Minneapolis Neighborhood Revitalization Program

In 1987, the Minneapolis Mayor and City Council created a task force that they assigned the responsibility of determining how best to approach the “physical revitalization of Minneapolis neighborhoods,” as decline of the city’s neighborhoods had become widespread and apparent through the mid to late 1980’s. In 1988, the task force reported that complete revitalization “would cost over $3 billion,” and the best way to move forward was through the implementation of a “citywide planning effort.” (City of Minneapolis, Overview of NRP Funding, 2006)

According to a City of Minneapolis news release, “The NRP was established through state legislation in 1990 and is governed by a joint-powers agreement between five government jurisdictions: the City of Minneapolis, Hennepin County, the Minneapolis Park and Recreation Board, the Minneapolis Public Schools, and (originally) Minneapolis Public Library.” (City of Minneapolis, Overview of NRP Funding, 2006) Additionally, this program was designed for implementation with assistance and intense participation of neighborhood associations and residents.

The Neighborhood Revitalization Program (NRP) was born in 1989 when an implementation committee, created based on the recommendations of the task force, proposed a program with three distinct objectives for revitalizing Minneapolis’ neighborhoods:
• Protect Fundamentally Sound Neighborhoods
• Revitalize Neighborhoods Showing Signs of Decline
• Redirect Neighborhoods with Extensive Problems


The NRP was created for implementation over the course of 20 years, from 1990 to 2009. Phase I would be in effect from 1990 to 1999. The program would then transition and begin Phase II in 2000 and continue until 2009. The NRP funding came directly from the City of Minneapolis’ tax increment financing (TIF) proceeds. In 1990, legislation was passed that allowed the City to use up to $20 million of TIF revenues to fund and support the NRP.

Minneapolis’ expenditure for NRP exceeds that of any other similar programs in the United States. The City of Minneapolis has approval to spend up to $20 million per year of their TIF proceeds. This kind of investment has resulted in the Minneapolis NRP being a shining beacon of best practices by way of neighborhood revitalization strategies. Many articles have been written assessing such programs, and the Minneapolis NRP is cited as case study for many of these analyses (Abt Associates, 2004).


“Funding for each neighborhood is based on an allocation formula that results in more distressed neighborhoods receiving more funding. The formula is based on the following five factors: 1) Neighborhood population; 2) Number of dwelling units; 3) Number of units administered by absentee landlords; 4) Number of substandard units; and 5) Index of low-economic status based on average income, economic assistance cases, and health statistics.” (Abt Associates, 2004)


Many individual supporters of NRP, as well as official neighborhood associations, would have liked to see NRP continue in a similar manner by which it had existed over the past 20 years. However, the TIF legislation ended in 2009, leaving the program without the revenue source it had relied upon for 20 years. The City Council of Minneapolis stated support for continuing the NRP as it had existed, but without legislation to renew the TIF districts that so efficiently helped finance the lion’s share of the program, there has been no choice but to redesign. The program is still in transition, and only time will tell what it ultimately becomes after its successful 20-year incumbency as one of the nation’s most successful neighborhood revitalization programs. As of May 3rd, the program had received $3 million more in funding, and there is now a plan in place to transition the NRP into the Neighborhood Community Relations (NCR) department within the City.

http://www.nw.org/network/pubs/studies/documents/revitalizationReview.pdf

http://www.ci.des-moines.ia.us/Departments/CommunityDevelopment/PDF/AboutNeighborhoodRevitalization.pdf

http://www.ci.minneapolis.mn.us/ncr/index.asp#P6_641

www.ci.minneapolis.mn.us

http://www.ci.minneapolis.mn.us/ncr/docs/Overview_NRPFundingSummary.pdf

www.neighbors4nrp.com

www.nrp.org

Transit Funding in the Twin Cities

State and local governments are facing an historic budget crunch that is affecting all governmental expenditures. This is especially true in the field of public transit. Transit service has been cut nationwide during the current recession.

Metro Transit is the main transit provider for the Twin Cities Metropolitan region. In 2008, Metro Transit spent $229 million on bus operating costs, almost $30 million on light rail, $32 million on Metro Mobility, and $1.3 million for vanpools (2009 Met Council Performance Evaluation). Regionally, $272 million was spent on bus operating costs and $345 million was spent on the entire transit system in 2008. Of the $272 million spent on bus operating costs, 69 percent was spent on urban local buses.

Comparison to other Metros

From 2005-2008, transit costs rose 18 percent in the Twin Cities and 23 percent in the 11 peer regions (2009 Met Council Performance Evaluation). Moreover, the Twin Cities region spends less money on transit per capita than the average for the peer regions. The Twin Cities’ 19.9 miles of transit per capita is slightly below the peer region average of 20.7. For the Midwest region, Milwaukee and St. Louis both had fewer miles per capita than Minneapolis-St. Paul at 19.8 and 17 respectively. Similarly, in operating funding per capita, the Twin Cities are ranked below the peer cities’ average. The Twin Cities spends $145 per capita while the peer city average is $168 (2009 Met Council Performance Evaluation).

Funding for Transit

Metro transit gets a mixture of funds from the states, motor vehicle sales tax, transit fares, and federal grants. Nationwide, 33 percent of transit funding comes from local sources for transit. If one were to include fares and other sources, 67 percent of funding for transit is from local sources (TCRP 129). Also, transit agencies get 33 percent of their revenue from the farebox. The Twin Cities however only gets 29 percent of its funding from the farebox (2009 Met Council Performance Evaluation).

Suggestions for future funding

The region should move away from the perverse incentives of funding transit through motor vehicle sales tax. With this in place, transit funding is subject to the volatility of motor vehicle sales. During the current recession and with the price of gas skyrocketing, car sales dropped drastically leading to less revenue for transit (2030 Transportation Policy Plan). Minnesota would be best served initially by raising the gas tax or at least indexing it to inflation. Without this measure, the gas tax revenue declines in real dollars. For transit, the simplest source of new revenue would be from the general fund. Additional income can come from the state by increasing the income tax on the wealthy as this is the most equitable form taxation currently available. In addition, peak hour tolling or congestion pricing could be implemented with revenue partially funding transit operations.

Minnesota state spending in higher education

Higher education is the service primarily provided by the state governments. This type of financing in Minnesota includes appropriations to the state universities, colleges and funding higher education programs. Minnesota along with 21 states has a 100% state share in state vs. local higher education spending.Compared to other states total spending in higher education Minnesota ranked 20th nationally in 2004-2006 (Table 1). As we see from the table the absolute growth in spending for Minnesota is not significantly high if adjusted to population growth and inflation, and it parallels trends of growths in other states and nationally. In 2004-2006 years Minnesota per capita expenditures ranged from 591 to 660 dollars and the US average expenditure were from 589 to 642 dollars relatively.
Table 1.Minnesota and other states total spending in higher education 2004-2006 (in millions).
State 2004 2005 2006
Minnesota 3,010 3,118 3,402
NY 8,847 9,429 9,770
Texas 13,973 14,955 15,635
US total 173,086 182,268 191,758
Source: Governing's State & Local Sourcebook

In order to see how much of the burden of higher education expenditures Minnesota took from its residents the relation of spending to the personal income was considered and compared to the states and the national average. In terms of personal income Minnesota spent 1.6 % in higher education in 2004-2006.This figure did not change over the period staying quite constant. It equaled with the US average (1.60%) after the US average had declined in 2006.The higher education share in the state budget is steadily declining since 2000 .Based on this data we can make conclusion that Minnesota State financing of higher education relative to other jurisdictions has been strong and strong in recent years. Although, it also does not indicate any significant growth of the State higher education spending neither in relative or absolute numbers in the recent years.
As for the current state expenditures in higher education they are heavily influenced by the Governor`s and the State lawmakers` decisions of reducing the state budget deficit. It is considered to reduce current 1 billion budget deficit through spending cuts in different areas including higher education finance.
Overall, for the current biennium, the Governor’s proposal recommends to cut funding to higher education institutions by $47 million and general fund spending on other higher education programs by $7 million. This is in addition to the $100 million in unallotments on higher education appropriations the Governor implemented in last summer. A few higher education program areas will receive larger cuts. The Governor proposes to permanently reduce the State Work Study program by $2.5 million per year (a 17 percent cut).
The current fiscal policy of the state is to decrease the expenditures wherever it is possible without raising revenues. Cuts in higher education as short term budget solutions may have a long term negative impacts on economic situation in Minnesota. But cuts seem to be unavoidable.

MN Debt Service Problem

Minnesota’s Debt Service Situation
Many states, including Minnesota, have used general obligation bonding to relieve pay-as-you go budget constraints. However, as Minnesota continues to issue bonds in increasing dollar amounts, the total costs associated with paying back the debt increases from year to year.





For the FY2010-2011, the share of Minnesota’s debt service to its total expenditures is forecasted to be at 2.8%, or about $956 million dollars of a $31 billion dollar budget.



Of that total, approximately 82% of the bonds issued were general obligation bonds, with the remaining 18% transportation and revenue bonds. Compared with the forecasted general revenue for the same fiscal year, Minnesota’s general obligation debt service ratio will reach 2.99%, a substantial increase from previous years, when it has remained below 2%. The Minnesota Department for Management and Budget has predicted that at current levels of borrowing through issuing general obligation bonds, Minnesota’s debt service costs will grow at a median rate of 4.2% annually for the next five years. At that rate of increase, it is predicted that Minnesota will need to increase its suggested debt service ratio limitation to 3.2% of the state’s income.

Continued increases in general obligation bonds issued by the State of Minnesota, combined with decreases in revenue from the current economic recession will cause the debt service ratio to grow as a percentage of general revenue. The growth in the debt service ratio has the potential to induce negative consequences on the State’s financial situation, such as increasing the costs for future borrowing. Additionally, increasing debt service costs will add further constraints on the State’s ability to fund other expenditures during a time with budget limitations. In order to mitigate the potential costs associated with an increased general obligation bond debt service, the State should consider two options: 1) increase revenues through either expanded economic growth in the state or revenue generating taxes to increase the total general revenue budget, or 2) decrease the amount of general obligation bonds issued for a period of 5 years to allow the total debt owed by the state to decrease.

Through increasing the state revenue, the share that the debt service represents of the total will decrease, improving the debt service ratio for the state by increasing the denominator used when calculating the ratio. Increased revenue generation would also have the added benefit of reducing the perceived risk assessed by bond rating agencies, and improve the credit history of the state, thus reducing the borrowing costs in the future. Increasing Issuing fewer bonds for a five year period would have a similar effect, reducing the rate of growth the state is engaging in bond issued debt. Furthermore, at five years, 40.7% of Minnesota’s existing bond debt will be paid off, dramatically reducing the amount of total debt the State needs to pay through annual debt servicing on its general obligation bonds, improving the credit rating of the state, and freeing up revenue to invest in other departments of the budget.

Biting the Hand That Feeds You: Transit and the Motor Vehicle Sales Tax

The state of public transit budgets in Minnesota is looking worse and worse every year, even though over the past decade more and more people are parking their cars and riding public transit. The addition of the Hiawatha and Northstar rail transit lines to the Twin Cities has increased the profile of transit services in the area. As a result more and more Minnesotans are considering public transit as a viable transportation option. This has especially been true in suburban communities where transit providers such as SouthWest Transit, Minnesota Valley Transit, and Maple Grove Transit have experienced a significant increase in ridership over the past decade. With all the success that public transit has enjoyed in Minnesota as of late you would think that the state legislature would place public transit on the top its "things that need to be fully funded" list. And really, it did...sorta.

In 2000 the state legislature passed a law that dedicated 30% of the revenue generated by a 6.5% sales tax levied on the sale of new and used automobiles to transportation. In 2006 the state legislature proposed a constitutional amendment that would be voted on by the public via a public referendum. The referendum that proposed to dedicate all of the Motor Vehicle Sales Tax (MVST) to transportation, with 60% going towards highways and 40% going towards public transit funding, passed. The logic of the public was sound enough. If people are going to buy and operate cars on Minnesota roads, they ought to help pay for the roads and for the services that help people get around on the roads. The state assumed it solved the problem of finding a funding source for public transit for good. According to the Minnesota Department of Transportation, in the last decade of the 20th century revenue generated from the MVST increased at an average annual rate of 6.8%. So nothing to worry about, right?...

Not so surprisingly, it turns out that the MVST lives and dies by the success of the auto industry. Well, as we all are aware, the first decade of the 21 century has not been so friendly to the auto industry. Rising gas prices, a recession in 2001, and a bigger recession in 2009 shifted the auto industry into reverse. People started buying fewer cars and the ones they are buying are smaller, cheaper, and more fuel efficient. So, all of these factors put together leads to, yep, you guessed it, less MVST revenue. According to MnDOT, since 2002 MVST revenue has decreased at an average annual rate of 2.6%.

While on the other hand, because of the poor economy more and more people are choosing to ride public transit. Which means transit providers in Minnesota are caught between a rock and a hard place. They can help improve our environment by taking people out of their cars and putting them on convenient buses and trains, but by doing so they are essentially ensuring that they will not have an adequate funding source in the future. So thanks to the Minnesota State Legislature (and Minnesota voters), if transit providers want to operate a successful service they are going to have to bite the hand that feeds them.

This article, written by the Metropolitan Council, explains further how Minnesota's public transit formula is broken.

The Hidden Expenditures: Tax Expenditures

Tax expenditures are about $1 trillion or more annually, approximately equal to all discretionary spending, although it’s difficult to estimate the exact cost because of how these provisions interact with one other.[1] It is difficult to link a specific tax expenditure such as the home mortgage interest deduction to a specific expenditure function because the function of this tax expenditure is to incentivize home ownership. Tax expenditures are a real issue for many states in that they reduce state revenue and have the propensity to cost the state hundreds of millions of dollars yearly. Deductions and exclusions accounted for more than 80 percent of the major individual income tax expenditures federally in 2008 (see figure 1). However, the use of refundable tax credits has increased over time, primarily because of the growth of the earned income tax credit (EITC) (see figure 2)[2].

The other issue with tax expenditures is that they are difficult to assess because they are written into the tax code and thus they don’t get assessed for their costs and benefits with each budget cycle. Many states attempt to bring transparency and clarity to tax expenditures by publishing a tax expenditure report. These reports can help to bring public attention to tax expenditures and what they incentivize. A majority of states produce tax expenditure reports, but eight states do not publish a report: Alabama, Alaska, Georgia, Indiana, Nevada, New Mexico, South Dakota, and Wyoming
[3].

Essentially, tax expenditures are a form of spending by the state because they cost states money in a similar way to direct spending. Tax expenditures are different from direct spending in that “direct spending continues only if funds are appropriated for each budget, but the continuation of a tax expenditure does not require legislative action[4]” thus a tax exception continues indefinitely unless there is a specific provision in the tax expenditure that sets an expiration date. Tax expenditures also differ from direct spending in that “direct spending programs are itemized on the expenditure side of the budget, tax expenditures are reflected on the revenue side of the budget and are not itemized.[5]” But not every tax exemption, deduction, credit or lower tax rate is a tax expenditure[6]. For the State of Minnesota, tax expenditures must meet all seven criteria to be considered a tax expenditure. These seven criteria are:

􀂾 has an impact on a tax that is applied statewide;

􀂾 confers preferential treatment;

􀂾 results in reduced tax revenue in the applicable fiscal years;

􀂾 is not included as an expenditure item in the state budget;

􀂾 is included in the defined tax base for that tax;

􀂾 is not subject to an alternative tax; and

􀂾 can be amended or repealed by a change in state law.[7]

Tax expenditures make up a surprising amount of state and federal budgets, according to a policy brief published by the Center on Budget Policy and Priorities (CBPP) tax expenditures accounted for $760.5 billion in 2007, compared to $549 billion for national defense spending and $493 billion for non-defense discretionary spending.[8] With tax expenditures making up such a large share of federal and state budgets it is important to continue to dissect who these tax expenditure’s affect and benefit. According to the Tax Policy Center, tax expenditures for the top quintile are nearly double the income of those in the bottom quintile[9]. This suggests that tax expenditures as a whole are regressive and are mostly benefiting those that may not really need the tax breaks and under-serving those that may really need the tax breaks. According to the Minnesota Tax Expenditure Budget Report, the highest Minnesota subtractions from tax expenditures comes from K-12 Education Expenses, roughly $14,300,000 in 2010 to $14,800,000 in 2013.[10] The highest tax expenditure credits come from the Working Family Credit, $179,800,000 in 2010 to $182,400,000 in 2013.[11] These tax exemptions pale in comparison to deduction of mortgage interest on owner-occupied homes federally which accounts for $573 billon and exclusion of employer contributions for health care and health insurance premiums; $568 billion[12].

[1] http://crfb.org/blogs/spending-any-other-name-smells-sweet-tax-expenditures

[2] http://www.taxpolicycenter.org/briefing-book/background/shelters/expenditures.cfm

[3] http://www.ctj.org/taxjusticedigest/archive/state_tax_issues/alabama_1/

[4-7] http://www.taxes.state.mn.us/legal_policy/other_supporting_content/2010_tax_expenditure_links.pdf

[8] http://www.cbpp.org/cms/index.cfm?fa=view&id=2662

[9] http://www.taxpolicycenter.org/publications/url.cfm?ID=411922

[10-11] http://www.taxes.state.mn.us/legal_policy/other_supporting_content/2010_tax_expenditure_links.pdf

[12] http://crfb.org/blogs/spending-any-other-name-smells-sweet-tax-expenditures

Health Care Reform: Unfunded Mandate?

One of the frequently stated criticisms of the federal health care legislation passed in March is that it is an unfunded mandate. The assumption is that states, already struggling to meet funding obligations under current Medicaid eligibility criteria, will unable to afford the Medicaid expansions called for under the new bill. There are two significant problems with this assumption. Number one, the vast majority of the legislation's tab is picked up by the federal government (making the unfunded part of unfunded mandate criticism difficult to fathom). Number two, state health care spending was projected to increase dramatically with or without federal health care reform. Although it is very possible that under the new health care system states will be unable to meet health care spending obligations, for many states the federal health care reform has made that scenario less likely, not more.



The most important element of the federal health care reform legislation is that it expands Medicaid eligibility to include all legal residents making under 133% of federal poverty guideline. This includes childless adults who are currently ineligible for Medicaid. The Congressional Budget Office (CBO) estimates that 16 million people will become eligible for Medicaid over the next decade under the legislation (there are currently 58.7 million -- 20% of total population -- enrolled in Medicare.) (CBO, Final Cost Estimate) The 16 million person expansion is projected to cost $454 billion between 2010 - 2019, with the federal government bearing $434 billion, or 96% of the burden. Under this projection, the states pick up the remaining $20 billion, or 4%. (CBO, Final Cost Estimate) To put this in perspective, with or without reform, the states were projected to spend $1.6 trillion to cover Medicaid eligible individuals during that 10 year time period. (Center for Government and Politics) The additional $20 billion represents a 1.25% increase in state Medicaid related expenses.

Admittedly, the state/federal breakdown of financial burden is not the source of much of the criticism of the Medicaid expansion. Rather, the criticism is motivated primarily by a sense of misplaced federal priories -- the idea that more should have been done to cut government costs rather than expand coverage. Although federal health care reform reduces the deficit by raising more revenue than it spends, the legislation authorizes an additional $794 billion in total federal health care expenditures 2010-2019. (CBO, Final Cost Estimate) Since Medicaid spending is normally distributed on a 57% federal / 43% state match basis, increased federal health care spending potentially puts pressure on states to follow suit, raising additional revenue to match additional federal funding available. This pressure is not reflected in the 10-year state additional expenditure estimate cited above due to the 96% federal / 4% state match on newly eligible enrollees, but this ratio is likely to change after 2019, resulting in some federal to state cost shifting.

That said, the potential of increased Medicaid costs for states in ten years must be weighed against the immediate crisis that is facing state run health care programs across the country. According to the Kaiser Foundation, 46.3 million Americans (15.4% of the population) were uninsured in 2008. (Kaiser Foundation) This is a .2 percentage point increase from 2007, which means that the ranks of the uninsured grew by over 600,000 in one year. With health care costs increasing rapidly (nearly 7% a year from 1991 to 2004), unemployment high, and wages stagnant or falling, most states will be forced to deal with growing uninsured populations in the near future. Under the old Medicaid eligibility criteria, states would be forced to provide programs funded solely with state revenues or suffer the consequences of having large uninsured populations. Minnesota is one of many states that in the past has decided to raise revenue in order to ensure broader access to health care but has recently considered eliminating or significantly downsizing health care programs in order to save money.

More than anything, the federal health care legislation provides states a short reprieve from the very difficult decisions surrounding what to do about the uninsured. Starting in 2014 (when the expanded Medicare eligibility criteria goes into effect) and continuing until 2019, the federal government will essentially take care of it. This provides states with an important opportunity to do the thing that critics accuse the federal government of avoiding -- namely, find a way to provide health care more cheaply. If past trends continue unabated, then by 2020 state health care programs would be in serious trouble no matter what the federal government did with Medicaid eligibility. As Governor Pawlenty is learning, even now cut-only approaches to health spending generate extremely high levels of political opposition. This is likely to be even more true in 10 years when there are millions of additional working Americans who have been priced out of the insurance market.

Minneapolis Great Streets

Minneapolis Great Streets Neighborhood Business District Program

West Broadway Business and Area Coalition (WBC) is currently administering two facade improvement programs for businesses along the West Broadway Corridor as part of the Minneapolis Great Streets Neighborhood Business District Program.
http://www.ci.minneapolis.mn.us/cped/Facade_Improv_Matching_Grant_Program.asp

The facade program was created to help revitalize existing businesses. WBC is administering a traditional facade improvement program and an artist inspired façade improvement program. http://www.westbroadway.org/programsservices.html The façade improvement program is only one of the initiatives put forward by the City of Minneapolis within the Great Streets Program.

The Minneapolis Great Streets Neighborhood Business Districts program was created in 2007 to support revitalization and redevelopment of neighborhood commercial corridors and neighborhood commercial nodes throughout Minneapolis. 112 geographic areas (nodes and corridors) in Minneapolis have been identified as target support areas. There are four grant and loan opportunities included in the Great Streets Program: Business Loan Programs, Real Estate Development Gap Financing, Business District Support Grants, and the Façade Improvement Matching Grant Program. http://www.ci.minneapolis.mn.us/cped/great_streets_home.asp

The geographic eligibility is based on areas identified in the Minneapolis Plan; the City is interested in using public funds to fill the market gap necessary to spur redevelopment and investment in neighborhoods. Commercial corridors and nodes have been rated into three categories. Targeting the greatest amount of funds into areas with the most need. http://www.ci.minneapolis.mn.us/cped/GS_Geographic_Eligibility.asp

Four different pools of money fund the corridor and node programs within the Great Street program. The program funding comes from a combination of sources, the funds total approximately 2 million for node revitalization and 2 million for corridor revitalization. (See Table 1) The funds from CARF are very restrictive, they can only be used within the “Common Project Areas” and can only for bricks and mortar. Funds from the Community Development Block Grant is also restrictive and can only be used within CDBG target areas, projects must “benefit low-and moderate-income people or remove blight.” The Minneapolis Economic Development Fund is not restrictive and can be used citywide for façade improvement, business district support, The Hilton Legacy fund is unrestricted. These funds can be made available to support businesses outside of targeted areas.


The financing formula works well for two reasons. It targets areas that are in great need but it still offers opportunities to businesses throughout the city that have a need. By targeting areas at different levels it directs funds appropriately based on the level of need. It also uses diverse sources of funding from both the local and federal level. By obtaining funds from a diverse sources the program is not in harm of being eliminated completely funding source stops funding the program or dries up.
http://www.ci.minneapolis.mn.us/council/2007-meetings/20070427/docs/14_Great_Streets_RCA.pdf

There was a great article published today on the Artist Façade Program being administered by West Broadway Business and Area Coalition.
http://camden.kstp.com/content/submit-designs-w-broadway-business-space

Policies set by the City of Minneapolis guide the Great Streets programs:
2009 Business District Support Grants April 28, 2009
City Council report on Great Streets April 17, 2007
Presentation to the City Council April 17, 2007
City Council report on Commercial Corridors November 7, 2006
The Minneapolis Plan, Chapter 4 Marketplaces: Neighborhoods 2000

Brownfield Remediation in Minnesota

It is estimated that there are more than 450,000 brownfields in the U.S. According to the EPA, a brownfield is a property, the expansion, redevelopment, or reuse of which may be complicated by the presence or potential presence of a hazardous substance, pollutant, or contaminant.

Managing brownfields is complex because the liability for the contamination may not be obvious. Therefore, a variety of organizations may play a role in the course of cleaning up and redeveloping brownfield sites. For instance, local economic development or planning agencies may provide tax incentives for brownfield redevelopments in order to attract investors and businesses to their communities, guide growth, and increase jobs. In Minnesota, the Minnesota Control Agency (MPCA) Voluntary Investigation and Cleanup (VIC) Program offers technical assistance and liability assurances. However, the EPA and Minnesota Department of Employment and Economic Development (DEED) provide the majority of the cleanup and redevelopment financial support.

The EPA provides four basic grant types, including:

1. Assessment Grants provide funding for a grant recipient to inventory, characterize, assess, and conduct planning and community involvement related to brownfield sites. In 2010, four Minnesotan organizations received a total of $1.6 million out of a total of $37 million in assessment grants from the EPA Brownfield Program.
2. Revolving Loan Fund Grants enable states, political subdivisions, and Indian tribes to make low interest loans to carry out cleanup activities at brownfields properties. Minnesota did not receive any funding in 2010.
3. Cleanup Grants provide direct funding for grant recipients to carry out cleanup activities at brownfield sites. The St. Paul Port Authority received $600,000 out of $35.1 million available
4. Job Training Grants provide environmental training for residents of brownfield communities. Minnesota did not receive any job training grants in 2010.

MN DEED provides three programs aimed at supporting brownfield cleanup and redevelopment:

1. Contamination Cleanup and Investigation Grant Program helps communities pay for assessing and cleaning up contaminated sites. In FY09, 32 sites totaling $10.4 million were selected for cleanup or investigation grants.
2. Minnesota Cleanup Revolving Loan Program provides low-interest loans through the EPA to clean up contaminated sites.. In 2009, DEED received $2 million in revolving loan funds, but did not receive any funding in 2010 (DEED, 2010).
3. Redevelopment Grant Program helps communities with the costs of redeveloping blighted sights. Eight projects totaling approximately $2.5 million were awarded redevelopment grants in 2010.

Funding is best situated at the federal and state governments due to their high level of resources. However, all grants are directed to lower levels of government such as cities, counties, port authorities, housing and redevelopment authorities, and economic development authorities. The local nature of real estate markets suggests that state and local governments are in the best position to determine how valuable the redevelopment of a particular brownfield will be in reducing a site’s negative health and environmental effects and in encouraging economic development and social justice. However, the funding of brownfield remediation must be a cooperative effort with the national, state, and local government providing resources. Single projects needs multiple funding sources in order to cleanup and redevelop a site. Although local governments should bear the costs of creating the benefits of local economic growth, the national and state governments must assist in those efforts.

Will you EVER retire?

One of the most significant expenditures in any state budget is the funding of retirement benefits for current and former employees. This expenditure presents substantial risks to state budgets in that it can be deferred to future periods, allowing for financial neglect in the current period in order to meeting immediate budgetary needs. The majority of these benefits come in the form of state and local pensions. State and local pension funds are the retirement vehicle for most government employees. According to a GAO testimony, nearly 20 million employees and 7 million retirees and dependents of state and local governments are promised pensions.

Recently, issues within Minnesota and neighboring state North Dakota have brought visibility to the fact that many state and local pensions are vastly underfunded. For instance, North Dakota introduced legislation that would eliminate pensions for public employees, instead leaving them with individual retirement accounts, or 401Ks.

What's the difference?

A pension is generally a defined benefit, meaning that an employee is guaranteed a specific benefit upon retirement, such as the average of their last 5 years of salary or a specific monthly amount. Defined contribution plans, often labeled 401Ks or 403bs, do not guarantee a specific benefit for employees upon retirement. Instead, the plans define a specific contribution that an employer will make on behalf of an employee, such as 3% of gross pay per month.

What's the gravity of the problem?

Nationwide, the Pew Charitable Trust estimated in 2007 that states lacked $361 billion to meet their pension obligations, an additional $370 billion is needed to cover the vastly underfunded health benefits that have been promised to state employees.

In Minnesota the Teachers Retirement Association (TRA) is in pretty bad shape, with only 59 percent of its obligations covered. Without changes, they will run out of money by 2032, meaning individuals within that plan would cease to be paid their benefits.

What can be done?

In order to become adequately funded, pension funds can undertake a series of actions: cut pension benefits, increase contributions among employees and employers, reduce the cost of living adjustment (COLA) which seeks to balance inflation, or increase the retirement age. Another factor in underfunding is the expected earnings percentage; some states and localities may have unrealistically high targets that they will never meet. However, lowering investment targets would require even larger contributions or benefit cuts to meet commitments, which are politically unfeasible.

In general, it is essential to devise institutions and arrangements that do not depend upon self-interested public officials for responsible stewardship. There are institutional innovations that can help public officials make these unpopular decisions. Ideas include: increasing the autonomy and independence of auditors, providing greater insulation from pension boards and legislators, or creating a multistate body with the authority to monitor public pensions and establish guidelines regarding fund balances and expected rates of return.

Public Library Funding

According to the American Library Association, there are over 16,600 public libraries in the United States. Further, statistics from the American Library Association show that in January of 2009, “over 25 million Americans reported using their public library more than 20 times in the last year, up from 20.3 million Americans in 2006. It is likely this trend continued or increased through the remainder of 2009” (http://www.ala.org/ala/research/initiatives/plftas/issuesbriefs/issuebrief_perfectstorm.pdf). This marked increase in library usage is thought to be largely the result of the economic recession in the United States. Rather than buying books, music, and movies, Americans have turned to libraries as a free source of entertainment and leisure. In addition, public libraries offer valuable resources for those who are unemployed and seeking new lines of work or for those who are investigating available government financial support programs.
Public libraries are funded in a variety of different ways from state to state. In most cases public libraries are funded through a combination of state and municipal revenue. The municipal revenue that is spent on public libraries tends to be a portion of property tax that is required by a state statute. Some have argued that this sizable dependence on property tax revenue results in significant inequities between libraries from municipality to municipality. This may be especially problematic given the public need for library resources and services. The irony of the situation is that the wealthiest counties and municipalities may be least impacted by cuts in state aid to public libraries; yet libraries in the wealthiest areas are used less as they do not have as many low and moderate income residents. In addition, some states are beginning to encounter serious issues with regard to using property taxes as a result property tax freezes. Some states, such as Ohio utilize a multi-faceted funding formula that seeks to balance inequities across jurisdictions by using an equalization factor to give further revenue to the counties most in need.
In an effort to confront this dilemma residents in some municipalities are working to pass referenda (http://www.dispatchpolitics.com/live/content/local_news/stories/2010/05/05/copy/voters-pass-levies-to-keep-books-on-shelves.html?adsec=politics&sid=101) that address the budget shortfall. These referenda would offer municipalities an increased tax levy that would be earmarked for use towards supporting public libraries in their community. Citizens in many states have initiated grassroots lobbying campaign to attract attention work to convince legislators to limit budgetary cuts to state aid to public libraries (http://savemynjlibrary.org/).

For Further Information:
1. http://www.nj.gov/governor/home/pdf/20100316_BIB_final.pdf
2. http://newsbreaks.infotoday.com/NewsBreaks/Voters-and-Public-Library-Funding-An-OCLC-Market-Research-Report-50000.asp
3. http://www.oclc.org/reports/funding/fullreport.pdf





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Cash for Jobs: Wage Subsidies

This economic recession has inspired several interesting governmental programs to speed up recovery including: Cash for Clunkers, Cash for Caulkers, and in January, Al Franken introduced the new SEED Act, also known as Cash for Jobs. Cash for Jobs is a wage subsidy program that would help small and medium sized business and non-profit organizations employ individuals who have exhausted their unemployment insurance payment. Cash for Jobs comes at a time when the national unemployment rate is 10.2% (in Minnesota, the rate is 8.2%) and has quite a bit of support.

Wage subsidies have been used in the past to address unemployment and economic development during recessions. SEED is modeled after one of the most successful of these programs--the Minnesota Emergency Employment Development (MEED) act that was in place between 1983 and 1987.

This type of solution can been as more of a market approach. The primary advantage of this method is its simplicity in encouraging the private sector to employ disadvantaged members of the population and its ability to assist the unemployed relatively efficiently and quickly.

There are also disadvantages to this approach of addressing unemployment. These programs can have a high cost per job and previously, have only resulted in a relatively modest amount of jobs created . There is an additional concern of the program having a high windfall wastage, or that the subsidy would go to many employers who would have hired new positions even without government assistance.

The program provided a subsidy of four dollars an hour for wage and up to an additional dollar per hour for fringe benefits. The subsidy lasted for six months but employers participating in the program were required to retain the worker for a minimum of a year, or return a portion of the subsidy to the State. Eligible placements included both public sector (government jobs) and private sector employers. Because the wage subsidies were meant to be directed at the private sector, government jobs had slightly different requirements. First of all, they were primarily to help participants gain work experience. Although the subsidy lasted for six months, there was no requirement to keep the worker for the additional six month period. In addition to direct wage subsidies, there was limited funding for activities such as job search assistance, child care, and transportation.

The Jobs Now Coalition performed several evaluations of the MEED program and found the program to be highly successful for local and state governments, private companies and unemployed Minnesotans.

Some statistics:
30,000 Minnesotans participated in the program in its first phase (1983-1985)
15,00 were able to find unsubsidized employment in the next 2 years
9,500 permanent jobs were created
$37 million of the original $100 million invested was returned through income tax revenue and savings from General Assistance and GMAC
59.5% of businesses surveyed said they would not have been able to expand (or would have delayed expanding) without MEED

By all accounts, MEED was a successful program that helped the State and its residents recover from a difficult economic recession. Wage subsidies were crucial to providing employment and income to Minnesotans and provided opportunity for small businesses to not only survive, but expand as well. It created permanent employment and provided important work experience for disadvantaged individuals. It was administratively simple and able to recapture at least part of its initial investment. At least according to anonymous surveys, most companies would not have been able to hire new employees without government assistance. To aid communities, small businesses, and individuals, wage subsidies do seem to be an appropriate expenditure for governments, at least during an economic crisis.

However, MEED was partially successful because of the State’s timely response to the recession. As the economy recovered, the program still provided benefits, but not as impressive as they were during the first phase of the program. Perhaps wage subsidies are most successful when used for emergency recovery. This is an important factor for the US Senate to decide when evaluating the potential of SEED.