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Pawlenty sizes up business atmosphere

Gov. Tim Pawlenty spoke to about 30 people Tuesday at the Red Wing American Legion hall.

Gov. Tim Pawlenty warned that Minnesota's reputation as a high-cost state could threaten businesses as economic conditions worsen.

"Being cost-competitive is important -- especially now," he told a group of Red Wing business leaders Tuesday at the American Legion hall.

The Republican governor's visit comes on the heels of a Minnesota Chamber of Commerce survey revealing a pessimistic attitude among business leaders. Pawlenty said leaders must chart a course to reassure citizens that "we'll get through this."

"We've got a national economic crisis, and people are worried for understandable reasons," he said after the meeting in an interview with the R-E.

State chamber President David Olson said the survey indicates the 2009 state legislative session, in which lawmakers will write a two-year state budget, likely will be contentious.

"The 2009 session already looms important, especially if the economic downturn continues and there is pressure to raise taxes," Olson said. "We are likely to see numerous proposals to raise taxes on business, and they could not come at a worse time."

A state budget deficit between $1 billion and $2 billion can be expected, the chamber predicted. State economists will release a forecast in November, though uncertainty in the markets makes determining those figures difficult, Pawlenty said.

"But we have to live by their forecast," he said.

More than half of the chamber Business Barometer poll's respondents said higher taxes are the biggest problem their companies face when it comes to creating jobs. A year earlier, high taxes were listed as the No. 1 problem by one-third of those taking the poll.

During Tuesday's visit, Pawlenty railed against Democratic tax increases and issued an urgent call of support for House GOP candidates. He and House Minority Leader Marty Seifert, R-Marshall, used the meeting to stump for Tim Kelly, the Republican candidate for House District 28A.

House Democrats are within a handful of seats of establishing a veto-proof majority in the Legislature. That could be decided in November, with all House seats up for re-election.

"I would plead with you to do all you can" to preserve the veto power by electing House Republicans and keeping tax hikes in check, Pawlenty told the crowd.

Sen. Steve Murphy, DFL-Red Wing, said a veto-proof Legislature would give Democrats more leverage in reaching compromises with Pawlenty, who has a reputation as a tough negotiator.

"It sure would be nice to have a governor to sit down and legitimately negotiate with legislators," said Murphy, a supporter of Kelly's opponent, Rep. Sandy Wollschlager, DFL-Cannon Falls. "If he's unwilling to sit down and legitimately compromise on issues, the train wreck continues."

Forum Communications Minnesota Capitol Bureau Chief Don Davis contributed to this report.