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President David Berg of Moorhead-based American Crystal Sugar Co. tells fellow manufacturers Friday that his company is donig well, but faces tough international competition. In an interview, he said that the sugar industry historically has not been affected by economic downturns like is happening now. (Don Davis/St. Paul Bureau)

Minnesota economy sweet and sour

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Detroit Lakes Minnesota 511 Washington Avenue 56501

ST. LOUIS PARK, Minn. - American Crystal Sugar Co.'s future is sweet, despite current economic turmoil, if history is any indication.

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But not so much for many Minnesota manufacturers.

"They are down, but optimistic," President David Olson of the Minnesota Chamber of Commerce said about the state's manufacturers.

On the other hand, David Berg, Crystal Sugar's president, remained optimistic about his firm's future.

"In general, sugar consumption doesn't get hurt by an economic slowdown," Berg said Friday after talking to about 200 at the annual Minnesota Manufacturers' Summit.

The news was mixed at the suburban Minneapolis meeting. A Princeton cabinet maker said business is down 10 percent to 15 percent because of the housing slump. But a St. Thomas University professor said export opportunities are bright because the dollar is weak in comparison to other currencies.

Regardless of the industry, however, Gov. Tim Pawlenty and Olson warned that state legislators may want to raise taxes when they meet starting in January.

"The last thing we should be doing in this state is increase your taxes," Pawlenty told the heavily Republican group.

Pawlenty emphasized his opposition to higher taxes, which he said would raise costs of struggling businesses. He also told the industry leaders something they already knew - many small businesses do not pay corporate tax, but pay business taxes via their personal income taxes that some Democrats want to raise.

"I am very concerned about our tax burdens," he said.

Olson agreed, adding that he fears if Democrats get a veto-proof state House majority that they will push through those tax increases and Republican Pawlenty will be powerless to stop them.

Pawlenty promised that "for as long as I am governor, I will do everything I can to keep a lid on these costs and lower them when possible," referring mostly to taxes.

Berg, the day's keynote speaker, told the story of the Moorhead-based Crystal Sugar cooperative. Its six sugar beet processing plants make 18 percent of the country's sugar.

Even if current economic problems end up having no impact on Crystal Sugar, other indirect problems are on the horizon.

With high energy prices driving more farmers to raise corn for ethanol production, "other agriculture products want to pull acres away from sugar beets," Berg said.

In an interview, Berg said that he expects the biggest economic impact to be high interest rates he must endure to obtain loans.

But, he said, other, unexpected, problems may lie ahead.

"You have to have your eyes open as wide as they can be," he said.

Olson said many Minnesota manufacturers are considering laying off employees because they have no choice, although "they are trying to keep the employees they've got."

Pawlenty said that besides keeping taxes low, state government needs to improve education.

The governor has discussed education changes often during his six years in office, but his emphasis on the subject Friday showed a renewed interest. He said businesses would benefit from better educated workers, and of the Friday morning summit discussion often touched on education.

Minnesota colleges do not do a good enough job teaching teachers, Pawlenty said. And he emphasized a pet project of his: switching teacher pay to a system based on performance rather than seniority.

"The rest of the world has moved on," Pawlenty said. "Everyone else aligns the money with the results they want."

The governor hinted that he will look for ways to get people on welfare working at industrial jobs that now go unfilled.

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