Tuesday, May 12, 2009

Doomsday (Mostly) Averted: New York's Transit Financing Crisis

When I was in New York City this spring, I was amazed that the base rate for a subway or bus ride was $2.00, only $.25 cents more than here in Minneapolis. Even more surprising was New York did not have a rush fare, meaning that taking public transit in rush hour  in New York was actually a quarter cheaper than in Minneapolis. There were rumblings however of a doomsday approaching, meaning massive service cuts and the possibility of a 25% fare increase. I was lucky enough to be offered a position in New York during my trip and I will be moving to the city at the beginning of June, right when the doomsday will hit. Out of interest in the topic, and for my own personal budgeting plans I have been following this topic over the past couple months. It appears the doomsday has been (mostly) averted, though many players (including transit riders) in this process will still feel some pain.

The New York Metro Transit Authority operates as a unit under the state government of New York. The MTA network includes the New York City Transit system of buses and subways (forth largest in the world),  the Long Island Railroad, Long Island Buses, The Metro-North Railroad, and tolls on bridges and tunnels that connect to Manhattan, MTA service extends from New York City through Long Island, north to upstate New York, and even into Connecticut (the state of Connecticut does provide some funding to MTA in the form of grants). All of these services make up an annual operating budget of nearly $11 Billion. Page II-1 of this document provides a nice overview of funding sources and expenditures in the operating budget. 

Notably, the largest revenue source (45%) for MTA's operation budget is through fares, but a significant portion also comes through real estate and state dedicated taxes (28%). The current economic crisis has resulted in a 2% decrease in ridership for 2009 from 2008 and decreased real estate tax revenue, leaving the MTA with a nearly $2 Billion budget deficit for 2009

In December, 2008, Gov. Paterson called upon former MTA director Richard Ravitch to create a commission that would draft a plan to cover the budget gap. The Ravitch Commission Report contained the following new revenue sources:
-A "regional mobility tax" taking the form of a payroll tax for the 12 counties primarily served by the MTA (Net Revenue: $1.5B)
-The purchase of the East River and Harlem bridges by MTA from New York City to impose tolling on the previously toll-free bridges (Net Revenue: $600M)
-Cyclical fare increases, not to exceed twice annually

These recommendations were strongly supported by Gov. Paterson, yet did not take immediate ground in the legislature. In late March, it appeared that the budget gap would be covered primarily by fare increases and service cuts when the state legislature refused to take action, prompting much disdain from the public.

This past week, a deal finally passed through, three weeks before the June 1st deadline. There will be new fare increases, but they will not be as drastic as expected. Although doomsday is much tamer than originally thought, major pains are still being felt across the state. Gov. Paterson and the Legislature appear to be politically damaged due to the drawn out process, and many fear that the payroll tax increase may not be sustainable if the economic downturn continue. Additionally, as painful as this process has been, a new financial crisis may be brewing in the MTA's capital budget.

Tuesday, May 5, 2009

Housing Tax Credits [Group 4]

Minnesota Housing, in collaboration with other state agencies, other units of government, and private stakeholders developed Heading Home 2010 (the Plan). The Plan calls for the creation of 4,000 housing opportunities (both physical developments and rental subsidies/vouchers) targeted to those experiencing long-term homelessness (as defined by the state).

At its outset, the $483 million Plan included $60 million in Housing Tax Credits (HTCs). Under Section 42 of the Internal Revenue Code, HTCs provide a dollar-for-dollar reduction in tax liability for project investors. Credits also provide an equity investment for development, pulling down the rents required to achieve acceptable net operating income.

States currently receive credits worth $2.20 per capita (adjusted annually for inflation). Approximately 60% of the credits available to Minnesota are allocated by Minnesota Housing. The remainder are distributed by local government suballocators. HTCs have remained a mainstay of Minnesota affordable housing finance since their inception in the late 1980s but are not without shortcomings.

The market for tax credits is pro-cyclical—development of tax credit-financed projects drops as unemployment and foreclosure rates increase. This problem is particularly acute in non-major markets and in supportive housing developments. Some provisions of the American Recovery and Reinvestment Act of 2009 seek to temporarily stabilize the HTC market. Among them is the tax credit exchange program, in which tax credit allocators may sell unused 2008 and 2009 credits back to the Treasury for 85 cents on the dollar. This policy is expected to yield a windfall for “shovel-ready” projects.

Additionally, HTCs are inherently designed to finance moderate income housing, not the very-low housing as called for in the Plan. Only 30% of persons experiencing long-term homelessness are employed—only 12% full-time. Affordability to the lowest earners is a key barrier to housing.

Because of these structural weaknesses, additional financing is required in order to make housing financially sustainable and affordable to very low earners. In Minnesota, the state-appropriated Housing Trust Fund helps cover capital costs, but is vulnerable to budget reductions in tight economic times.

Other states have taken different strategies in combating long-term homelessness. Wisconsin funds five state programs to this end. In contrast to Minnesota, the Wisconsin programs all give direct payments to individuals. However, the Wisconsin programs seem skewed toward middle-income target populations, as they emphasize stable home-ownership.

King County, Washington has convened the Committee to End Homelessness, an effort very similar to Minnesota’s plan. Noting that long-term homeless populations tend to consume other social services at high rates, the Committee hopes to capture cost savings across all services by stably housing people. These cost savings realized through cross-system and cross-sector coordination finance the county’s housing efforts. [see chart below from CEHKC]

Clearly, long-term homelessness is causally complex and cannot be solved by HTCs alone. Minnesota should strengthen its Housing Trust Fund—the flexibility provided by this financing source is well-matched to the needs of the population and could help to fill systemic resource gaps. Additionally, Minnesota should continue exploring cross-sector, networked approaches to housing and social services.

[Team 3] Improving Transit Efficiency: The Role of Performance-Measurements in Resource Allocation Decisions for Transit

The Metropolitan Council’s regional transit system faces a major budget deficit next biennium:
“For regional transit, including Metro Transit, Metro Mobility, suburban transit services and Northstar Commuter Rail, it will mean $18 million less in projected revenue for the 2010-11 biennium, and a projected shortfall that now grows to $62.5 million for the two-year period that starts in mid-2009” -- Metropolitan Council
The primary reason for the shortfall: declining car sales. Tax on car sales account for 30% of the metro regional transit system’s annual budget. As car sales decline, so do transit subsidies. Transit ridership, however, is up:
“Over the last four years, Metro Transit ridership went up 17.4% to nearly 82 million rides, a 27-year high.” -- Metropolitan Council
Despite increased transit ridership, the Met Council wants to avoid another fare increase. Ina recent statement, Peter Bell, Metropolitan Council Chair, made it clear that the Metro Transit would work to maintain service and keep the current fare structure despite declining revenue:
“The last thing we want to do, given the economic times and growing demand, is cut service or raise fares. Ironically, other transit systems in the country are being forced to do exactly that. We’re hoping not to go there.”
This begs the question: How can transit meet increased demand despite decreased funding?

There is a $67 million short-term solution: The Metropolitan Council expects to spend $70 million in federal stimulus dollars for capital expenditures to support transit.
But what about the long-term?
Is there an opportunity to increase the efficiency of existing transit services to meet new demand while maintaining costs?
Some public finance and budgeting experts argue that performance measurement and budgeting can help.
Just recently, the U.S. Government Accountability Office began advocating performance measurement and budgeting as an opportunity to “improve public management and increase the efficiency and effectiveness of public programs.”

By linking organizational goals with internal resources, outputs, and outcome, performance measurement and budgeting stands to change how public agencies make resource allocation decisions.

But can performance measurement and budgeting be used to improve the efficiency of transit systems – or, more specifically, to improve the efficiency of Metro Transit? In the past 20 years, many states and regional transit systems have signed on to performance measurement and budgeting as a means to monitor and improve ridership and cost-effectiveness.

However, there continues to be a great diversity of opinion and approaches to the use of performance-based funding systems for public transportation by states and regional funding entities.

Currently, Metro Transit does use some performance measurement as a means to monitor progress toward “enhancing transportation choices and improving the ability of Minnesotans to travel safely and efficiently throughout the region. Additional performance measures are used to evaluate new capital projects – such as the Northstar Commuter Line.

how might Metro Transit apply some of the existing approaches to measure and, hopefully, improve the efficiency of the operation of its own transit system?

A review of existing approaches revealed promising practices in applying performance measurement to transit operations. One such approach was implemented in Muncie, Indiana (see Figure 1).

While implementing a similar performance measurement system might be a first step in improving Metro Transit’s ability to improve the efficiency of its service and resource allocation decision, additional research and steps are needed.

First, Metro Transit should consider building a better understanding of the applicability and appropriateness of performance measures to its own unique transit systems. Lastly, as Metro Transit relies on a system of funding formulas to manage the allocation of state funds for operations, it would be useful for MnDOT and Metro Transit to gather research about successful and not so successful efforts
of other transit agencies to control or reduce operating expenses while maintaining optimal levels of transit service.

Given the similar predicament in other states and transit regions, this body of research is likely to be growing.

[Group 1] Should transit funding sources follow a stockbroker's advice and diversify?

It seems that during these harsh economic times most transit agencies are running a deficit. Major cities like St. Louis and Seattle are facing heavy choices ahead. Transit Agencies Facing Huge Deficits. Many services are considering cutting service or substantially raising fares. Metro Transit has not been spared. Initially, the expected deficit would be around $45 million which by latest estimates will be more towards the total of $62 million. Metro Transit Predicts More Red Ink. Metro Transit like many different transit agencies will have to reevaluate funding.

However, Metro Transit should consider itself lucky to not be in a larger as other agencies are in. Metro Transit relies on several different funding sources for bus and light rail operational funding. The largest source of revenue comes from the Motor Vehicle Sales Tax. Because of a constitutional amendment, MVST has been dedicated for transportation funding with 40% dedicated to transit. Relying on this tax appears counter to the goals of transit. If transit ridership increases through new routes and transit corridors, people will place as many miles on their vehicles. Vehicles will last longer and new and used vehicle sales will decrease, decreasing the revenue for the MVST. However, this source only accounts for 38% of total funding sources. Minnesota Transit Spending. Some have called for a shift to a sales tax to stabilize funding and spending. However, transit systems relying heavily on a sales tax have also not remained stable.

Seattle and S. Louis both rely heavily on a regional sales tax and fares. St. Louis Metro Funding. Seattle Transit Funding. Both of these systems are in serious deficit. Seattle is currently running a $100 million deficit and St. Louis is running a deficit 21% of its operating budget. Reliance on a sales tax and fares may not be the answer for a stable revenue flow. Transit may want to take the advice of a stock broker and diversify.

Metro Transit is only running a deficit equal to 6% of its operating budget. This can be attributed to several different sources making up funding for the transit. Like with sales tax, diversifying the sources of revenue will allow for the system to become more stable. The formula of funding sources should not rely so heavily on an elastic vehicle sales tax. Consideration should be given for a regional transit sales tax as another funding source for transit. The most recent transportation bill included provisions for a county option sales tax for capital transitway and park and ride projects. Local Option Sales Tax. Consideration should be given for the addition of a sales tax to the formula of sources for operational funding. A county sales tax for operation will allow the reduction in the reliance on the motor vehicle sales tax and increase the diversity of funding sources creating a better formula for transit funding and stabilize the revenue flow.

What is the value of early childhood education for low income children?

Head Start is a long standing comprehensive early childhood program targeting services to preschool children three to five years old who are low income. Head Start provides a full menu of services including school readiness programming; medical, dental, and immunization services; nutrition assistance; referrals and parent engagement strategies. Established in 1965 Minnesota is one of only 17 states that supplement federal funds with state funds and places fourth in the nation in total funding for the program. Minnesota compliments the federal allocation of $84, 817, 000 in 2009 with an additional $20,100,000, an increase of $2,145,000 since 2002.

Head Start is funded by a complex funding formula in federal law. It emphasizes assurance that programs will receive at least the same amount of funding they did the year previous including an annual cost of living increase, prioritizes funding for programs serving Indian and migrant children and families, and then expanding access by emphasizing those states serving less than 60% of eligible children. 50% of any remaining funds are directed to expanding Early Head Start, a more recent program serving children birth to three years. Minnesota distributes its funding on the same base as the federal aid. The 35 state providers of Head Start programs are required to submit annual plans to the Minnesota Department of Education to be eligible for the funding. Plans must detail the number of low income families and children served by the program, a description of the services, and a plan for coordinating with local full day child care providers.

The value of early childhood education has increasingly come to be an area of study and controversy. In Minnesota the Legislative Auditor reviewed three early childhood programs in 2001. Art Rolnick, Senior Vice President and Director of Research at the Federal Reserve Bank of Minneapolis has studied early childhood programming for at risk children as an unorthodox economic development strategy and found that rigorous programming can return up to $17 for every dollar invested for at risk children in future savings. While Head Start’s supporters argue that it is a solid investment in low income children and families detractors argue that the effects of Head Start fade within three years and as such is a poor investment of public funds.

The recent American Recovery and Reinvestment Act provided an additional $2.3 billion for Head Start. The funds are structured to respond to criticism of the program by strengthening staff pay and training, assisting staff in increasing their post-secondary education, reduce child-to-teacher ratios, and expand Early Head Start.

The Future of GAMC: Cutting Costs and the Costs of Cutting Costs

General Assistance Medical Care is a Minnesota Department of Human Services program designed to give some health care access to low-income adults that do not qualify for federal programs. The two main services currently provided under GAMC  are hospitalization coverage which only covers inpatient hospital coverage, and comprehensive coverage which also includes doctor visits, eye exams, prescriptions, and additional health services. 

The future of GAMC is currently in question, as the Governor has proposed a major restructuring  (p. 138b) of the program that would eliminate the hospital only coverage provided by GAMC, focus spending on outpatient benefits and save $171 million over the 2010-11 biennium. The cuts to GAMC are part of a broader plan to make widespread cuts to health care programs, as the Governor argues that these costs will be among the fastest-growing in Minnesota over the next several years. The proposed cuts to health care programs by Governor Pawlenty total nearly $1.7 Billion. 

The State House has countered this proposal with a bill that would reduce cuts to health care programs and leave GAMC as it currently is. This move comes after much criticism of the Governor's plan on grounds that it will have severe consequences for those in greatest need of health care, as well as that removing GAMC hospitalization funding which will place further financial burden on Minnesota's hospitals   that are already threatened by bankruptcy

The State Senate recently proposed $625 Million in State health care cuts, $200 Million more than the House but still well short of the $1.7 Billion in cuts proposed by Gov. Pawlenty.

Minnesota is certainly not the only state considering drastic cuts to the funding of health care during the current recession. These cuts are re-opening the age old debate of tax hikes vs service cuts in times of recession. One popular argument advocated by Nobel-Prize winning economist Joseph Stiglitz and current White House OMB Director Peter Orszag states that tax hikes on high-income earners are less harmful to the overall economy than cuts to human services.  Unfortunately, this budget situation appears dire enough that the politically and socially unpopular outcome of a combination of tax hikes and health care cuts will be the likely outcome across the country and in our state.

[Group 5] The Minnesota Working Family Credit: Another Government Giveaway or Sound Economic Policy?

In 1991, Minnesota created the Working Family Credit (WFC), based on the Federal Earned Income Tax Credit (EITC). The EITC has been around since 1975, when it was included in an economic stimulus package (sound familiar?). It was small, only $400 for families with children, but 6.2 million families still claimed the credit in its first year. The credit was made permanent in 1978, expanded significantly in 1986 under President Ronald Reagan, and doubled in size under President Clinton in 1993. It was in 1993 that a small credit for single working adults was added.

The EITC is one of the largest and generally considered the most successful anti-poverty programs of the Federal government. It's also one of the few US social welfare programs widely adopted outside North America. It may be surprising to learn that the origin of the EITC can be traced to a proposal by conservative economist Milton Friedman. He had originally suggested a negative income tax, which would have replaced all welfare programs with a cash payment that declined as income rose. Despite the support of then President Nixon, Congressional opposition to the idea led instead to the creation of the EITC.

The EITC, and the WFC, is a means-tested tax credit that applies only to earned income. The credit is calculated through a formula that considers the number of dependent children, shown below. A taxpayer’s EITC increases for every dollar earned until a maximum earned income threshold is reached but the credit does not decrease until a much higher phase-out threshold is reached. The credit is structured this way to decrease the disincentive for individuals and families at the maximum earned income threshold.

The first state to establish its own state EITC was Rhode Island in 1986. Since then, twenty-two more states and the District of Columbia have created their own credits. Like the Federal credit, most state credits are refundable. Only 4 states do not provide refundable credits: Connecticut, Delaware, Maine, and Virginia. There are 18 states with a state income tax, but without a state version of the EITC credit. Households can claim both the Federal EITC and their state credit; they are not mutually exclusive.

Eligibility for these credits is based on the Federal EITC standard. Every state, except Minnesota, calculates its credit as a fraction of the Federal credit.

In 1998, Minnesota restructured its Working Family Tax Credit and renamed it the Working Family Credit. The old credit was set at 15% of the EITC and was scheduled to increase to 25% in 1998, but the Legislature was increasingly concerned with disincentives created by the interaction of the credit with wages and the state's welfare programs. So, the legislature created a two-tier system that increases the maximum benefit, so net income does not decline as a recipient works more hours. Unlike the EITC, when the maximum benefit is reached, the Minnesota state credit increases to a second and higher maximum. The state credit only begins to phase-out when earned income reaches a new higher floor. This change was made to address the relative regressiveness of state income taxes and increase the work incentive.

Most studies indicate that the EITC and similar state credits create a meaningful work incentive and raise low-income working families out of poverty. In 2003, it was estimated that EITC lifted 4.4 million families above the poverty line. It is also estimated that 60% of the increase in employment of single mothers is also because of the credits.

Although the EITC and related state credit programs are generally regarded as effective and successful, there are some common issues associated with them. These problems include: work disincentives, low participation rates, and tax filing costs. Another criticism sometimes leveled at the program is that it does not address poverty for indigent non-working adults. This latter criticism seems to miss the point of the credit. Minnesota has already addressed the first problem with the 1998 revisions to its credit formula. To address some of the other concerns, we recommend the following actions: increase outreach to eligible populations, especially non-native English speakers; ensure free tax filing services are available in low-income communities; and monitor WFC usage and job participation. We believe these actions will provide a solid first step toward addressing common problems with the WFC and increase the credit's effectiveness.

Saturday, May 2, 2009

The Political Feasibility of Adequately Funding Transportation in Minnesota or: How I Learned to Stop Worrying and Love My Commute

There are many measures to judge our system of highways, transit, and transportation options.
However, there are two very noticeable measures that we tend to monitor: congestion and commute times. And in Minnesota both are increasing.Congestion first: A recent study by the Minnesota Department of Transportation (MNDOT) reported that freeways in the Twin Cities were 14% more congested in 2007 than the previous year.

Now commute times: Another recent study from MnDOT revealed that commute times in Minnesota are on the rise.
During the 1990s, commute durations in Minnesota increased by about 2 1/2 minutes on average (this is a lot!). Furthermore, this trend is expected to continue through the 2000s.

While some the increases in congestion and commute times can be attributed to the collapse of the 35W Interstate Bridge in August, the same report warned that
“without additions to freeway capacity, we can expect the future to continue the long-term trend of growth in congestion. MnDOT has limited resources to slow projected increases in congestion.”
By 2030, MNDOT projects that 41.5% of the Twin Cities freeway system will be congested.

In other words, Minnesota is not adequately funding its transportation system.
If we fail to increase funding to provide additional capacity, almost half of our metropolitan freeways will turn into parking lots by 2030.

Assuming our current transportation modal choice, between 2008 and 2030, MnDOT estimates that the
“additional funding needed to maintain our transportation system in good condition and to meet some of the growing demand on the system is near $1.8 billion per year.”

This growing problem is not lost on Minnesotans. After the weather, traffic congestion is a favorite topic of conversation.
So if it stands as a clear problem, why haven’t we addressed it? Why does our transportation system go underfunded?

One piece of the problem is politics.
While taxpayers demand better more efficient transportation, the political feasibility of providing adequate funding remains low for a number of reasons.

First, our current system of funding transportation has few options for increasing current revenue sources:

Before 2008, Minnesota’s fuel tax has not increased since 1988 – inflation has eroded purchasing power
  • The motor vehicle sales tax revenue simply replaced tab fee and property tax revenue
  • Transit service continues to decrease and fares continue to increase
  • Cost for transportation construction projects continues to increase at rates greater than inflation
In other words, additional funding for transportation would most likely have to come from new revenue sources or increased taxes.

Second, Minnesota’s elected officials face an intense political agenda against raising taxes.
In 2008, after six Republican legislators in the House helped override the Governor’s veto of gas tax increase, these select few lost leadership positions, some lost party endorsements, and others lost their seats.

Lastly, an increase in funding to transportation remains a highly visible and contentious issue among Minnesota voters.
While Minnesotans did vote and pass a constitutional amendment to dedicate all motor vehicle sales tax revenue to transportation, any increases in funding simply replaced existing funding from tab fees and property tax revenues. Furthermore, the recent increase in state’s fuel tax came only after the tragic collapse of the 35W Interstate Bridge.

Without adding new sources of income or increasing existing sources, Minnesota stands to face dramatic increases in congestion and commute times over the next 20 years.
Can Minnesota policy makers and voters come together to solve this issue?

Friday, May 1, 2009

As economy contracts, both unemployment rolls and benefits expand dramatically

As our economy struggles to recover, unemployment insurance is an increasingly important safety net for Americans to survive the loss of employment.
Unemployment insurance found its genesis during our last period of prolonged economic struggle.  Our neighbors in Wisconsin adopted the first unemployment program in the early 1930s, and the Social Security Act of 1935 provided strong incentives for states to participate in a new federal program.  Unemployment insurance today is funded through federal and state taxes on employers. States are allowed to expand upon the basic federal unemployment framework.   
Generally, workers must lose employment through no fault of their own in order to be eligible for benefits, though there are some exceptions to that rule.  Workers receive benefits that are calculated based on the employee's reported quarterly earnings, and adjusted by the number of quarters the employee has been employed.   Workers must show they are actively pursuing work, and in Minnesota can utilize state-provided job search and retraining resources. MPR reports that about one third of eligible people generally decline to apply for unemployment, perhaps figuring they will find work soon. But the economic crisis may have changed that; data suggests fewer people are declining benefits today.
Each week, the federal Department of Labor posts information on rates of participation in unemployment programs.  In the last week for which there is data (the week ending April 18th), there were 7,725 new applications for unemployment, along with 125,426 Minnesotans receiving continuing unemployment insurance, out of the 2.6 million Minnesotans covered by unemployment insurance. Graphing this data from the last ten years shows the particular strain on the system today:

The Minnesota Department of Employment and Economic Development reports that March's 42,806 applications for unemployment was over double a year ago.  Included in that number, the manufacturing sector alone saw an additional 8,000 applications in March of this year versus last.  All industries saw an increase of at least 40% in applications, except utilities, which actually saw a decrease in applications.
All that said, if you're going to have to depend on unemployment insurance, the system is far more generous now than it has been in the recent past.   The Minnesota Budget Project described how unemployment benefits have been extended recently.   Typically, workers are eligible for 26 weeks of benefits.  But in recognition of the nation's dire financial straits, the federal government has made available an additional 33 weeks of benefits.  And once the state unemployment rates pass a certain threshold, yet another 13 weeks of benefits are made available.  As a result, a potential 72 weeks (or about 1.38 years) worth of unemployment benefits have been made available to Minnesotans.  If unemployment continues to remain high, another trigger could be passed to extend benefits even longer still.  
The stimulus (also known as the American Recovery and Reinvestment Act) contained funding that would help shore up state unemployment programs in exchange for loosening the rules of eligibility for unemployment to include certain temporary and seasonal workers.  Many will remember that unemployment benefits became the subject of a game of political football earlier this year when figures like Louisiana Governor Bobby Jindal very publicly declined to participate in the federal program, suggesting that the required rules changes would create new uncompensated long-term costs for states.
Unemployment benefits are taxed, which may seem a bit curious, as most people who are receiving unemployment benefits are receiving them during a period of time when every penny counts.  Taxation started after 1987; previously, unemployment benefits were not taxed.  The federal stimulus package at least rolls back these taxes temporarily, leaving the first $2,400 of unemployment income untaxed.  

Enrollment in Public Programs - A Win Win

Research shows that even small increases in a family’s income—as little as $372 per month over three years—can have positive impacts on a child’s social skills and school readiness. Health care coverage, food support, child care assistance, energy assistance, earned income tax credits, and other public programs were designed to help low-income families meet basic needs. These programs also encourage parents and adults to remain in the workforce. Despite the benefits, many eligible Minnesota families do not participate in public programs or claim tax credits.

· Energy Assistance (70% of eligible households are not enrolled)
· MinnesotaCare and Medical Assistance (22% of eligible individuals are not enrolled)
· Child Care Assistance (76% of eligible children are not enrolled)
· Food Support (58% of eligible individuals are not enrolled)
· EITC and WFC (18% of eligible households do not claim)

There are many reasons why families are unable to participate in the programs for which they are eligible: if they are working, they often believe they don't qualify; language or literacy barriers can make a complex application process overwhelming; they feel stigmatized by public programs; they’ve had poor experiences or they distrust government bureaucracies. Even at current participation rates, these programs bring hundreds of millions of federal dollars into the Minnesota economy. In 2006, Minnesota received:

· Energy Assistance=$77 million
· EITC=$432 million
· Child Care Assistance=$132 million
· Food Support=$250 million

The United States Department of Agriculture estimates that every $5 dollars of Food Support benefits generates $9.20 in total economic activity. The economic impact on Minnesota would be enormous if all families participated in these programs. I currently work for Children’s Defense Fund Minnesota on an outreach project called Bridge to Benefits. A core component of the project is an online eligibility-screening tool designed to help individuals and families understand if they are eligible for seven public programs and two tax credits. By answering a few simple questions, individuals and families can learn if they qualify for programs, print out applications and get county-specific information about how and where to apply. The website will also connect families to organizations that provide one-on-one application assistance.

Helping Families Work

Child care is critical to the ability of families to work, go to school, and contribute economically to our community. According to the Children’s Defense Fund's 2008 Kids Count Data Book, the average cost of full-time, year-round care for an infant at a child care center was $13,000 -- no small chunk of change!

Minnesota’s Child Care Assistance Program (CCAP) is designed to help low-income families and families on public assistance pay for high quality child care while they work, look for work, or attend school. Specifically, child care assistance is available to families participating in the Minnesota Family Investment Program (MFIP), families with a MFIP case that closed within the last 12 months, and low-income families that may be eligible for a basic sliding fee (BSF) scale program. During the state fiscal year 2008, there were an average of 8977 families per month receiving child care assistance through the BSF program. However, as of February 2009, there were close to 7500 families on the waiting list, a number which has climbed from 2900 in July of 2007.

Local nonprofit organization Child Care WORKS advocates increased funding for CCAP to eliminate the waiting lists for families needing child care assistance. They also recommend increasing the state’s reimbursement rates -- those payments the state makes to child care providers who provide care for families receiving child care assistance. In 2003, rates were frozen at 2001 levels and have increased only minimally since then. Those increases have not kept pace with the cost of providing care to children.

Federal stimulus funds in the amount of $26 million were announced in February through the federal Child Care Development Block Grant. Which is a good thing. Because in a January interview on Minnesota Public Radio when asked about child care assistance, Tim Pawlenty responded, “'There's a whole array of really good programs and the need always exceeds the resources.' He says the obligation is first to balance the budget and then provide for people in need, and then provide for the future. 'Our listeners have to come to understand the magnitude of the challenge we face. It would be nice to keep things the way it is, but we can't.'"

For personal questions on whether you're eligible, CDF's Bridge to Benefits has a lot of the answers.

Better Buses

Given the choice between buses and rail, without regards to price, I would rather have rail. Trains tell you when they will be there or if they are running late, they don’t stop every block, they have faster boarding and debarking times, and they are not bothered by road traffic. A lot of these benefits do not need to be for rail only; they could, and can, be applied to buses.

Metro Transit recently introduced “NexTrip” which they hope will improve rider satisfaction by telling them exactly when the next bus is coming. This type of innovation is overdue, but in its current incarnation it is extremely limited. The Chicago Transit authority has taken this technology to the next level by including the real time tracking to bus stops, eliminating the uncertainty of waiting for a bus; riders will know exactly when it’s coming.

One of the most annoying aspects of riding a bus is the constant starting and stopping, almost every city block it seems. Not only is it fuel inefficient, but every stop requires riders to debark and new riders to board and pay their fare, adding to the total stop time. A better solution has been around for a while in Curitiba, Brazil, where riders enter a mini-terminal, pay their fares, and queue for efficient boarding in a protected in a full shelter. Not only would the rider transfer take less time, but less stops would be required, if combined with bus tracking, riders could wait for a bus they know is coming in a nice shelter.

Finally, being subjected to road congestion is a limiting factor in bus speed. Minneapolis has begun on an ambitious plan to increase bus reliability and speed. They are creating two dedicated bus lanes on both Marquette and 2nd Avenues that will allow buses to pass other buses that are at a stop. Improvements like this will be necessary to reduce the time it takes to travel Minneapolis by bus, which can be prohibitive.

What will stimulus money do for MN education?

A recent Star Tribune article reports that Minnesota will receive $95 million in federal stimulus funds to address the needs of low-income K-12 students. As Title 1 aid, these funds will be used to provide tutoring services, after-school programs and improve professional development. The Minneapolis School District plans to spend approximately $2.2 million of these funds on early childhood education programs. With the largest achievement gap in the nation, proponents of Minnesota's early education efforts argue that programs like Head Start and Ready for K are critical to improving student performance. 

In addition to federal stimulus money, Governor Pawlenty has requested $188 million from the state legislature to carry out his "Transforming Minnesota's System of Education" proposal. The primary objective of this proposal is to improve teacher quality through professional development, staff training, and the recruitment of effective teachers. 

Unfortunately, many are frustrated by the Governor's lack of support for student-specific programs. Angie Eilers of Growth and Justice (a Minneapolis-based think tank) claims that, under the current proposal, few funds are directed at students. At present, the only student-specific expenditure is an intensive summer school program. This program would receive approximately $10 million dollars or a mere 5 percent of the Governor's requested $188 million. Ms. Eilers recommends that additional funds be set aside to promote best-practice teaching strategies and to provide "rich learning environments" in and outside of school.

And what about higher education? Most higher education stimulus money will fund Pell and research grants. In addition, the stimulus will provide $2500 education tax credits and an increase in work study funds. However, a report by the Minnesota Daily asserts that state allocation of these funds is still uncertain. Senator Sandra Pappas, Chair of the Senate Higher Education Committee, warns that the stimulus will not address all of the University of Minnesota's budget shortfalls. 

Education Secretary Arne Duncan has set aside $5 billion to reward innovation and high performance in higher education institutions. It's good for morale, but is it fair to expect high performance when funds are in short supply? I guess we'll find out. 

Special Assessment Financing for Transportation Improvements

Special assessment districts are geographic areas within which property owners gain some special benefit from a public improvement. Within the boundaries of the district, property owners are assessed a portion of the cost related to the special benefit accruing to their property as a result of the improvement. The rationale for the use of SADs is that property owners close to public improvements realize benefits that are greater than those experienced by the larger community. For example, the community may see a rise in economic activity as a result of a transit improvement, but those located nearby the transit improvement may also realize benefits based upon their proximity to the improvement. 

Special assessments are typically used to finance improvements like street construction, street lighting, sewer and water infrastructure, or transit infrastructure. More recently, cities have used special assessment districts to finance the construction of local transit systems. During the 1980s, Southern California Regional Transit District (SCRTD), now the Los Angeles Metropolitan Transit Authority (LAMTA), used special assessment districts around four metro stations to finance their construction. In Miami, special assessments helped finance a portion of their downtown people mover system. Through the 1990s, SADs remained a viable strategy for financing rail stations, with the opening of the New York Avenue Metro station in Washington, DC in 2000. More recently, cities such as Tampa, Seattle, Portland and Charlotte have used special assessment districts along urban corridors to finance streetcar and light rail infrastructure with many other cities including Columbus, Cleveland, Atlanta and Minneapolis considering its use for similar purposes. Such special assessment districts are often larger than other kinds of special assessment districts, since the benefits of such an investment are typically felt across a broader geographical base. For example, Atlanta's proposed Peachtree Street Streetcar Line will be over a mile long and half a mile long. Special assessments for transit use may be particularly appealing in high-density commercial districts, because benefits from the improvement are immediately felt in the form of higher traffic, increased revenues and higher demand for adjacent commercial and retail space.

While the cumbersome regulatory process required to implement and approve the use of special assessment financing reduces operational efficiency, the special assessment collection process is highly efficient, since special assessments are collected with property taxes. Moreover, special assessments are relatively economically efficient, because they do not distort the market. They are also relatively equitable, since the cost of the improvement is determined by each payor’s benefit. Where property value is a good measure of income, they are also equitable from an ability to pay perspective, because assessments are often based upon property value. However, where home value isn’t a good measure of income, special assessments may become regressive. Special assessments rarely provide adequate revenue to pay for the entirety of an improvement, but they can provide a crucial final financing source. In addition, special assessments are highly predictable, making them attractive to local governments. Finally, special assessments are administratively difficult to implement, they are easy to manage, since payments are collected with existing property tax collection resources. The political feasibility of special assessment financing depends on the nature and location of special assessments. As mentioned above, commercial property owners may be supportive of special assessments, since they realize immediate benefits in the form of more traffic deriving from the improvement. However, homeowners may be opposed to special assessments because they do not realize substantive benefits until they sell their home.