Death by a Thousand Cuts

How does Minnesota's fresh-minted 2003 budget make this a meaner place? Let us count the ways

If the State of Minnesota had received a nickel every time Governor Tim Pawlenty used the phrase "tough choices" over the past five months, it would have been well on the way to solving its $4.2 billion deficit. The phrase proved an all-purpose mantra for the Governor, simultaneously connoting machismo, integrity, and even an unearned hint of compassion for those who were bound to suffer by the time he was done.

How did we get here? As a state senator, Pawlenty championed an income tax cut for the 2000-01 biennium that was the largest in the nation during that season of wholesale tax cuts. (The average reduction in Minnesota was $575 per capita; Connecticut was second at $216.) Two years ago, Pawlenty helped broker a deal with then-Governor Ventura that saw the state take on nearly a billion dollars in education funding expenses--expenses formerly borne by local property taxes--without specifying any means to pay for them. And last year, Pawlenty and then-Senate Majority Leader Roger Moe worked out a short-term deal that depleted the budget reserve and employed a variety of accounting gimmicks to ensure that both men could run for governor without onerous spending cuts or new taxes on their résumés.

These legislative actions, as much as the torpid economy or unbridled government spending on "human services," is why Minnesota was $4.2 billion in the hole coming into this session.

Despite Pawlenty's "tough choices" rhetoric, the overwhelming size of the deficit actually made it much easier for him to push unprecedented spending cuts. The traditional beneficiaries of state social spending were on the defensive from the start: Who among them would dare fail to answer the call for sacrifice? The most obvious rejoinder to Pawlenty's austerity rhetoric would have been to suggest the reinstatement of some eliminated taxes, but Pawlenty never considered that option, and he was never seriously pressed to do so by the putative DFL opposition.

Now that the 2003 session has torturously crawled to a close, the governor's rhetorical flourishes concerning "tough choices," "shared sacrifices," "personal responsibility" and "no new taxes" will become reality, with many changes occurring on July 1. Pawlenty and his legislative cohorts won't brook any talk of consequences: "doom and gloom scenarios," Senate Majority Leader Steve Sviggum calls them, adding that the important thing for people to remember is that "we didn't raise taxes or cut into core services."

Is it really that tidy? What follows is a look at some--by no means all--of the cuts to education and social spending programs likely to be handed down to Minnesotans in the days ahead.

 

A Tax by Any Other Name

By hammering on their "no new taxes/protect core services" theme, Pawlenty and the Republicans are engaging in a kind of semantic jujitsu designed to convey the impression that they are enabling most Minnesotans to continue their current lifestyles without taking a financial hit from state legislation. In fact, their budget is riddled with hidden costs that amount to crypto-taxes in themselves.

Let's count the ways.

The state's approximately $400 million cut in higher education funding means that tens of thousands of students attending the University of Minnesota and the MNSCU system of state colleges will face tuition increases ranging from 13 to 20 percent in each of the next two years, even as staff is laid off and programs are cut at those institutions.

Thirteen thousand nursing home residents who pay for their own care--the vast majority of whom lack any supplemental insurance--will be shelling out an additional $2,028 per year each: not to improve care at their facilities, but to help balance the state's general fund.

Bus fares will increase while service routes are cut.

The cost of court filings will rise as much as 600 percent, and that still won't be enough to offset cuts to the system that will add more delays in the legal process.

Exempting Northwest Airlines from paying $4 million into the state petroleum cleanup fund makes it likely that the state's gas tax will go up (at least briefly) in each of the next two years.

And there are literally dozens of fee increases for citizens who use the state's social services programs. They will apply not just to the poor and disabled, but to working families who use child care as well.

The granddaddy of the hidden taxes passed on by the Pawlenty budget involves cuts of approximately $140 million in local government aid (LGA) funds. Pawlenty and the legislators know that most Minnesota cities and towns desperately need that money to function, so they have allowed them to recoup 60 percent of it in property tax increases. This property tax shift will hurt residents of cities and rural towns much more than suburbanites. According to the Star Tribune, assuming the full 60 percent is levied, it will trigger a property tax increase of 28 percent in Duluth but just 2 percent in Edina, with property owners being hit with an 18.5 percent increase in St. Paul and 12.5 percent in Minneapolis.

There's more: Because those tax increases will only cover three-fifths of the state's cut in aid, many local governments will be forced to choose between police and fire protection, libraries, schools, and parks. In other words, state legislators have simply passed the buck for raising taxes and cutting core services to the mayors and city councils in towns across Minnesota.

 

Schools: Holding Education Harmless, the Pawlenty Way

Pawlenty repeatedly pledged that he would "hold education harmless" by funding it at levels that wouldn't hurt "classroom learning." The recently passed K-12 education bill that he will sign into law directly contradicts those words.

Basic education aid to school districts is being cut by $185 million over the next two years.

In addition, the state will save $11 million by limiting the eligibility of children in the limited-English-proficiency program.

Changes in the "compensatory aid" formula used to allocate funds to schools with an inordinate number of students in poverty erased approximately $45 million.

Additional funds earmarked for special education are set to be whacked by about $62 million.

There's no way the general student population can fail to be hurt by the pending cuts. For example, all schools are mandated by federal law to provide an appropriate learning environment for special-ed students, whose expenses are frequently tied to rises in health care costs. Thus, any cuts in state special-ed funding are almost certain to be borne by the school's general education budget. Likewise, cutting money for poor students and immigrants learning English doesn't occur in a vacuum--they're all in the same classrooms. That's especially true in urban districts like Minneapolis, which laid off 464 teachers last week.

 

Health Care: The Biggest Hole in the Safety Net

The Governor's budget proposal would have savaged funding and raised eligibility requirements for the state's three health insurance programs--Medical Assistance, General Assistance Medical Care (GAMC), and MinnesotaCare--enough to deprive over 60,000 Minnesotans of coverage. Due to the tenacity of Sen. Linda Berglin (DFL-Minneapolis) and a late infusion of federal dollars (which Pawlenty himself did not want to spend this year), families with children and single adults earning less than $561 per month will in most cases retain their current health care benefits. Overall, "only" about 13,000 people are now likely to lose their health insurance. (This figure includes "undocumented" people, mainly immigrant workers, who will be booted off at a savings of $35 million to the state.)

But even that sobering number doesn't factor in the ways access to health care will be compromised for some enrollees. For example, the state will no longer pay for primary care medical services for single adults enrolled in GAMC who earn between $561 and $1143 per month. The state will pay for emergency inpatient services at a hospital for those adults--provided they cough up a $1,000 co-payment. For single adults earning the same amount of money who are enrolled in MinnesotaCare, the state will pay for primary care (if the MnCare enrollees chip in their monthly premium and various co-payments for services) but will maintain a cap of $10,000 a year for inpatient hospital services and impose a cap of $5,000 per year on outpatient services.

Given the skyrocketing cost of health care, it won't take long for many adults with chronic illnesses to exceed those caps. In all, the restrictions and caps imposed on the state's health care programs amount to a budget cut of more than $200 million.

But refusing to pay for health care doesn't miraculously lessen the expense. The hundreds of millions "saved" by the state will show up as costs shifted onto hospitals, which have a legal obligation to treat patients. For example, if an adult on GAMC making $561 per month doesn't come up with a $1,000 co-payment for his catastrophic treatment, the state can stick the hospital with the entire medical bill.

Simply by closing the loophole that allowed hospitals to retroactively enroll patients who met all the GAMC eligibility requirements, the new budget estimates that the state will manage to avoid paying for $78 million in care. Hospitals also eat the treatment costs (or rather, pass them along by charging higher rates to private insurers) that accrue when MnCare patients exceed their insured $10,000 cap. For good measure, the state is reducing its Medicaid hospital payments by five percent.

With the federal government also ratcheting down its Medicare payments, it's no wonder that 31 of the state's 140 nonprofit hospitals operated in the red last year. The situation is particularly dire for the three "safety net" hospitals in the metro area--Fairview/University, Regions, and Hennepin County Medical Center--which treat a disproportionate share of the poor and indigent and are estimated to be on the hook for about half the total of the state's cost shift.

In anticipation of the costs it will have to absorb this year, HCMC has already laid off 190 employees and reduced spending on travel and new equipment. The hospital's administrator, Jeff Spartz, says that most of these cuts were in nonclinical areas, but warns that as further cost shifts from the budget are added over the next two or three years, "I don't how we can avoid cutting into our clinical services."

 

Public Safety: Y'All Be Careful Out There!

Time and again Pawlenty has called public safety the state's number one priority. But not for purposes of this budget, apparently. When the lion's share of a local government's expenditures are for police and fire protection, and the state cuts local government aid by 25 percent, public safety is not improved. Layoffs and reduction-by-attrition in police and fire departments have been the topic of the day lately in many cities around the state.

Minneapolis has already laid off 18 policemen and 44 firefighters who almost certainly would have been retained if LGA were fully funded.

Funding for battered women's shelters was cut by $3.8 million, or 11 percent, which will result in staff reduction and the likely closure of some rural facilities.

Crime victims assistance grants, which fund over 400 programs that serve nearly 200,000 victims of battering, sexual assault, general crime, and child abuse, were cut by $4.8 million, a third of its total state funding.

A $1.45 million grants program designed to teach K-12 students to resolve conflicts and reduce violence was eliminated.

Law enforcement and community grants used to support crime prevention programs in 300 state and local units of governments was cut $by 1.3 million, or 28 percent.

 

The Disabled: No Respect

One of the most valuable resources for people with significant developmental disabilities--the home- and community-base waiver program (see Kokmen, p. 14)--has been cut by $13 million ($26 million, really, when you count the loss of federal matching funds). This affects service to 600 people (another 1,500 are on a waiting list) in group homes and day programs.

Another waiver program that supports Minnesotans with traumatic brain injuries and keeps them out of nursing homes will be cut to the tune of $4.9 million (and, again, an equal amount of matching federal dollars) in the coming biennium by limiting the program's caseload to 150 new slots per year.

Another safety net program, one that helps 1,800 parents of children with hearing loss, diabetes, cystic fibrosis, and other chronic conditions, is cut by $1.8 million.

The state will also charge $4 million in additional fees over the next two years to 5,600 families who earn too much to qualify for Medical Assistance but whose children are eligible for disability-related aid.

Two hundred additional families will lose $2.4 million in state-supported services that helped them care for severely disabled children at home in lieu of placing them in institutions.

Coverage for a new program for people with autism has been repealed, a $4 million cut.

Then there are the thousands of young adults who have graduated from special-ed programs (whose ranks will swell by 1,300 in the next year alone), living at home with parents who work in the daytime. The state will allow financially strapped counties more flexibility in how they provide day training and habilitation services for these people, a likely recipe for diminished quality of care and training.

 

Infants and Children: Sacrifice Starts in the Cradle

Automatic health insurance coverage for newborns is cut by $7 million.

Head Start (which provides comprehensive health, education, and parent-involvement services for low-income families) will be cut $3.5 million, or nearly 10 percent, over the coming biennium.

Early Childhood Family Education (ECFE), which currently serves over 300,000 parents and pre-school children (that's nearly half the eligible population) from all income levels, is being tagged with an across-the-board 20 percent cut that amounts to more than $8 million, an especially hard blow to poorer communities that can't soften the impact with fee increases.

School Readiness, a self-evident program targeted to Minnesota children aged three and a half to four, with a priority given to kids who are developmentally disabled and otherwise at risk, is being pared back ten percent, or more than $2 million over the biennium.

And so on. The state will save an extra $1 million by eliminating Way To Grow, another school readiness program that provides everything from prenatal counseling to culturally specific family services in five metro communities.

Also gone (at a total savings of $1.75 million) is the last vestige of state support for the Children's Trust Fund, which provides grants to 45 programs dealing with child abuse prevention, adolescent pregnancy prevention, parenting education, and other child-related services.

State funds for crisis nurseries have also been cut, forcing the layoff of seven people (a quarter of their workforce), the elimination of their 24-hour hotline, and the closure of at least one branch office. Crisis nurseries provided emergency shelter for more than 1,100 children last year, and counseling for the parents of many more.

This budget also reduces funding for child care by more than $80 million over the next two years, raising eligibility requirements so that 1,200 moderate-income families will no longer receive assistance and dramatically increasing co-payments in most of the lower-income brackets. For a family of four earning about $1,500 a month, the cost rises from $5 to $59 per month; if that same family earned $3,000 a month, their monthly co-payment would jump from $208 to $376.

 

From Poor to Worse

Not all "shared sacrifices" are created equal. Poor single-parent families who rely on the state's welfare program (known as the Minnesota Family Investment Program, or MFIP) get hammered by this budget. Under the benign guise of welfare reform and reorganization, millions of dollars in federal Temporary Assistance for Needy Families (TANF) funds are being diverted from the program.

Further, all MFIP participants must have an employment plan, a "work first" provision that will delay millions of dollars of payments. Access to education benefits is eliminated for those not working at least 20 hours per week; funding is cut off for those who don't comply with program rules for six months; and cash assistance will not increase if a child is born while the family is on the program.

A freshly instated cap on emergency assistance programs--a fund used more than 6,000 times in an average month to help families facing eviction, utilities shut-off, or some other crisis--will save another $16 million. The state is likewise trimming another $1.6 million by reducing the income ceiling for welfare participants from 120 percent to 115 percent of the federal poverty standard.

And in perhaps the most outrageous gambit of the entire budget, the state is cutting welfare assistance by $125 a month for every MFIP family member with serious enough disabilities to qualify for Supplemental Security Income from the federal government. Because 17 percent of the families have at least one person getting SSI, this "penalize the disabled" provision saves the state a cool $22 million over the next two years.

Had the state chosen to use that money to build affordable housing for welfare recipients--extending the $24.5 million in one-time funding it provided the Minnesota Housing Finance Agency last biennium--its action might have been deemed defensible. Instead, legislators cut $4.4 million (18.5 percent) from MHFA's housing challenge program, which will halt the construction and rehabilitation of 418 units of affordable housing for low- and middle-income families.

In addition, another $2.6 million in funding for emergency shelters and transitional housing was not renewed, halting the construction of 252 beds that would have helped mitigate the needs of the state's burgeoning homeless population. In all, the final budget cuts $9.6 million in funding for nine different MHFA programs.

Effective advocates for the poor are a dying breed in state government--and their path to extinction will be further greased by a cut of $3.1 million in Legal Aid funding.

 

Severing the Bootstraps

The state has also cut millions of dollars from Adult Basic Education and Adult Graduation Aid.

After School Enrichment Grants, which combined community and education resources for out-of-school programs tailored to "at-risk" youth who were struggling in the classroom, have been eliminated at a savings of $11 million.

Youthworks, a program that provides educational scholarships and tutoring in exchange for community service, has been cut nearly 50 percent.

Economic Opportunity Grants, which allow 40 community action agencies to help 750,000 low-income people attain the skills and knowledge to become more self-sufficient, have been substantially reduced.

The Job Skills Partnership, which helps schools and businesses develop specific training programs for people on public assistance to get a job, endured a minor cut.

Minnesota YouthBuild, the Minnesota Youth Program, Learn to Earn, and the Youth Intervention Program--all designed to help disadvantaged, underemployed youth become self-sufficient-- have had their funding cut to varying degrees.

The Independent Living Services for the Disabled has been drastically cut.

Funding for the Self-Sufficiency unit of the State Services for the Blind received a minor cut.

The Displaced Homemaker Program was eliminated.

So was the Vinland Center Grant, an employment program for disabled veterans.

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