Minnesota business community reckons with GOP losses, empowered Democrats in St. Paul

Minnesota business interests who went all-in to help Republicans hold legislative majorities at the State Capitol are worried what it might mean for the bottom line after midterm elections instead increased the power of Democrats in St. Paul.

The political funds for major business groups devoted most of their money and muscle to maintaining the GOP's two-year hold on the state House and Senate rather than lavishing it on Republican Jeff Johnson's bid for governor. It was a calculation that even if Democrat Tim Walz were to win the governor's office — which he did — that a Republican House and Senate could curb his power.

But Democrats also seized the House majority. Republicans held onto a one-vote state Senate majority, leaving Walz on the verge of the support he needs for initiatives opposed by broad swaths of the business community.

That includes his support for a statewide minimum wage of $15 an hour, strongly opposed by many business owners and leaders of major business groups. Walz has also proposed a gas tax increase for road repairs and spending hikes across a number of state programs, and voiced support for a single-payer health care system. It's left business leaders reckoning with the near-certainty that Minnesota will remain one of the nation's most highly taxed states.

"It's a big step backward," said Mike Hickey, Minnesota director for the National Federation of Independent Businesses, which mostly represents smaller companies and businesses. The group endorsed Johnson and a slate of Republican candidates, and he said the best he hopes for now is two years of gridlock in St. Paul and a better showing for Republicans in the 2020 election.

Hickey also said he doesn't think Walz and state lawmakers will be able to agree on changes to the state tax code that would bring it into alignment with its federal counterpart. That would mean a confusing tax season for business owners, he said, and a signal that Minnesota is an unappealing place to do business.

Voters in the same suburban districts that are home to some of Minnesota's biggest companies — and their employees — helped Democrats flip 18 House seats to take the majority.

Charlie Weaver is a former Republican legislator and operative who is executive director of the Minnesota Business Partnership, which represents some of the state's biggest companies. The group has generally supported Republican candidates, but Weaver said he believes the new Democratic lawmakers from the suburbs won't swing too far to the left.

"They recognize business … contributes 50 percent of all the money to places like the Guthrie and the Walker, places we love and contribute to our quality of life which is something they want to maintain," Weaver said. He also said he's optimistic that Walz appreciates "the value of business."

The election underscored the complex and sometimes competing interests between the business community and shifting political alignments. While Democrats locked down wider suburban support, Republicans strengthened their grip in rural areas where support for President Donald Trump is among the strongest.

Trump has cultivated that political base in part through promises to crack down on immigration, another area of friction with big business. Leaders like Weaver and others have called a continued strong flow of immigrants into the state vital to maintaining workforces.

Weaver noted that Walz won the support of business leaders like Jeff Ettinger, the former CEO of Hormel, and suggested relationships built during his six terms in Congress made Walz "the perfect candidate for the Democrats to put up."

"Doesn't mean he's going to do everything we ask him to do but at least he cares enough to find out where we are," Weaver said. "That's about all I can ask."

Rob Stenberg, president of the Duluth BizPac, a new political action committee launched in the city earlier this year, described the "wholesale change" brought on by this election as cause for "a little nervousness" for the business class. He expressed worry over the specter of continued tax increases under DFL leadership.

"Sooner or later, because the pie in Duluth is not getting any bigger, we're not growing … you're going to tax people out of their houses and then you've got even bigger problems," Stenberg said. "So from a business perspective over-taxation to me is going to be one of our biggest issues moving into the future."

Republicans failed to win a statewide race again this year, a drought that reaches back to 2006, when former Gov. Tim Pawlenty was re-elected. Stenberg cited a leadership void in the party and said Trump's brand of politics hindered the party's prospects in Minnesota. Bill George, former CEO of Medtronic, agreed, pointing to Democratic U.S. Sen. Amy Klobuchar's overwhelming re-election to a third term — and her success in courting donors who represent some of the country's biggest corporations.

"Look, we're not a red state, we're not gonna be, we're a moderate state," George said. "Look at Senator Klobuchar, very moderate across the aisle. Every CEO I know supports her because she is willing to work with them to create a good business environment."

For now, some business leaders are sounding a hopeful note about working with Walz and the new Legislature even as their priorities promise to clash with what was previewed on the campaign trail.

Doug Loon, president of the Minnesota Chamber of Commerce, said he is looking forward to working with lawmakers "regardless of party." He said he expected the chamber to highlight issues of tax code alignment, diversifying revenue streams to improve transportation, boost access to health care "in the commercial market by increasing market competition and stability," and to steer away from mandating employers to offer certain benefits packages.

"Our advocacy efforts are well-positioned to navigate divided government and deliver on behalf of the statewide business community," Loon wrote in an e-mail.

Stephen Montemayor • 612-673-1755

Twitter: @smontemayor