Shutdown concerns mixed among Minnesota's private sector

From landlords to hospitals to construction firms, unease is growing in Minnesota's private sector about the state government's pending plans to suspend projects and lay off workers.

Although some sectors of the economy, like banking and retail, seem less worried so far, St. Paul landlord Frank Viggiano is among those starting to lose sleep.

Standing outside one of his buildings on Thursday, he explained that all five tenants rely on various forms of government assistance to pay their rent.

"I'm concerned about them and also concerned about our ability to keep the building open if there is a state shutdown," Viggiano said.

Some of Viggiano's renters get subsidies from Section 8, a federal housing subsidy; others draw support from a nonprofit helping them with mental illness.

Viggiano worries that a state government shutdown could disrupt the flow of money to his tenants and their ability to pay rent.

"The way my process works, I get rent, and I have a mortgage, sometimes two mortgages, and if I don't pay those within 30 days, I get a letter from the credit union. If I don't pay within 60 days, they start the foreclosure process," said Viggiano.

In some of Minnesota's bigger industries, the unease has gotten even greater.

The Minnesota Hospital Association has expressed consternation over Gov. Mark Dayton's effort to have the state withhold payments to medical providers who deliver care to people enrolled in such state-funded programs as Medicaid and MinnesotaCare.

A judge has yet to rule on Dayton's plan, but that could cut a crucial flow of cash to Minnesota hospitals, said Lawrence Massa of the association. He said the state's hospitals collect about $1.5 million a day from Medicaid to treat low-income and disabled patients.

Massa said hospitals might need to shed workers to counteract any loss. He said some facilities have financial reserves to handle such an eventuality, but cash on hand varies from one hospital to the next.

Layoff worries are also reverberating through the construction sector, which is in road repair season. Dave Semerad, chief executive officer of the Associated General Contractors of Minnesota, said a state shutdown would cause layoffs.

"Not only on some public jobs, but could be private jobs, too, because it's going to affect permitting and inspections and that sort of thing," said Semerad.

The shutdown looks more dire for businesses that rely on direct spending by state government than for those depending on the patronage of state workers whose paychecks could be curtailed.

The state's projected spending under current law is more than $19 billion a year. The total pay of state workers is around $2 billion. That's less than 2 percent of all wages paid in Minnesota. So it's too soon to speculate about the effect of a shutdown on retailers, said Brian Steinhoff with the Minnesota Retailers Association.

"Is it a week shutdown? Is it two weeks, a month? All that's going to have a bearing on the effect it's going to have on retailers," Steinhoff said.

Bankers likewise don't seem too worried yet. Tess Rice, general counsel for the Minnesota Bankers Association, said banks could run into some difficulty filing paperwork. But she doubts deposits would decline due to worker layoffs.

"I'm not sure that would have a significant effect on a single bank," Rice said.

Even at businesses like Affinity Plus Credit Union, where state employees make up a big chunk of the clientele, concerns about the shutdown are muted. Chief executive Kyle Markland said the credit union has taken out new lines of credit and built up its reserves, steps that will insulate the organization against any financial hit its members take and let it be flexible with members who struggle to repay loans.

"We just see this as short term interruption of income to them and we don't anticipate this would have any material impact on our financial standings," he said.

Markland said the credit union is moving ahead with plans to hire 50 new workers in the next three months.

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