Reinventing the Economy: Franken Talks Jobs

During the height of the budget brawl at the nation's capitol, Senator Al Franken called together his staff and asked them to take on an apparently impossible task.

“I said we have to invent a perpetual motion machine,” Franken told city officials during a visit to the Burnsville Ice Center on Friday. “We have to create jobs with no money.”

Franken’s request was a response to the impending end of the American Recovery and Reinvestment Act, which was signed into law on February 2009. The act included $288 billion in payroll tax cuts, a $224 billion increase in health care and educational funding, and $275 billion for grants, contracts and loans meant to stimulate the economy directly. At the time, businesses were suffering from a severe shortage in capital. Private financing had come to a halt as banks tightened in and refused loan applications.

The intent of the Recovery Act was to create or save jobs by spurring on new projects with investment from Uncle Sam. Some of the money was allotted to local and state government, which then used it to finance projects. Others funds were given directly to businesses. It was thought that such measures would create 3.5 million jobs by fourth quarter 2010, according to a report in May 2009, and 6.8 million by 2012.

“(The stimulus) really helped and we’re running out. It’s not being renewed. There is the issue that people in the country don’t know what it did, the jobs it created, the energy savings,” Franken told those at the meeting. “We hear over and over again about the ‘failed stimulus package.’ It certainly was not that.”

By Franken’s account, the stimulus package created between 2.4 million and 4 million jobs, though the numbers have been the subject of a heated debate between the rival parties.

“It may have saved us from going into a deeper recession or a depression,” Franken said. “I don’t think that’s a failure at all. It’s a tremendous achievement.”

The Burnsville Ice Center was one such project. The feds granted the city of Burnsville $347,000 to revamp the aging ice center, which was built in 1972. At the time, the building was the largest carbon dioxide producer in the city. The facility was also a consistent drain on the city’s budget, costing approximately $29,000 each year for repairs alone.

The federal funds covered a portion of the renovation project, which cost $4,993,000 overall. During the project, contractors replaced both ice sheets, upgraded the lighting system in both rinks to be more energy efficient and installed a geothermal heating and cooling system, among other things, said Dean Mulso, director of the ice center and skate park.

The project was completed in October 2010. The upgrade has resulted in significant energy savings, city officials said.

“We used to use $60,000 to $80,000 of natural gas. We’re going to spend only $11,000 this year on natural gas,” Mulso said. “We’re seeing a huge savings there.”

In total, energy savings are expected to save the city $77,000, presuming that energy rates hold constant.

The ice center was just a small chunk of the money allotted to the city through the Recovery Act, however. The city was awarded $559,300 awarded. So far they have spent $501,741 of that total, according to quarterly reports available on recovery.gov, a federal website devoted exclusively to tracking expenses and outcomes of the Recovery Act. In addition to improvements at the ice center, the money was intended to go to an energy upgrade for Burnsville City Hall, convert holiday lighting in the Heart of the City from traditional to LED lighting, an inventory of the city’s greenhouse gas production and energy audits at city buildings and the creation of a financial incentive program for energy-efficient programs for Burnsville businesses.

According to the same quarterly statements, the city reported that between February 2009 and June 2011 a total of 4.92 jobs had been created as a direct result of the recovery funds they received.  However, these findings were not reported by the businesses themselves, which received 96 percent of the funding.

The city reported that it had paid $480,655 of the funds to vendors and contractors. The site even includes a list of those in the private sector who benefited from the recovery funds. Among them were Cornerstone Copy Center, CR Planning, the Dakota Electric Association, Direct Digital Controls, Harty Mechanical, Nelson-Rudie & Associates and Lund Food Holdings.

Across Minnesota, $2.7 billion in Recovery funds have been paid out, a little more than half of the $4 billion awarded. However, the number of jobs that were created or retained in Minnesota as a result is not easily quantifiable, said Edward T. Pound, the director of communications for recovery.gov. In Minnesota, a spokesperson for the Minnesota Department of Employment and Economic Development said that their agency did not track those numbers.

Both directed Patch to the Minnesota recovery website, which is operated by Minnesota Management & Budget. As of Tuesday afternoon, the requested information was not forthcoming.

According to another source, State Economist Tom Stinson, no such numbers are available.

"There are no precise measures of the number of jobs retained and created in Minnesota by the 2009 stimulus package. Most economists, however, believe the great recession would have been much worse in the absence of the actions taken by the federal government and the federal reserve," Stinson said. "Mark Zandi (former economic advisor to Republican John McCain) and Allan Blinder did a study looking at the national impact about a year ago and found it to be significant." 

At the meeting, Franken defended the Recovery Act and projects aimed at energy efficiency as a means of increasing job growth and reducing climate change in one fell swoop.

“We have a challenge in Washington on both scores. We have found that new members of Congress and some old ones have not bought that the climate is changing worldwide and the causes of that,” Franken said. “I think they’re wrong. But to those members I can tell them that energy efficiency in and of itself is a way to save money and to create jobs. This facility right here is evidence of that.“

Nevertheless, it looks unlikely that another stimulus package will be forthcoming, Franken said. Thus, the economic “perpetual motion machine,” which is not an impossibility after all, Franken said.

“We have to create jobs with no money. I’ve seen jobs that do that,” Franken said. “There’s an air conditioning company called McQuay International in Owatonna and Faribault. What they do is essentially lend money to people who would use the air condition systems — colleges, university and such. There is no money out of pocket for the clients. They pay them back through the energy savings.”

Franken proposed such a system for broader job creation. If, for example, such a system had been used to renovate the ice center, the contractors would have fronted the money to the city and the city would have paid them back with the $77,000 in annual energy savings.

“There’s our perpetual motion machine,” Franken said. “We know that 40 percent of the energy used is used by buildings. With so many people in the building trades out of work, and out of work a long time, it feels to me that this is an area where we can put people back to work and not spend money out of pocket. Then we use the energy efficiency saving to pay off the capital.”