Corrections Expenditures Border Battle: Gophers v. Badgers

Minnesota and Wisconsin are two states frequently compared to one another due to their similar populations and demographics.  In terms of corrections spending, however, they could not be more different.  In Minnesota, $460 million is spent annually on the 152,319 (1 in 26) adults under correctional control.  Wisconsin, on the other hand, spends $1.08 billion each year to supervise 110,642 adults (1 in 39) in corrections.  So, who wins?  Which state's citizens are safer?  

Minnesota

In the Gopher State, the Minnesota Department of Corrections (DOC) operates both adult and juvenile correctional facilities (10 total) and provides probation, supervised release, and parole services with the support of 4,250 staff persons.  In FY2010, the DOC budgeted nearly $300 million for institutional operations, $115 million for community services, and $21 million for operations support.  In FY2008, DOC expenditures totaled 2.6% of the general fund.

Minnesota’s 1973 Community Corrections Act (CCA) established a comprehensive strategy to incarcerate serious offenders, allow local communities to address the needs of less serious offenders, and facilitate community supervision programs that maintain public safety.  The act also authorizes the DOC to award subsidy grants to participating counties, which then operate parole services at the local level.  Thirty-two of Minnesota’s 87 counties (representing 70% of the population) participate in CCA programming.  In 1980, the state established felony sentencing guidelines to formalize when an offender should be imprisoned and for what recommended length of time, based on offense and offender characteristics.  Together, the CCA and sentencing guidelines helped slow the growth of the state’s prison population (see Figure 1, below).  

In 1982, 14% of Minnesota’s correctional population was in prison (ranking Minnesota 49^th out of 50 states and Washington, DC); at the end of 2007, 12% was incarcerated (ranking Minnesota a winning 51^st).

The Minnesota DOC maintains lower-than-average prison expenditures by focusing on probation, parole, and community supervision services.  Housing an offender costs the state $89.77 per day whereas supervising an individual in the community costs just $3.73 per day.  In all, the DOC spends approximately 17% of its budget on probation and parole services.

Wisconsin

Across the border, the Wisconsin Department of Corrections manages nearly 40 corrections-related facilities; provides health, education, employment, and offender programming; administers probation and parole; and operates a number of community-based programs.  The department employs over 10,300 full-time equivalent positions.  The $1.08 billion budget includes just over $1 billion for corrections facilities and nearly $175 million for probation and parole services.  In FY2008, DOC spending totaled 9.2% of general purpose revenue funds.

While Minnesota enacted legislation and guidelines to control its prison population, Wisconsin instead reacted to opposite political forces.  Throughout the 1990s, public safety concerns gave rise to decreasing parole rates, extending prison sentences by over 16%.  Wisconsin also added six 

times as many prisoners to its facilities as Minnesota during this period (see Figure 2, to the right).  

In 1982, 25% of the state’s corrections population was incarcerated (ranking Wisconsin 32^nd out of the 50 states and Washington, DC); by 2007 36% was incarcerated (ranking Wisconsin 25^th).

Wisconsin’s high corrections spending is primarily due to its reliance on incarcerating offenders.  As in Minnesota, the cost to detain an offender is more than 20 times what it costs to supervise an offender on probation or parole.  The Wisconsin DOC spends approximately 14% of its budget on probation and parole.  

Most important, though, is the fact that crime rates do not significantly differ between the two states.  In Wisconsin, 3,030 crimes were reported for every 100,000 citizens in 2008; in Minnesota, 3,113 crimes were reported.  And so, it appears that Minnesota wins this public finance battle by achieving the same public safety results at more than half the cost.  

Public Education Finance

Education funding is something that is critically important in the United States because our future rest on the generation we are educating. In most states the funding for education is a combination of state, local and federal funding. What is done with the money once it is collected is what might differ from state to state. In Minnesota we have a per-pupil funding system in which the funding to a school district is based on a dollar amount per student. There has been some criticism of this system because of the inherent inequities in the system.
Following are some tables of where the united states is in comparison to other countries Minnesota rankes 19th in money spent per pupil which is right at the average of the United States.

The current funding formula while very complicated does not account for some of the discrepancies that need to be addressed in school funding. There are two suggestions to change the funding formula available that aim to address some of the problems, although neither would solve the school funding inequalities entirely. One is from research done by Gregory Thorson at the University of Minnesota Morris and another is by the Minnesota Department of Education.
Thorson’s focus on research is on the size of the school districts and argues that smaller school districts are at a disadvantage because there are fixed cost of running a school system that do not decrease with the number of students. The new funding formula he proposes would address these inequalities but not offer solutions for school districts that have many students but because of their student body needs more resources to offer them similar educations as other school districts. Larger school districts have the luxury of running at higher efficiency with most students thus reducing the cost per student. Thorson’s formula would allow an 8% increase in funding per student for the school’s first 500 students and 4% for the second 500 students. After the initial 1000 students they would recommend keeping at the initial per pupil funding. This would clearly have a very high effect in smaller school districts and help manage some of the discrepancies in small and larger funding
The next formula change was recommended by the States of Minnesota’s Department of Education. This report was produced because the funding ration from the bottom 5th percentile and the top 95th percentile increased from 2008. The ratio increased from 2008 ratio of 1.243 to 1.265 in 2009. Although this rate is not higher than the rates from 1997-2001 the increase causes the department to issue opportunities for readjusting school funding to decrease the difference in funding for local school districts. The report states that in an attempt to adjust the lowest 5 percent to be within the previous year’s ratio they are looking at ways to change the funding formula to better compensate districts with lower funding.
Both of these methods try to address a problem with the funding formula but their scope is very narrow and does not get at the root of the problem which might be that wealthier communities are able to spend more money on their school systems and thus have better schools. Students can get a better education based on where they live. There is a large inequality to exist in our state that needs to have a solution for our school systems to be working for everyone.

Special Education Finance in U.S.

With a history of thirty five years, the special education program in U.S made a huge progress in helping more and more children with disability to get the equal study opportunity. However, in an era of floundering economy, a lot of states have made the decision to cut the educational expenditure because of the devastating budget deficit, which indicates the potential financial crisis of the special education. How to finance the special education soaring in both number and variety is a big question confronted by the policy makers.

How the special education be financed?

The financial accountability on special education is disproportionate among different level of government. On the average, states provide about 45 percent and local districts about 46 percent of the support for special education programs, with the remaining 9 percent provided through federal IDEA funding. Different states use different funding formulas because of different policy orientation and provisions. Overall, there are six funding formulas: Pupil weights, Resource-based, Percent reimbursement, Flat grant, Census-based and Variable Block Grant.

Issues with the special education finance

The greatest challenge associated with special education is the rapid increase of the cost across the nation. The expenditure has grown at twice the rate of the regular education in a lot of school districts. Overall, Special education takes up about 20 percent of overall budgets statewide. There are shortage of the funding on special education in most of the states according to the state special education scorecards. Another problem is that the federal support hasn’t increased too much. Even though the federal aid to special education has been flat for this fiscal year, it doesn’t meet the actual need of the full funding as President Obama promised before. Another major issue with special education is the need for greater flexibility in placement and use which related to the funding formulas. Other concerns are about the efficiency of special education services. Studies showed that only about 62% of the special education dollar is being used to provide direct services to students and too much is spent on administration.

New Reforms

The Mayor of New York City recently comes out of a reform plan that the principals of each school district are encouraged to take in more students with disability rather than send them to schools that have specific programs for special education and educate them with more flexibility. Several states such as California and Nevada have initiated a GATE (Funds on Gifted and Talented Education) program to encourage high-achieving and underachieving pupils in public elementary and secondary schools who have been identified as gifted and talented. Students have to pass several tests to participate into the program.

Suggestions

A lot of efforts should be made to meet the demand and create a more efficient system. These efforts include: transform the objectives of the special education funds, balancing criteria to meet program objectives, differentiate the severity of disability to choose the better placement for children and build up a lower cost assessment and evaluation tool.

Milwaukee Public Schools - The Impact of Retirees

The cost of health insurance for retirees has become a heavy burden for the Milwaukee Public Schools (MPS) budget and will most likely be significantly worse in the next few years. MPS currently has a pay-as-you-go policy of funding retiree health insurance benefits, which will cost approximately $70 million in 2009 and grow to over $130.8 million, or 20% of payroll costs, by 2016. These costs are a major contributor to MPS’s fringe benefits rate of 68.7%, the highest among 33 peer institutions in the midwest.

The unfunded liability for these health care costs, i.e., the estimated costs of future health care insurance benefits for retirees that MPS has promised to pay but has not set aside money for, now stands at $2.6 billion, more than double the district’s entire annual operating budget. These costs will ultimately be borne by Milwaukee taxpayers, and, because of the state school funding formula, taxpayers statewide.

Part of the reason for the size of the liability is that retiring MPS staff who qualify for the program are ensured a lifetime subsidy to pay for health insurance. In 2008, the subsidy was up to $1,882 monthly for family coverage or $851 monthly for single coverage. Unlike pensions, which typically link benefit levels to time on the job, MPS provides the same monthly health insurance benefits to all retirees who meet the criteria, even those who retire as early as age 55 and work for MPS for as few as 15 years. The average age of a retiring MPS teacher is 57 years old. In fact, workers who retire early receive more in total health insurance benefits than those who retire closer to age 65 because the younger retirees collect the maximum benefits for more years before they qualify for Medicare.

The most important consideration of potential decisions to address or continue to ignore the unfunded liability is the potential effect on the classroom. MPS finds itself in a catch-22 situation. Pre-funding of retiree health insurance benefits would add $125 million to the annual budget. This equates to the estimated costs of 1,625 teachers and is more than double the 2009 budgeted costs, for instance, of all MPS middle schools combined. Therefore, in the short term, not pre-funding retiree health insurance costs may appear to be a prudent decision. However, from a long-term perspective, continuing the current pay-as-you-go approach will result in retiree health insurance costs growing from $70 million in 2009 to $130.8 million in 2016, and the total unfunded liability growing from the current $2.6 billion to over $4.9 billion. Consequently, doing nothing takes money out of the classroom even in the short term. In the long term, doing nothing could profoundly limit the district’s resources available for the classroom.

a subsidy based on another subsidy

HUD is responsible for delegating federal funds to states and their public housing authorities (PHAs) to implement a variety of affordable housing programs. The most widely utilized affordable housing program is actually the Housing Choice Voucher (HCV) Program, also known as Section 8, which provides individuals and families with a housing subsidy that can be used in the private market to make housing more affordable. The PHA’s responsibilities include determining the fair market rent (FMR) of units in the service area as well as determining the voucher holder’s monthly income, including earned income and all forms of public assistance. The housing subsidy amount covers the difference between the FMR of the unit they are looking to move into and 30% of their monthly income.

HUD’s 2010 HCV budget is approximately $18 billion, with 90% of the budget used for housing assistance payments (HAPs) . This money is not equally distributed amongst all of its agencies, but allocated based on the amount of vouchers from the previous year and the actual cost of the previous year’s vouchers, adjusted for inflation . Budget constraints can prevent the renewal of existing vouchers so PHAs never know exactly how many housing vouchers they will be able to provide every year. On average, the Minneapolis Public Housing Authority is able to provide 5,000 vouchers and the St. Paul Public Housing Authority provides 4,000 vouchers with the yearly budget from HUD.

The National Low Income Housing Coalition’s 2010 Out of Reach report provides comparative information about subsidized housing. The FMR for a two-bedroom apartment in the Twin Cities is $899; for a two person-one child household with one person working full-time at minimum wage, the most the household can afford to pay for housing, without spending greater than 30% of income, is $377. In order to afford the two-bedroom apartment at $899, the working family member must work 95 hours a week, over twice the normal 40 hour work week. If the household were on the HCV program through their local PHA, the HAP would be $522 per month.

If the same household did not have any earned income and only received monthly Supplemental Security Income (SSI) payments of $674, they would have a rent affordability of $202, with a HAP of $697. The PHA pays $175 more per month in HAPs for households with no earned income and receiving SSI than households that had one person employed at minimum wage full-time. Based on the assumption that the entire Twin Cities HCV budget is $5 million dollars, PHAs can only provide housing assistance to 7,173 families who have no earned income and are solely dependent on SSI versus 9,578 families who work full-time at minimum wage. PHAs can help 1.34% more households, given households have one person employed full-time at minimum wage.

The dependency on aid decreases the PHA’s ability to effectively serve more families with the limited budget they are given. This not only affects the local government’s housing budget, but also the overall welfare budget as families that fall into this category are receiving two types of public assistance, increasing total local government expenditures. The only way to reduce housing and welfare expenditures is for recipients to obtain employment, therefore, earning income and decreasing the amount of public assistance they receive because they are becoming more self-sufficient.

While I believe that the HCV program is an effective program because it increases affordable housing opportunities for more households, the dependency on public aid significantly decreases its effectiveness in assisting more households. The income/rent disparity assumes a wage problem; people are not getting paid enough to afford adequate housing and there are not enough jobs out in the market. The recession is not providing enough employment opportunities, but even in good economic times, it is important to note that housing affordability is still a problem for those making minimum wage. The solution to decreasing government expenditures for housing subsidies may be to develop policies that support lower-income households so that they become more self-sufficient and less reliant on public aid. This, in turn, would help to increase the effectiveness of the HCV program.

Race to the Top: Minneapolis' disadvantage

The State of Minnesota’s massive budget shortfall is a well-known fact, and the effort to bridge the $4.6 billion gap is a perennial news headline. It is clear that solving the shortfall will require creativity, patience, and thoughtful prioritization. It is not yet clear what the shortfall will mean in the coming years for K12 education in Minnesota, which today accounts for nearly 40% of total state spending, the largest single expenditure in the state. The state appropriation for K12 education spending (General Education Aid) was reduced by $500 million for the 2010 – 2011 biennium. That reduction was offset by a one-time infusion of federal fiscal stabilization funds under the American Recovery and Reinvestment Act of 2009 (ARRA). However, the ARRA funds are obligated only through September 2011, and the Minnesota Department of Education reports that school district property tax levies will remain essentially flat during the current biennium.

Minnesota’s constitution requires the legislature to “establish a general and uniform system of public schools. The legislature shall make such provisions by taxation or otherwise as will secure a thorough and efficient system of public schools throughout the state. “ The state’s effort to secure this system of K12 education has been marred by reports that Minnesota has one of the largest achievement gaps in the nation (the disparity in scores between black and white students on standardized reading and math tests), and more recently, by a failure to obtain a $330 million “Race to the Top” federal grant for K12 education improvements.

Minneapolis Public Schools face one of most difficult challenges in the state. The district comprises 91 schools, serves 34,570 students who speak 90 different languages, has a total expense budget of more than $446 million—and is facing a $20 million budget shortfall for the 2011-2012 school year. Enrollment has steadily declined each year, a total of 23% since 1999; during the same time period, changing demographics and a grim economic outlook have placed additional pressures on the district. They are, truly, being asked to do more with less.

But what is "more", and how much does it really cost?

We know that the state requires Minneapolis Public Schools to provide an adequate education to every student. A report by the Minnesota Taxpayers Association defined an adequate K12 education using satisfactory results on the Minnesota Comprehensive Assessment Test and the Minnesota Basic Skills Test, along with the state graduation rate. The report found that the cost of an adequate education in the state of Minnesota averages $6,236 per student, but that there was a large variation among school districts, ranging from $14,446 in Minneapolis to $5,524 in districts with a more advantageous environment. These findings bring to light issues surrounding adequacy (defining it), equity (how to achieve it and who is responsible), and efficiency (why some school districts are able to achieve more with less).

The district acknowledges that they have balanced the budget for the current fiscal year, but that it relies on one-time funds which will not help resolve their projected $20 million shortfall for the 2011-2012 school year. Balanced budget or not, Minneapolis Public Schools need assistance from the state of Minnesota in order to provide adequate, efficient, and equitable education to its students.

Financing Rural Transit

Rising gas prices, concerns about global warming, congestion and the country’s aging infrastructure has created a resurgence in transit demand, and with that, ideas for financing the transit systems of the future. While most strategies have been focused on funding systems in large metropolitan areas, local governments also face challenges in funding small systems in rural America.

State government in Minnesota spent $30.3 million last year to fund transit in Greater Minnesota. Outside the seven county metro there are 66 systems statewide operating in 76 counties. This includes urbanized systems serving cities of 50,000 or more, small urban as well as rural transit systems and services for the elderly and persons with disabilities.

Rural transit is financed through a combination of federal, state and local contributions. Minnesota receives federal funding from the Federal Transit Administration in the form of categorical grants for programs. State funds are appropriated through the General Fund and the dedicated Motor Vehicle Sales Tax (MVST). Each local government pays a fixed share of its’ operating cost. Urbanized and small urban systems pay 20% and rural systems and those serving the elderly and disabled pay 15%.

The recession has taken a toll on all areas of local and state government, including rural transit. Last fall MnDOT cut $400,000 to rural transit providers, with another cut of a million and half dollars on the horizon. The state funded sources of revenue – the General Fund and MVST – are especially susceptible to fluctuations and decreased receipts exacerbated by the recession.

While current funding is being cut, future transit use is projected to grow due to demographic changes. Future demand and cost are outlined by MnDOT in their “Greater Minnesota Transit Plan 2010 – 2030” report. The state’s population is increasing, but more importantly for rural transit, whose users are primarily over the age of 65, it is also aging. MnDOT projects that demand for annual trips will rise from 14.2 million in 2010 to 17.8 million in 2030. Using this projection they estimate that by 2030 annual operating cost will be $184,152,960. This is a 119% increase from the projected 2010 costs of $83,794,200.

While there are many innovative ideas for transit financing like value capture, vehicle miles traveled tax and congestion pricing, none specifically fit the context of rural transit. Most suggestions for rural transit have focused on ways to make systems more efficient and save costs by emphasizing multi-purpose uses and coordinating existing programs for the elderly, low-come and disabled populations that they serve.

Rural transportation funding is an example of why state and federal equalization and redistribution can be crucial in providing services. Recession or no, it’s unlikely that local governments would have the tax base to pay more than the fixed rates, especially considering rural transit typically only benefits a small portion of the population. As costs and use increases, local jurisdictions should coordinate services and utilize technology, but in the future there has to be continued support from state and federal governments.

Will Health Reform Fall Short - Why Politically Acceptable Reform Is Not Enough

Frederick Gluck was with the McKinsey Corporation management consulting firm for nearly thirty years, serving as its Managing Partner from 1988 to 1994. He has been a regular contributor to the Republican National Committee – not the sort of fellow you would expect to push for a single-payer national health insurance plan.

However, in a letter to President Obama before the passage of the health reform bill, Mr. Gluck urged the President to do just that. He also warned, “If you settle simply for expanded coverage, you will have fallen short and the system will founder of its own weight sooner.” This perspective was undoubtedly influenced by the time Mr. Gluck served as director of Hospital Corporation of America, Inc., an operator of 163 hospitals and 105 surgery centers in 20 states and London, England.

What does Mr. Gluck mean when he says that the new American health care system may “founder of its own weight sooner” rather than later? The issue is cost: the U.S. health care system chews up 17 percent of gross domestic product (GDP) while only covering (before health reform passed) 85 percent of Americans. All the other developed countries in the world spend on average half what the U.S. spends on health care, but get better results.

In fact, the U.S. health care system was never “designed” like the health care systems of our allies around the world, such as Japan or Germany, but just grew piece-meal to serve the needs of various constituencies, with private and public insurance bureaucracies created to administer them. While the health reform legislation will cover more Americans, it will likely do little to contain exploding health care costs.

Conservatives in the U.S. hold vehemently to the notion that government-run programs (like a national insurance system) are inherently inefficient, and our current private, for-profit insurance system is much better at containing costs. International comparisons do not bear this out. For example, in 1994 Taiwan created a health system that uses private doctors and hospitals with a single, government-run national health insurance plan. Administrative costs for Taiwan’s National Health Insurance are two percent, one-tenth as high as the administrative burden in the U.S. system.

What explains the high cost of private health care administration in the U.S.? Part of the explanation comes from the fact that our private, for-profit insurance industry operates with a “medical loss ratio” standard of 80 percent, meaning that payments for actual medical services (“medical losses”) should not exceed 80 percent of premium payments.

The remaining 20 percent is reserved for administrative costs and profit. Any CEO of a for-profit health insurance company whose medical loss ratio strays much above 80 percent is summarily shown the door. According to Gluck, “We now support an enormous, purely administrative insurance and reimbursement infrastructure that segments markets in ways that create an extraordinary range of possible access options for the insured. This is, of course, the diametrical opposite of a system designed to guarantee equal access to all. This infrastructure is very expensive and yet, in the end, has very little effect on the care actually delivered to any patient.”

In comparison, national health spending in Taiwan equals about 6 percent of GDP. With such (relatively) low spending on health care, surely care must be rationed significantly? In fact, the Taiwanese system allows free choice of any hospital, clinic, or doctor in the country. The National Health Insurance in Taiwan is comprehensive, covering just about every form of medical treatment, including physical, mental, dental, and optical care, as well as organ transplants, acupuncture, traditional Chinese medicines, and long-term care. Other factors help control cost in Taiwan’s health system, but average premiums for an entire family in Taiwan are extremely affordable by American standards – only $150 per month.

Why is Mr. Gluck so concerned that a “piecemeal approach” to health insurance reform will fall short? Two other industrialized democracies, Taiwan and Switzerland, implemented national reforms in the early 1990s, at the same time that the Clinton reform collapsed in the U.S. In both cases, the winning political argument was a moral one. Should society guarantee access to health care as a basic human right, or is access to health care a commodity to be bought and sold, a product like a car or computer?

The Swiss and Taiwanese both decided that health care is a basic human right. Perhaps surprisingly, the American public overwhelmingly agrees: when pollsters ask the basic question – “do you think everybody has a right to medical care when they get sick?” – more than 85 percent of Americans answer that access to health care is a basic human right. However, this moral issue, what noted Harvard health care economist William Hsiao refers to as the “first question,” has not been a part of the public debate about health care in America.

With the majority of Americans soon to be covered, the moral argument for comprehensive reform has been diminished significantly. This will make it that much harder to challenge the entrenched political interests (the health insurance industry) that stand to lose from reform that will tackle cost control head-on.

The $tate Airplane – $mart Expenditure or Frivolous Waste?

From planners and engineers to the governor, state airplanes shuttle public employees around the region for meetings and events. While private planes have long been considered a necessary business tool, their use by public employees, regardless of title, often draws the ire of the public who find it a waste of taxpayers’ money. It is the use of such planes by the governor, of course, which draws the most criticism.

In South Dakota, the governor’s purchase of a 6^th state airplane ($1.4 million) without legislature consent (none was technically needed) raised questions from numerous state lawmakers as to its need. In addition, causing greater public anger was the discovery that he used the planes to attend 7 of his son’s high school basketball games throughout the state. While personal use of the planes was reimbursed through his political donations fund, it did little to calm the public’s anger. Such controversies on how public money is being used for airplanes has now become a policy issue on which candidates for governor must take a stand – pro-plane or anti-plane . Governor Rounds insists, however, that the planes save thousands of hours of lost productivity during travel. The argument that work productivity is higher during air travel may be brought into question, however, when one considers that the governor (a licensed pilot) often flew the planes himself.

Wisconsin proves no different as then candidate Jim Doyle criticized incumbent governor Scott McCallum for using state airplanes too much . Once governor, however, Jim Doyle faced criticism on his frequent use of the state planes, which cost a total of $2 million a year to operate. During his tenure, Governor Doyle has flown nearly 200,000 miles on the planes. While he has flown less than his predecessors, the fact that he flies at all is enough for critics.

In Minnesota, 2 state airplanes operated by the DOT are routinely used by state employees to reach far flung areas of the state. While their use is encouraged by the Office of Aeronautics as a means of saving public money through more efficient travel, its use by the governor still draws criticism. A reporter with MPR calculated one day’s air travel by Governor Pawlenty in 2008 and figured $3,755.05 was spent to shuttle the governor and his education commissioner to multiple stops around the state. While accomplishing the same amount of travel by car would have taken far longer and needed to include lodging and other expenses, critics are not assuaged.

And finally, South Carolina’s Governor Sanford (no stranger to criticism...) has not helped the state airplane win more fans. It has been reported that his use of the state airplane included a $1,265 flight to get his haircut and $5,536 for him and his family to travel 2 hours from their home to the state capital for the annual Christmas tree lighting. The public’s bill for the airplanes use by the Governor and his family alone has totaled nearly $400,000 during his time in office.

While state airplanes do serve a function in providing efficient transportation for government employees, is its cost to the public justified?

State-Level Health Care Assistance

With all of the recent discussion regarding the new federal health care bill, I thought it would be interesting to write about health care assistance already provided by the government at the state level. Among the most interesting aspects are the impacts of these programs on certain hospitals, and the policy decision of whether any of the expenses of childless, low-income adults should be covered.

The Minnesota Department of Human Services provides health care coverage for low-income Minnesotans through publicly subsidized programs. Nearly 750,000 Minnesotans have coverage through state programs. The largest and most significant are Medical Assistance, MinnesotaCare, and General Assistance Medical Care (GAMC). Medical Assistance is the largest of the government funded health care programs. It is Minnesota’s version of the Medicaid program, and is jointly funded with state and federal funds. The program provides coverage for more than 500,000 people each month—more than half of which are children and families. The remaining recipients are elderly or disabled. In fiscal year 2008, the total state and federal expenditure for Medical Assistance was $6.265 billion. MinnesotaCare is a state program for Minnesota residents who do not have access to affordable health care. The program is funded by a state tax on hospitals and health care providers, federal matching funds, and enrollee premiums. MinnesotaCare provides services to over 100,000 individuals each month. In fiscal year 2008, total MinnesotaCare expenditures were $463 million. Sixty-six percent was paid by the state, 27 percent by the federal government, and 7 percent by enrollee premium payments. GAMC is a state-funded health care program for low-income adults between 21 and 64, with no dependent children.

In total, Minnesota spent $8.8 billion (35 percent of the total state budget) on health care programs in 2009. This equals roughly $1,660 per capita. In comparison, Wisconsin spent approximately $6.6 billion (27 percent of the total state budget). This equals roughly $1160 per capita. These figures show that, in general, Minnesota’s state health care programs are substantially more generous.

In May 2009, Minnesota Governor Tim Pawlenty line-item vetoed GAMC, eliminating $381 million in expenditures from the 2010-11 biennial state budget. This was one of the Governors most significant, and controversial, steps to close the biennium’s $2.7 billion deficit. The governor proceeded to unallot an additional $16 million of GAMC funding for fiscal year 2010. With his veto and unallotment, the governor intended to transition about 21,000 of the 30,000 to 38,000 GAMC participants into MinnesotaCare. The governor’s actions were strongly opposed by DFL members in the legislature.

Besides its affects on current and future GAMC recipients, this veto strongly impacted hospitals and other medical facilities that treat low-income patients. Hennepin County Medical Center in downtown Minneapolis estimated that it would lose $43 million to $109 because of the cuts. In addition, Regions Hospital in St. Paul estimated loses of $46 million, 10 percent of its gross revenue. These hospitals are required by law to provide emergency services to low-income individuals. If GAMC is cut with no comparable replacement, the hospitals will lose all compensation they receive for treating those individuals formerly covered by the program.

DFL lawmakers and Governor Pawlenty reached a compromise on GAMC funding. GAMC would be temporarily extended through May 2010 using $28 million from Minnesota’s health care access fund. Beginning June 1, 2010, a new hospital-based, coordinated care delivery system will be created in partnership with county agencies.

While Medicaid and health care assistance for families is typical in most states, assistance for childless adults (like GAMC) is not. Twenty-nine states do not provide any health care assistance to adults without children. Compared to the states that do, the GAMC program in Minnesota is relatively generous. One reason that these programs are less common is because they lack federal funding or federal guidelines. When states are short on funding, these programs are more administratively and politically easy to cut. The result is that low-income childless adults will be particularly vulnerable during tough economic times.