Manufacturing is Montana’s Best "Revival Tool"

When it comes to improving its economic environment Montana has its work cut out, Jerry McConnell, President of Jore Corporation in Ronan, told Montana manufacturers at a conference in Missoula.

Posted by: The Journal

Economy and Business By Evelyn Pyburn

(Thanks to Deborah Nash for passing this along.)

While some people in the state are "working tirelessly" to improve the economic environment, they have an "uphill battle," said McConnell who has spent most of his career working in all parts of the country, turning troubled companies around.

The opposition to manufacturing in Montana was very visible during the recent special session of the state legislature, he pointed out. Protesting outside the Capital Building were an "overwhelming number of opponents" — people who believe in "a sterile, government-subsidized, fantasy world, where everyone works at their pleasure, makes great money, and serves all mankind."

"Where were you?" McConnell queried the manufacturers in the audience at the biennial conference sponsored by the Montana Manufacturing Extension Center, Bozeman. He said he knew they were busy running their businesses, but the situation is one in which business owners have to put in an appearance in
Helena. "It’s critical," said McConnell.

McConnell presented an analysis of what’s wrong with Montana’s struggling economy, bluntly and succinctly. His view is not that of an outsider, however, because several years ago he and his wife, after many years of moving from state to state, "retired" to Superior, Montana by purchasing a business, Precision Sawmill Systems.

McConnell’s expertise in running ailing businesses was called upon to help save Jore, a tool manufacturing firm in Ronan, from the jaws of a $35 million bankruptcy case. The bankruptcy has been settled and the company was recently purchased by a Washington businessman. McConnell announced that for the first time he was happy to pay taxes, when Jore made its first quarter tax payment in three years. Not only does it mean that the business is making a profit once again, he said it will grow by 30 percent this year.

He said that saving Jore was the "most gratifying of all turnarounds" he’s accomplished, because in all other cases the business’ employees had other options for employment in their community — "not so in Ronan, Montana."

But despite all his experience in business in all the states in which he has done business, doing business in Montana was a new experience. "I became ‘painfully’ aware of the problems of doing business here" he said.

Top of the list of the state’s problems is having the highest of personal income taxes, said McConnell. "Being wealthy kicks in at $75,000, in Montana," he said, "while in other states it’s more typically at $250,000."

"Wealthy people bring wealth," he said, "and they bring opportunities for creating more wealth." He pointed out incidents in the state, which indicate that many Montanans have a "mind set that resents personal wealth," and they deliberately penalize the wealthy, to the detriment of their own communities.

Montana has "the most punitive workers comp rates and rules I have ever seen," continued McConnell, "and it’s so slanted in favor of the employee that it causes employers to throw in the towel."

McConnell cited four cases within his own company in which they have proven fraud, "but we can’t do anything about it." "That has to stop," he said emphatically.

To a lesser degree transportation is also a problem, said McConnell, pointing out that two-thirds of their product goes east of the Mississippi River and 70 percent of what the company buys come from east of the Mississippi. Of Jores’ vendors, to whom they owed the $35 million that was part of the bankruptcy, only two of the vendors were in Montana, he said. In terms of building its manufacturing sector, he said, the state suffers from a lack of infrastructure with limited access to suppliers and capital.

McConnell cited the state’s business property tax as being a "serious impediment." It’s a tax that most other states do not have.

There is also a bias in the state’s laws toward agriculture and the service industry, he said. "I understand that in the past we were dependent on agriculture, but it is only seven percent of the state’s economy today."
While the service industry comprises the largest part of the economy — 31 percent — the industry’s per capita income ranks 47th in the nation. "We moan and groan about that, and yet," said McConnell, "those are the kinds of jobs we solicit for the state."

While there is concern about the size of government and how it interferes with manufacturing, "manufacturers do not take an active role to change that," said McConnell, "and we have to change it."

He pointed out that a competing neighboring state, that usually out performs Montana, South Dakota, has no corporate income tax, no personal income tax, no personal property tax, no business inventory tax and no inheritance tax. The state had an unemployment rate in 1999 of 1.1%.

In 1980 Montana per capita income level ranked 34th and South Dakota ranked 46th. "Their legislature decided to take the long view," said McConnell, and today, twenty years later, they rank 35th while Montana ranks 47th. Their per capita income is $4,100 higher.

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