headed by their Lt. Governor (Becky Skillman).  More importantly, one would be hard-pressed to find a state agency with a wider array of programs and initiatives designed to address the needs of its rural communities and businesses.  From its Young Entrepreneur Program to their Hometown Competitiveness Initiative, the Indiana Office of Community and Rural Affairs is a highly connected and networked organization dedicated to the betterment of its rural places.  And just like its colleagues in Texas and Illinois, the Indiana Office hosts an annual Rural Summit designed to bring rural advocates, legislators and residents together to strengthen the fabric of rural Indiana.

So you can see how my answers to this colleague’s questions seemed a bit weak and tepid.  The reality is that over the years the rural voice here in Minnesota has become simultaneously weakened and fragmented as various rural groups focused on specific sectors or industries with little coordination.  And while I am not suggesting that Minnesota should establish a new state agency, I do believe that a key missing piece in our advocacy for rural Minnesota is that unifying organization to help amplify the rural voice for all. For those of us who sang in our college or high school choir, you know what I mean.  Regardless how strong our individual voices may be, our collective voice is both amplified and strengthened when the director brings us all together.

Mobile Internet is an Equalizer

For a number of years now I have touted in this column the importance of the Internet and the digital tools it provides both Minnesota businesses and residents.  These tools not only allow businesses to increase their productivity and market share, but they allow 24/7/365 access to an increasing variety of public services; provides new access points to higher education; telemedicine and greater personal and community connectivity.  On a large scale the Internet has allowed businesses and communities to have a global digital visibility; and on a small scale it can provide new tools for a local church to maintain a connection with its congregation all week long and not just on Sundays.  It is truly a remarkable technology.  However, the reality is that the Internet is only a useful tool to those who connect with it; so it is not surprising that researchers and government agencies have continually monitored Internet adoption and diffusion across the country since the beginning of the 21^st century.

Today, according to a variety of reliable sources including the U.S. Bureau of the Census and the PEW Internet and American Life Project, we can say with a degree of confidence that approximately 80 percent of all American adults use the Internet, with the overwhelming percentage connecting through a broadband connection.  In fact, according to a recent study by Connect Minnesota, more than 95 percent of Minnesota households have access to a broadband connection and more than 70 percent of Minnesotans purchase a broadband connection.

At the same time studies have consistently found a number of sub-groups lagging substantially behind the Internet adoption curve.   These sub-groups include residents who are 65 and older; residents whose annual household income is less than $30,000; adults living with disabilities; and residents of color.  However, the Internet landscape has been changing substantially in the past few years and one has to wonder if these changes have been truly reflected in many of these statistics? 

For example, today we know that almost 90 percent of the adult population owns a cell phone and that an increasing percentage of those cell phones are Internet-enabled.  Yet for years researchers (including myself) conducted surveys with the opening questions being, “Do you have a working computer in your home?” and if so, “Is the computer connected to the Internet?”  For up until now the assumption has always been that the primary appliance that people use to connect to the Internet was the computer.  However we simply can’t make that assumption anymore.  In fact since the creation of the iPhone, the popular phrase “There’s an app for that” increasingly reflects the adoption of mobile devices worldwide and the change in the way people connect to the Internet.  However, for many government agencies this change has yet to fully sink in, as some still do not consider mobile broadband a true broadband connection. 

For some the issue is the connection speed, as they see mobile Internet connections as generally slower than most terrestrial-based connections such as Cable and DSL (which is true).  But for me the issue is the functionality of the connection; and if I can smoothly stream a Netflix™ video to my phone, how can you tell me that I don’t have a broadband connection?  Further, as the major mobile carriers (Verizon, AT&T and Sprint) begin to deploy wireless 4G technology with connection speeds of 12Mbps and faster, it will soon become self-evident that mobile broadband simply can’t be ignored.

But most important to this discussion is the impact of mobile broadband on some of those sub-groups that have traditionally lagged when measuring broadband adoption.  For example, a recent study from the PEW Internet and American Life Project reports that White, Black and Hispanic Americans all go online wirelessly at the same percentage.  And when looking specifically at Smartphone ownership, Black and Hispanic Americans actually report slightly higher rates of ownership than White Americans.  In fact, very similar results were recently reported by Connect Minnesota where they found no difference in the adoption of mobile Internet among White and Black Minnesotans and that Hispanic Minnesotans substantially surpassed the statewide adoption rate (48% vs. 39%). Similar findings were found among low-income Minnesota families with children.

The point is that the increasing adoption of mobile Internet appears to be an equalizer that needs to be better understood.  The recognition that the adoption of mobile Internet devices seem to be more widespread across a broader set of demographic and socio-economic groups than terrestrial-based Internet is a welcome finding as the Internet has the potential to “lift all boats.”  Accordingly, the sooner we recognize this reality the better.

The Dynamics of a Regional Center

 In late 2008 the status became official: that the Mankato-North Mankato region was changed by the federal Office of Management and Budget from a Micropolitan Area to become Minnesota’s newest Metropolitan Statistical Area.  Of course, most local officials knew this change of status was coming as all of the population estimates since the 2000 Census suggested that the 50,000 threshold was near and most expected that this would be confirmed as soon as the 2010 Census was completed.  But getting the official status declared in late 2008 was to some an early Christmas present.  It opened the door for new levels and categories of federal funding and more importantly, it put south central Minnesota on the screen of many corporations and their site-selection firms seeking to expand to new, emerging and dynamic metropolitan areas.

But is the population size of the region the only factor that makes a region dynamic?  What about MSAs like Detroit and Cleveland whose size far surpasses south central Minnesota’s, but whose economy has stalled and population decreasing?  No, the true measure of a dynamic region is its ability to both serve as a hub and magnet for new job creation and sales; as well as its capacity to reciprocate growth in its smaller outlying region.

So it was with great interest that I read a recent report focusing on the “Trade Center Hierarchy in Greater Minnesota” by U of M researchers William Craig and Bruce Schwartau

( http://www.cura.umn.edu/sites/cura.advantagelabs.com/files/publications/Reporter-41-3&4-Craig-rev2.pdf).  Like many demographic and economic researchers before them, Craig and Schwartau rank greater Minnesota communities by their 2009 taxable retail and service sales.  But in addition to this simple ranking of sales, they also examine changes in the population size, retail sales, and sales per capita.  For you see, it is in these statistics that one can get sense of how dynamic the economy of a trade center really is; i.e. is the community truly serving a broader region, or is it primarily serving its own population? 

A simple example of this is to look at the communities of Willmar and Alexandria.  Willmar is by far the larger of the two communities with a 2010 population of 19,610; while Alexandria’s population is significantly smaller at 11,070.  Yet the smaller Alexandria had retail and service sales in 2009 totaling $287 million, while the much larger Willmar’s sales were only at $282 million.  In fact retail and service sales grew in Alexandria (1990-2009) at a rate of 68 percent, while sales growth in Willmar was less than half at 31 percent.  Translated into sales per capita, the smaller Alexandria reported sales of $25,958 per person in 2009, while the larger Willmar reported similar sales of $14,382 per person. Clearly it suggests that Alexandria is serving as a trade center that is drawing upon a much larger area and possibly a more affluent population than Willmar. And as one who visits both of these communities on a periodic basis, I can attest to the significant growth in retail shops, strip malls and hotels in Alexandria over the past decade, while such growth was not as apparent in Willmar.

So how did the Mankato-North Mankato MSA fair in these rankings?  Well the short answer is extremely well.  Of all greater Minnesota Cities it is clear that Mankato deserves its spot at number 4 in the rankings, behind Rochester, Duluth and St. Cloud.  While Mankato’s 2009 sales were just shy of $1 billion ($904 million to be exact), the remaining three all surpassed the billion dollar mark with Rochester leading the pack and nearly $1.2 billion.  However, what really secured Mankato’s ranking at number 4 was the sales figure for number 5 Brainerd, MN, whose sales were $421 million -- less than half of Mankato’s. Clearly, the Mankato-North Mankato MSA deserves its place and status with greater Minnesota’s other metro areas.

But what was truly most impressive was the sales growth of the Mankato-North Mankato region.  While sales from 1990-2009 grew at a rate of 39 percent in Rochester; 27 percent in Duluth; and 42 percent in St. Cloud; sales grew in Mankato over the same time period at a rate of 123 percent (from $406 million in 1990 to $904 million in 2009)!  Translated into sales per capita, the Mankato area actually generated $17,153 in retail and service sales per resident, while the similar number are $10,976, $10,986 and 10,041 for Rochester, Duluth and St. Cloud respectively.

As I noted earlier, having a large enough population to create a critical mass is certainly an important factor in creating a dynamic regional center, but population alone is not enough.  Rather the ability of a community to evolve into a truly dynamic regional center for sales, service, health care, education, the arts and entertainment is the true test.  And based upon this analysis, it certainly seems like the Mankato-North Mankato MSA is passing this test quite successfully.  With a 2010 population of 52,703, the Mankato-North Mankato MSA is half the size of the St. Cloud MSA at 101,206.  Yet in 2009 it reported 89 percent of the retail and service sales of the St. Cloud MSA.  If this trajectory continues will Mankato jump to the number 2 spot by 2020?  

Is Minnesota Nice to Small Business

The news that new job creation continues to slow is creating concerns among economists and politicians alike.  More and more of the evidence is suggesting that if you are truly concerned about job creation, you really need to focus on the needs of small businesses.  Why? According to the Small Business Administration, small businesses employ nearly half of all private sector employment and accounted for approximately two-thirds of the net new jobs created between 1993 and 2009.  More importantly, in our effort to speed our economic recovery along, it is helpful to remember that between the “dot-com” recession at the beginning of the decade and 2007, small businesses added almost 7 million jobs, while larger businesses with 500 employees or more actually shed close to 1 million jobs.  Lesson … if job creation is the goal, focus on creating an environment that supports small business development.

So it was with this in mind that I reviewed the results of a new research report on the friendliness of the states toward small business development.  The research, which surveyed more than 6,000 small businesses all across the U.S., was conducted by Thumbtack.com in partnership with the Ewing Marion Kauffman Foundation.  The study actually examined 12 separate dimensions of “business friendliness” for small businesses; from ranking the friendliness of a state’s licensing regulations to the friendliness of its tax code.  Not surprisingly, the findings that made the headlines in the press release was that Texas, Idaho, Utah and Oklahoma were the most friendly states for small businesses, while California, Hawaii, Vermont and Rhode Island were the least friendly.  In fact, California was home to the three least friendly cities to small businesses; Los Angeles, San Diego and Sacramento.

But aside from the rankings, what I found most interesting was the finding that small businesses in the study reported that licensing and regulatory requirements were nearly twice as important as tax-related regulations in determining overall business friendliness.  This finding reminded me of a study conducted last year by U.S. Bank Corp. where they also found that among the concerns of small businesses, only 8 percent reported that taxes were a primary concern.  So why are small businesses more concerned about the regulatory environment than they are about taxes?  Well I would suggest two reasons:  first, most small businesses are just that – small.  Most have few employees and modest sales revenues; therefore in most states taxes are not such a burden.  On the other hand according to the Small Business Administration, these same small firms with 20 or fewer employees actually spend 36 percent more per employee than larger firms trying to comply with federal regulations.  Simply put, complying with environmental, health and licensing regulations are disproportionately more expensive for smaller firms.  Therefore, when examining the friendliness of the business climate for small business, entrepreneurs focus more on the regulatory environment than taxes.

So how “friendly” is Minnesota to small businesses?  Well overall, the report gave Minnesota a solid grade of “B” ranking 18^th out of all the states.  Minnesota seemed to rank higher on the cost of hiring new employees; ease of starting a small business; zoning regulations; and the availability of training programs.  Conversely, Minnesota didn’t rank as well in licensing regulations and the friendliness of the tax code. The city of Minneapolis itself ranked 15^th out of the 40 major cities examined in the study, ranking high in the cost of hiring new employees and the ease of starting a new business.  Clearly, while the state ranked reasonably well in this study, we certainly can strive to do better.

Political and civic leaders should be encouraged to take a moment to consider the implications of this and similar studies.  While political leaders from both sides of the aisle may have difficulty agreeing on a variety of issues, both Republicans and Democrats alike want to improve the environment for small businesses.  In fact, the study’s authors examined these rankings by the political orientation of the entrepreneurs and found that there was very little difference across the political spectrum (i.e., conservative, moderate or liberal) in terms of how respondents ranked the friendliness of their states.

I am reminded that early in the 2012 legislative session our Republican-led legislature and our Democratic Governor found common ground in passing a bill to expedite environmental permitting.  With that in mind I might suggest that if our legislators are interested in finding bipartisan issues to work on in 2013, they may wish to start by focusing on improving the environment for small businesses throughout Minnesota.