Thursday, April 30, 2009

Serving the hungry

I was stunned and sad to watch the ABC 20/20 episode “life on the edge”. It tells the stories of those who are severely affected by the subprime mortgage crisis. But the one about “a hedge fund manager becomes a pizza delivery guy” got me contemplate how bad the situation was and an important public welfare program—food stamp (if you’d like, you can check this out in free episodes). For those without much savings and income, food stamp is the very help they would need to sustain life.

We have been hearing about the insanely high unemployment rate, but probably few pay attention to food stamp use, which has gone up to 32 million populations in January this year (See Washington Post for the indication of the trend in unemployment, food stamp participation and poverty). This means one in every ten Americans is receiving food stamp assistance.

Compared to a year ago, this figure has an astonishing increase rate across the nation: eleven states reported greater than 20% increases in their caseloads from the previous year. Idaho experienced the highest year-over-year increase surging 32% followed by Utah (29%), Florida (29%), Nevada (29%), Arizona (25%) and Wisconsin (25%). Minnesota has a 10.2% increase rate, about 6% lower than the national rate. (United States Department of Agriculture, State Level Participation) The financial crisis has hit hard every region of the nation. And people are seeking help with daily necessities everywhere, just as they have been looking for jobs.
The sadness with this campaign of serving the hungry is not only about the staggering population turning to government for help, but also the diversity in social classes that are joining the club. As is stated in a news report by CBS, “many solidly middle-class families that never believed they would have to rely on welfare are doing exactly that.” (CBS: From Six-Figure Salaries to Food Stamps) Although some consider using food stamp card to be embarrassing, the program guarantees the basic needs of the suffering are met. It also guarantees the stability of the society.

Food stamp is a legacy of the 1964 Food Stamp Act and has been replaced by the Supplemental Nutrition Assistance Program (SNAP) to emphasis nutrition and health to the low-income family. The amount of benefit is calculated through subtracting 30% of net monthly income of a household from the maximum allotment for the household size. The following is a chart of the SNAP allotment.


Transportation Financing: Not just for roads anymore

Minneapolis has finally arrived. According to Forbes Traveler(dot)com, Minneapolis now has ranking within North America’s most bike-friendly cities. How did this happen? Did someone pass the helmet?

Sort of.

Recently, Bike Walk Twin Cities, won part a federal grant for over 21 million dollars for building new bike lanes, safer crosswalks and other improvements make it easier to walk and bike in and around Minneapolis.

According to the Mayor’s Office, Bike/Walk Twin Cities is part of a national Non-Motorized Transportation Pilot Project administered by Transit for Livable Communities in partnership with the Federal Highway Administration and the Minnesota Department of Transportation (MnDOT). The program is part of a four-year, $21.5 million initiative in four states that was backed by Congressman Oberstar in the 2005 federal transportation bill, SAFETEA-LU.

Another boost to Minneapolis’ bike-friendliness is of course the Martin Sabo bicycle bridge that raises bicyclists above the LRT line and busy Highway 55 and completed the Midtown Greenway, in 2007. Hennepin County built the bridge with about $3 million in federal funds and $2.2 million of its own money.

However, not everyone is as keen on spending money on bicycle as Minneapolis is. A more recent blog entry on Twin Cities Streets tells of Senator DeMint’s (R-SC) stimulus amendment to prohibit bicycle funding. DeMint’s efforts didn’t work though. In a recent article, C.I.C.L.E projects from $700-$900 million in extra spending on bicycle-related projects.

The key is that individual state departments of transportation have the final say how stimulus money is spent. With that, Minneapolis has the potential of taking over the number one Seattle as the Nation’s most bike-friendly city.

Federal Stimulus Package and Transportation Projects

After last nights class and a couple of very interesting presentations, I wondered what might be in the works for transportation with all of the new federal stimulus money. From a freakonomics blog post, I learned that most politicians, republicans and democrats, are pretty supportive of most transportation initiatives as long as they bring home some money and projects for their home states. Kind of like a whats in it for me attitude.

So, whats in it for Minnesota?

I have heard of one project going on here from where I work. (I work at the Minnesota State Council on Disability, a small state agency.) The Met Council recently held a hearing to decide what it wants to do with some federal stimulus money. MnDOT was pushing to two large highway projects, an interchange on I-494 and improvements to 610, but there were several others (us included) pushing for several smaller projects to be undertaken. We want to use some of the stimulus money, about 30 million give or take, to be used for ADA compliance, meaning re-doing neighborhood sidewalks that have large cracks, curb cuts, signage, traffic signals, etc. around the state. Many cities have already submitted bids on ADA compliance updates. Ultimately, the Met Council decided to do the small projects and one of the large highway projects (Hwy 610), a fair compromise in my mind. The Startribune ran an article on this.

According to MnDOT, they need to allocate $175 million worth of projects by June 30 in order to comply with the legislation. As of April 23, they had allocated $176 million. Minnesota is receiving a total of $360 million from the stimulus bill for transportation. MnDOT is in charge of using the money, but in the Metro area, the Metropolitan Council must approve all of the projects. An example of one of the smaller projects is re-doing Whitebear Ave in Maplewood. Most of the money is going to road and bridge projects. According to MPR, some of the projects proposed by cities did not go through, like re-doing 77th St. in Richfield.

If anyone else knows of any other specific projects that Minnesota will be doing as a result of the federal stimulus funds, feel free to add a comment!

Tuesday, April 28, 2009

Think Congestion is Costly?

Minneapolis-St.Paul is now the 10th worst city in the nation when it comes traffic congestion, according to results of a national traffic study by the Washington-based firm Inrix. The Twin Cities ranked 13th on Inrix's 2007 survey, but moved up three spots to No. 10 in 2009. The bumper-to-bumper traffic brought a huge price on valuable time, productivity, energy consumption, air quality, and even safety on the road. Texas Transportation Institute calculated that the nearly 1.4 million Twin Cities rush-hour commuters in 2005 wasted 41.8 million gallons of fuel stuck in traffic. Also lost over the year were an average of 43 hours per driver valued at $14.60 per hour for individuals and $77.10 for businesses. That same year, the American Automobile Association (AAA) study said the Twin Cities area cost per resident of crashes was $757, and more than one study concluded crashes account for up to half the congestion we encountered.

As a market-based solution, congesting pricing became an experimental measure to reduce traffic volume. Some researchers estimated that a 1 percent increase in the time-plus-money cost of automobile travel would lead to roughly a 1 percent reduction in the rate at which those trips are taken. In 2005, Minnesota opened its first priced lane, the I-394 MnPASS HOT Lanes. In September 2009, a similar congestion pricing scheme which called Priced Dynamic Shoulder Lanes (PDSL).

According to the evaluation of I-394 HOT lanes in operation in 2007, it did successful work as a traffic management. Average speeds in the unrestricted/free lanes have gone from 58.9mph to 62.2mph - an increase of 3.3mph or nearly 6%. But the revenue is under half forecast, just a bit over $1m. How to financially self-support challenge this market-based measure. The emergence of Public-Private partnerships (PPPs) offers an innovative method for financing infrastructure in pricing roadways.

For decades, policymakers have largely relied on taxes from gasoline to fund investment in roadways. But the growing scarcity of fossil fuels and the political infeasibility of raising taxes make the revenues from transportation-related taxes are failing to keep apace with the needs of the transportation system, the congestion pricing really provides a trial not only in improving life quality, but also in funding transportation infrastructure.

Predatory government?

The New Voices in Philanthropy blog recently posted a piece about governments' increase in user fees as a social justice issue (scroll down to find blog post).  The author argues that the increased user fees are "predatory government" practices because of their regressive nature (in both % of total income and the types of services taxed).  Interestingly he also proposes increased user fees as an area where philanthropies could potentially have a social justice impact.  

He poses two questions to readers:

1. What response is philanthropy making (currently, we’re not aware of much direct response)?

2. How can/should philanthropy respond (and is this an area where philanthropy should offer a response at all)?

What do you all think?

Friday, April 24, 2009

Proposed Cuts to Minnesota’s Health Care Programs: At What Cost?

According to a recent survey conducted by the University of Minnesota, the number of Americans living without health insurance increased by 9.3 percent between 1994 and 2007. In Minnesota, the number of uninsured grew by 8.4 percent during the same time period. Even more troublesome, the number of uninsured children in Minnesota grew by 6.2 percent -- whereas the number of uninsured children nationwide decreased during the same time period.

Both the Minneapolis Foundation and Minnesota 2020 attributed recent cuts to Minnesota Care program and declines in employer-sponsored insurance to the rise in uninsured children and households in Minnesota.

Now, Minnesota and other states will most likely face additional increases in the number people living without health insurance. According to the University of Minnesota’s State Health Access Data Assistance Center, dramatic increases in Minnesota’s unemployment in the late 2008 and early 2009 coupled with additional increases in health care costs will contribute to even higher numbers of uninsured individuals and families.

Facing a $4.6 billion budget deficit, Minnesota lawmakers are faced with tough decisions to reach a balanced budget. As a result, reductions in funding to many state programs, including public health care programs, are on the table. While federal stimulus funds for Medicaid programs require states to maintain current eligibility thresholds for state-run public health programs, Governor Pawlenty’s recent budget revisions propose some dramatic cuts including the following:
  • Eliminate access to public health insurance programs to adults without children -- an estimated 60,000 people would lose access to health care;
  • Restructure General Assistance Medical Care to reduce available services to adults;
  • including eliminating coverage for hospital stays and outpatient services;
  • Delaying changes to eligibility requirements for state health plans to 2011 – changes that would result “in at least 84,000 people from government-subsidized health care.
Governor Pawlenty’s proposal reflects an attempt to balance the budget during a particularly difficult time. But at what cost?

First, a 2005 study by the Minnesota Department of Health reported that for every dollar spent on increasing access to health care, there is a return on investment to the state of between $3 to $6. This return is the direct result of decreased use of hospital emergency care and admissions as well as increased earnings of enrollees due to primary care access.

Second, hospitals expect reductions in access to public health care programs to dramatically increase the demand for emergency room charity care: “The health system, which operates the University of Minnesota Medical Center and six other hospitals, predicts a loss of $100 million in revenue over the next two years under Pawlenty's budget cuts.”

The result would be a health care system under stress with limited ability to provide care and services to the entire community of patients.

While the Governor’s revised proposal helps address the budget deficit in the short-term, reductions in access to health care could contribute to heightened costs in the long-term.

MFIP diluted

Minnesota Family Investment Program is Minnesota’s “welfare reform program,” providing families with children cash and food assistance, typically for a maximum of 60 months. Fact Sheet

MFIP requires parents to work, with assistance designed to be a supplement to, not a replacement for, earned income. The program seeks to accomplish this through several ways, such as not counting a the first 36% of earned income in determining the grant amount. Additionally, families do not lose their MFIP assistance until their income is 15% above the federal poverty line. This number has been continually shrinking over time…
The initial trial period, which was from 1994 to 1998 in a limited area (Hennepin, Anoka, Dakota, Mille Lacs, Morrison, Sherburne and Todd Counties) set a cut off at 140% of the federal poverty level.

This flexibility was thought to be one of the program’s key inducers of success. Indeed, MFIP’s dissemination was largely based on early studies, such as Manpower Demonstration Research Corporation’s initial program evaluation, which highlighted this unique attribute.

Persons in Family Poverty Line 15% above 40% above
1 $10,830 $12,455 $15,162
2 $14,570 $16,756 $20,398
3 $18,310 $21,057 $25,634
4 $22,050 $25,358 $30,870
5 $25,790 $29,659 $36,106
6 $29,530 $33,960 $41,342
7 $33,270 $38,261 $46,578
8 $37,010 $42,562 $51,814

Taking away this incentive could provide the political benefit of reducing program eligibility and thus participation, but it certainly has a negative effect on families. Indeed, 15% above the poverty line is not at all a self-sufficient level. Such hamstringing of the program would certainly negate substantial investments made into families. If the goal was to transition families off of welfare – limiting eligibility would certainly give the impression of success. However, if the goal is stabilize families, maintaining more families with higher levels of earned income would show real success.

Tuesday, April 21, 2009

Go Go Gadget Administrative Arms

A recently introduced bill at the Minnesota Legislature would "redesign" the way Minnesota counties deliver social services to Minnesota's most vulnerable citizens.

The redesign efforts have been led by the Association of Minnesota Counties (AMC) and the Minnesota Association of County Social Service Administrators (MACSSA). AMC and MACSSA contend that the structural relationship between the state and counties is unsustainable--that the money the state directs toward certain human services programs would be more efficiently allocated by local county-level administrators. In the same way that the states are policy "laboratories" for the nation, the counties, serving as the administrative arm of the state, can be incubators for innovative solutions to state-wide service delivery challenges.

MACSSA's 2009 Legislative position statement notes that government bureaucracies often grow incrementally in order to combat fraud and abuse, mitigate risk at the margins, and provide equal opportunity--hardly ignoble purposes. However, a thick bureaucracy can also slow the progress toward new ideas and trap local units in a sort of path-dependent "road to nowhere."

In a March 16, 2009 editorial to the Star Tribune, sums up the counties' argument: that if they are in the business of buying outcomes, not outputs, a radical accountability shift is needed.
[Murray County's] juvenile mental-health treatment costs dropped $60,000 from 2004-05 levels when two young people turned 18 and moved away, [AMC director Jim] Mulder said. But state rules required the county to keep spending at the former level. The rule, not actual need for services, drove spending, he said.
The complexity of human services funding streams between federal, state, and local levels of government makes elimination of these spending mandates (a.k.a. "maintenance of effort") a sticky political issue. From the Strib:
Eliminating some county mandates, especially those that require counties to spend at prescribed "maintenance of effort" levels to help snare federal matching funds, could cost the state hundreds of millions of dollars.
State lawmakers seem stuck in a terrible bind. All things equal, it seems perfectly reasonable to eliminate requirements that counties spend money needlessly. However, lifting these spending mandates would deepen a state budget deficit projected north of $6 billion (exclusive of federal aid).

Opponents of mandate elimination assert that mandates can work to level the playing field--that left to their own devices, some counties might myopically underspend in some areas--e.g. mental health services, public libraries, or other "public good"-type human services--leaving future taxpayers to foot the bill. All Minnesotans would agree that it would be unacceptable to backslide to a system in which, as one mental-health advocate put it, "some counties' idea of a mental-health program was a bus ticket to Minneapolis."

What do you think? Do local government spending mandates stifle innovation? Do they mandate anything but mediocrity? Does this debate question the adequacy of representative democracy (at the local level) in making human services spending decisions?

One county administrator I met last summer told me, "I'm not opposed to mandates. I'm opposed to ineffective mandates." A separate bill introduced last month in the House would tighten the circumstances under which the state could impose mandates on local units of government. It is unclear how this bill would complement the aforementioned redesign efforts.

I think that in recent months, both sides have moderated somewhat. As it seems likely that an effective solution to this structural problem lies somewhere in the middle, I'm hopeful that meaningful reform will emerge from the debate.

Saturday, April 18, 2009

How Healthy is the Dream?

If you have not had the chance to view this you tube video of Susan Boyle singing I Dreamed a Dream from Les' Miserables it worth a look if you enjoy watching Simon looking stunned. The clip is fantastic but it is the title of the song that interests me more for this posting, in many cases we dream of opportunities and many of them are available in the United States. One of those opportunities is education which is available through our public school system, but that opportunity comes with a price tag which is currently supported on the local level through state aid, property tax levies and bonding referendums. Given the current economic environment one may ask how healthy is the dream of providing quality education, particularly on the local level?

The Minnesota Legislature's House Research Department provides a great guide to education finance that defines pertinent terms, explains the formulas used to determine aid available to school districts, and reports on the amount of aid available to individual school districts.

In particular, the bonding referendums are the most interesting to me. The Fiscal Analysis Department, Minnesota House of Representatives has a fairly easy to understand description of referendum funding requirements and how state aid is used to equalize funding across districts that have varying tax bases. Without some of this background information I would struggle to understand the complicated formulas used to determine how education is funded.

Independent School District (ISD) #276
in Minnetonka makes an interesting case to change referendum requirements. They contend that, in the past referendum funding was used to support and provide services outside core educational requirements. Now, it appears that referendum funding may need to be used to provide the core services. Because the state issues a cap on referendum funding for school districts each year and state aid has been decreasing, ISD #276 proposes removing the cap and allowing school districts to pursue additional dollars through referendum. To view their proposal, take a quick look at page three of this document, . Will proposals such as Minnetonka's keep the dream of education healthy or will it cause additional or long term issues? I am interested in hearing your thoughts.

Friday, April 17, 2009

Higher Education Funding

With the downturn of the economy, most states are experiencing a budget deficit this year according to the Center on Budget and Policy Priorities. Minnesota is not an exception to this trend-the Minnesota Office of Management and Budget came out with the February Forecast at the beginning of March, and the legislature and the governor are going to have to fill a budget deficit hole of $4.6 billion.

In times of economic difficulty, many states, including Minnesota, have resorted to decreasing the amount of funding provided for higher education. This results in higher education institutions having to rely on tuition increases in order to continue normal operations.

Although it remains to be seen what will come of the legislative session as it relates to higher education funding, Governor Pawlenty proposed a tuition cap for the University of Minnesota and the Minnesota State Colleges and Universities system in his State of the State address. Putting a limit on tuition increases would benefit those who pay the tuition, because while tuition could be increased, payments would be guaranteed to not increase beyond a certain amount.

However, tuition caps could also adversely affect the institutions and those who benefit from them. Similar to a levy cap imposed on a local government which decreases the amount of flexibility that a local government has to deal with their budget, a tuition cap imposed on a university would not allow for the university to have flexibility in the options that they have to deal with their budget. This poses a particularly difficult problem in years when the state cuts funding to higher education.

The Minnesota House of Representatives is not proposing to cut any funding for higher education institutions for the upcoming biennium. Because of federal stimulus dollars, the House proposes to maintain the base level funding at approximately $3 billion. In future years, however, the House of Representatives is proposing to cut $122 million, amounting to a 3.9% cut in funding. HF869, authored by Representative Rukavina, is the Omnibus Higher Education Bill. HF869 uses federal stimulus dollars to create a tuition increase cap of $300. Given the ideas put forth thus far, it will be interesting to see how the House, Senate, and Governor will compromise on a higher education plan for the upcoming biennium.

While it remains to be seen what will happen this legislative session with regard to higher education funding, the reliance that Minnesota’s public higher education institutions, the state budget deficit, and the past trend to cut higher education in economic down times suggest that students across the state may be paying more for their tuition moving forward.

Education in Minnesota

Minnesota has always valued education. Funding higher education is certainly the pathway to building a stronger state. Higher education has played a large role in making Minnesota a great place to live. The University of Minnesota was established in 1851, seven years before the territory of Minnesota became a state. Due to economic woes, the University was closed during the Civil War, and later reopened with the public support from the Morrill Land-Grant Act.

The first public university in the state, the University of Minnesota has predominantly been one of the best public institutions for higher education in the state. Striving to improve the status of the U, legislators in Minnesota take higher education policy very seriously. This session (January 2009 to present) more than 36 bills have been introduced dealing solely with higher education policy and finance.

The one bill that I found to be most striking dealt with promoting higher education among high school students. This bill is House File 2080 introduced by Representative Lyndon Carlson. This bill states that higher education institutions, such as the University of Minnesota, are required to partner with high schools to promote college attendance. Along with encouraging students to obtain higher education, the bill also establishes programs to make these goals attainable.

The higher education in Minnesota is just one key component to the education system that characterizes Minnesota as such a great place to live. House File 2080 encourages students to pursue higher education, and therefore pursue a higher quality of life. Studies have shown that higher education not only has benefits to the individual but also society as a whole. Overall, I believe this bill would address access, which is a key deterrent to students not obtaining a higher education. By addressing access and education together, the bill adequately achieves its presented goals.

Wednesday, April 15, 2009

Why Does My Tutition Keep Going Up?

Nearly everyone likely to read this blog is aware that college tuition and fees have risen considerably over the past 25 years or so. A report released this last December, "Measuring Up 2008," found that tuition and fees have risen 439 percent since 1982 while median family income has only risen 147 percent during the same time. Unsurprisingly, students and families are piling on more debt and access is declining. This figure shows just how dramatically college costs are outpacing inflation and even medical care.

What is going on? Are colleges and universities spend-thrifts?

According to the Delta Cost Project, the answer is generally no, although there are differences between public and private institutions. For the most part, spending is not dramatically increasing over inflation, except in research spending. In the case of public universities and, especially, community colleges, tuition increases are mostly the result of cost-shifting. State subsidies to higher education have been declining over time in Minnesota and in nearly every state. About 92 percent of tuition increases in public research universities is due to cost shifting. Spending is actually declining in real terms at every other type of public post-secondary educational institution.

The situation is slightly more complex at private institutions, because they vary so much in size, wealth, and mission. Harvard, Yale, and the rest of the Ivy League received a lot of attention until recently over the massive size of the endowments and their low rate of endowment draw. These institutions tend to skew the data regarding spending, because they essentially went on spending binges during the long run-up of endowments since the mid-nineties. Only about 30 percent of tuition increases at private research universities was because of cost-shifting, the rest went to spending increases.

At other private institutions, the story is more similar to public institutions. According to that same study, about 85 percent of tuition increases was due to cost-shifting. The truth is that most private institutions are heavily dependent on student revenues and the exceptions are places like Harvard, Carleton College, and Macalester College.

Despite cost-shifting, some spending is taking place. Where is it going?

The biggest spending increase has occurred in institutional aid, a practice called tuition discounting. This practice is more common at private colleges and universities, but grant aid has increased at nearly every institution.

The next biggest category of spending increases occurred in sponsored research. In general, this does not have any effect on tuition, up or down.

The last major increase in spending is in student services and remedial education. Very little of this funding is directly related to instructional spending, it is for support programs and expanding access to post-secondary education.

So, which state spends the most on education and research per student at research universities? Minnesota at $21,400 (only Pennsylvania and Connecticut also spend over $20K).

How much do students at the U pay, on average, of that cost? $9,533 or about 44%.

The national per student average for education and research spending is $14,058 while students are expected to cover about $6,909 or 51% of the total.