Austerity Forever

The 2003 Minnesota legislative session will go down as one in which the state's most vulnerable residents--the impoverished, the working poor, children, immigrants, and the disabled--got the shaft. While it was Governor Tim Pawlenty and his fellow Republicans who led the drive to cut more than $4 billion out of the state's budget, the complicity of the "loyal opposition" in the DFL also played a crucial role in how the books were balanced and where the cuts were made.

In particular, the capitulation by DFL leaders to the Republican demand for "no new taxes"--at a time when public momentum was clearly swinging toward the sort of selective, targeted taxes the DFL had proposed--ensured that a Darwinian philosophy would hold sway at the Capitol.

The tenacious and, given the circumstances, relatively effective fight put up by Senator Linda Berglin (DFL-Minneapolis) during the final weeks of the session belies the contention that Pawlenty's agenda was inevitable. As the longtime Finance Committee Chair of the Senate's Health, the general fund to balance the budget. Her negotiations with the Republican-led House and the Governor's office were undercut by her own party's cave-in on the tax issue, forcing her to overhaul her budget by a half-billion dollars in 24 hours. She battled to convince members of the Pawlenty administration to spend a last-minute infusion of federal money from Washington, some of it specifically earmarked to address the state's health care problems. And even when agreements were reached in principle, Republican leaders reneged on some of the particulars.

Due to either myopia or party loyalty, Berglin was never able to explain why the Democrats didn't follow her lead and oppose the Republicans to the finish. But her example stands out. In the end, Berglin was able to cut the number of people deprived of state-subsidized health insurance from 68,000 to 38,000, and retained the MinnesotaCare program as a separate, dedicated fund after it had been slated for elimination. What follows is her version of what happened during the session's final days, and what it means for Minnesotans in the near future.

Chair of the Senate's Health, Human Services, and Corrections Budget Division, and a co-founder of the state's MinnesotaCare health insurance program, Berglin knows more about the ways and means of our health and human services programs than anyone at the Capitol.

When she discovered that her areas of the budget were the primary targets of Pawlenty's proposed cuts, she cobbled together ways in which her programs could save or generate hundreds of millions of dollars, only to see much of that money diverted intothe general fund to balance the budget. Her negotiations with the Republican-led House and the governor's office were undercut by her own party's cave-in on the tax issue, forcing her to overhaul her budget by a half-billion dollars in 24 hours. She battled to convince members of the Pawlenty administration to spend a last-minute infusion of federal money from Washington, some of it specifically earmarked to address the state's health care problems. And even when agreements were reached in principle, Republican leaders reneged on some of the particulars.

Due to either myopia or party loyalty, Berglin was never able to explain why the Democrats didn't follow her lead and oppose the Republicans to the finish. But her example stands out. In the end, Berglin was able to cut the number of people deprived of state-subsidized health insurance from 68,000 to 38,000, and retained the MinnesotaCare program as a separate, dedicated fund after it had been slated for elimination. What follows is her version of what happened during the session's final days, and what it means for Minnesotans in the near future.


City Pages: The position of the Pawlenty administration is that they didn't raise taxes or infringe upon core services during this legislative session. Is that a fair statement?

Linda Berglin: No. We were able to save health care for some people who would have had it eliminated, but there is still a substantial number of people who are going to lose their health care. It will force low-income people into emergency rooms and hospital beds that are not necessary. It will force some elderly people into nursing homes that are not necessary. Those things are going to cost us all, because those people will be using more expensive services when they could have gotten by with less. So I would say they did not get by without hurting core services.

As far as not raising taxes, the health care costs alone are going to cost Hennepin County somewhere between $30-$50 million, and Hennepin County relies on property taxes to pay for those things. So clearly property taxes, which are the least fair, least progressive taxes, are going to go up. Some people, including, I think, Governor Pawlenty, could have labeled the [proposed but unadopted] cigarette tax as a user fee because, in the Senate budget anyway, we were dedicating all of it to health care services. He chose not to do that. But he can raise a moving violation $25 and put that extra money in the general fund. And somehow that's not a tax.  

CP: Were you surprised at the extent of the cuts to health care?

Berglin: I was surprised about the plan for the wholesale elimination of the MinnesotaCare program, which has a dedicated fund paid in part by the premiums of those enrolled in the program. We promised the health care providers that we would keep that revenue out of the general fund and that it would never be spent on schools or transportation or any of the host of other things that might be demanding money. We kept it separate so we could make sure working people could get health care. They are doing the right thing under very meager wages, paying a premium based on what they can afford, getting their good primary, preventive care and staying out of emergency rooms. And yet we were going to take that opportunity to do the right thing away from them. And for some of those people, we still are going to take that opportunity away from them.

CP: You were one of the founders of the MinnesotaCare program back in 1992, weren't you?

Berglin: Yes. We started with the parents of the children in what we called the Children's Health Plan. The next group we brought in were people without children. And we phased everybody in over a couple of years. And the program grew because in any program that you start, everybody doesn't enroll on the first day; there is word of mouth and you get your maturity for a program over a four-to-five-year period. It has been pretty stable since then. We have seen a little bit of increased enrollment over this last year, because of the economy. We have had a significant number of people who have lost their jobs and lost their health care with their jobs and are looking at MnCare as the responsible thing to do, so they don't end up in an emergency room. One has to assume that one of these years the economy will turn around and we won't need to have MnCare serve quite as many people.

But even with that increased enrollment, I had made sure in my budget that the program would be financially stable over these next four years, without making any eligibility cuts. It was just rhetoric when the administration said MinnesotaCare needs to get folded into the general fund because it is going to go bankrupt. That was a bunch of hogwash. They wanted the money from MnCare. They wanted to cut people off and put the money from that into the general fund to balance their budget deficit.

For the first four months of the legislative session, night and day, I was having meetings talking about finding money. When we cobbled it all together, [we saved] over $200 million. Most of it was finding ways to get matching federal dollars, or using our buying power to get reduced prices from drug companies and health care providers.

CP: So you had put together your budget for health, human services, and corrections using that $200 million in savings and about $500 million from the DFL's proposed cigarette tax. You were in conference committee to work out a compromise with the House, which had a budget similar to the governor's. Then the DFL leadership made this "global agreement" not to raise taxes. Were you a part of the group negotiating that agreement?

Berglin: No. I wish I had been. Next year I'll sleep in [Senate Majority Leader] John Hottinger's office at that time of the session. I was told that they thought it would take days to get an agreement worked out. So I thought, "This would be a good night to try and get some sleep then." I went home, fell asleep, got up the next day, and was supposed to have this little meeting with [Rep. Fran] Bradley [the lead Republican on the conference committee] at ten in the morning. Bradley was the one who gave me the news. I was so enraged.

I had to totally redo my budget to bring in a proposal that was $517 million less expensive. [Note: This was due to the DFL's agreement not to push a hike in cigarette taxes.] But I did it. And I didn't cut anybody's health care. I didn't take any federal dollars out of MFIP [the state welfare program] and leave people in that program destitute. I obviously had to make some cuts that I didn't make the first time around that I didn't enjoy making, to nursing homes, community-based services, and other areas. But all in all, it would have been enormously better than what we ended up with.  

CP: What were the negotiations like after you redid your budget after the global agreement?

Berglin: I'd get called into this room with about 25 people, all of them Republicans except me, and they'd be screaming at me about how the global agreement requried me to get serious and adopt [the governor's] budget. Usually John Hottinger would be in the room for part of the time, but he would usually have to leave to go to a different meeting. Sometimes for moral support [Senator] Becky Loury was there with me and a couple of nights [Senator] Linda Higgins was with me. For quite a while during these discussion sessions, [the Republicans] were talking about the money they wanted to take from MinnesotaCare. They kept saying, "When you agreed to the governor's budget numbers, you agreed to take $191 million out of MinnesotaCare because that is what's in the governor's budget." And I kept saying, "I never proposed taking one dime out of MinnesotaCare in any proposal I ever made, including the one I have now, which meets the governor's number." They thought that without any [new tax] revenue that I would cave. But I wasn't about to cave.

I sat down and figured out that less than 20 percent of the monthly benefit for MnCare goes to hospitalization. Hospital bills are a lot, so you know that the program is working the way it was supposed to--people were using good, low-cost outpatient services and not ending up being sick in the hospital.

I said, "This isn't going to work. If you put in place a $2,000 cap on benefits, about 75 percent of these people are going to run out of benefits during the course of the year and quit paying premiums to be in the program. And if somebody is close to running out of their outpatient benefit and something happens to them, there is going to be an incentive to hospitalize them. Because then at least the provider can finish providing some of the care and get paid for it. So you'll have people dropping out, we won't be collecting premiums, and we'll have more utilization on the hospital side, which will drive up the average cost of care.

Finally, using $93 million in [matching] federal money, I was able to get the outpatient cap for MnCare up from $2,000 to $5,000. At that number, about 75 percent of the people won't run out of their benefit. The rest of the federal money was spent correcting some cost shifts they had made. And we still left $21 million of the available federal money on the table.

CP: What strikes me about these negotiations is that Pawlenty kept saying we need to reform government. Yet in your budget you came up with $200 million in savings through reforms and your programs don't benefit from those savings.

Berglin: Right. The governor had sent out a letter saying he would support user fees but only if they were going to support the activities related to where they were getting the money. So we were going to have an increase in criminal fines and use that money to pay for the public defender's office. Well, we ended up with a disaster on our hands in the public defender's office because they took away those fees. All the prevention programs are eliminated from that office and the short-term offenders are going back to the county. Only about a third of the cost to the county is being paid, so the rest will be on the property tax.

Pawlenty and the administration had proposed a 15 percent cut in the central office [for the Department of Human Services], but only in the second year of the biennium. No cut in the first year. Well, I felt like before we were going to make all these terrible deep cuts to elderly and disabled people, you ought to be reducing your administrative costs as well. In the end they wouldn't accept that. And since that time, I have heard the commissioner of Human Services has sent a letter out to all his employees informing them I proposed cutting their jobs and that he saved a lot of their jobs. It is an interesting world.

CP: Former Finance Commissioner John Gunyou wrote a story in the Star Tribune recently about the hidden costs associated with this budget and how projected spending for the 2004-05 biennium may be underestimated up to a million dollars a day. Are there poison pills and nasty surprises in store?  

Berglin: The Pawlenty budget is based on the assumption that the economy is going to get better and that there will be growth due to the savings from the budget cuts. So if the economy doesn't get better or if they were overly optimistic about the savings generated--or both--then obviously the budget will be in trouble.

There is an assumption that if you take money out of the economy by making budget cuts, that is not bad for the economy. But if you take money out of the economy by way of a tax--even something like a cigarette tax, which would have some beneficial side effects--that is bad for the economy. I find that to be a strange concept. One way or another, this money is coming out of the economy. People are no longer going to be able to pay their rents and buy their groceries if their benefits are cut. If health care workers are not getting paid, then that is less money to spend in the economy.

CP: Under the original Pawlenty budget, it was estimated that 68,000 Minnesotans would lose their health care. You got that number down to an estimated 38,000 people, which is still a lot. How does this break down among the state's three health insurance programs, Medical Assistance, General Assistance Medical Care, and MinnesotaCare? Was medical assistance hurt much?

Berglin: Yeah, pregnant women [earning] over 200 percent of the poverty level were eliminated from the program. Children between 150 and 175 of poverty were eliminated from the program. And currently if a child is born while on Medical Assistance, they would get two years of care to make sure they got a good start in life. Now it is one year.

CP: The big cut in General Assistance Medical Care was eliminating outpatient benefits for people without children earning between 75 percent and 175 percent of the poverty level, right?

Berglin:Yes, and so the incentives are for hospitalization. It is going to be a real perverse incentive for things like mental illness, because the major way of stabilizing people is medications. But then when you discharge them, they can't afford their medications because outpatient services aren't covered. It is not uncommon for mental health medications to run anywhere from $500 to $1,000 a month. We are talking about people who earn $8,000 a year. I mean, the cost of their meds is more than the income they have. So an unfortunate part of it is, not only will this lead to more hospitalizations but more incarcerations. Today, about 40 percent of our workhouse population suffer from serious mental illness. Thirty percent of our prison population do also. Prisons and jails are expensive ways for us to take care of people's mental illness. It is another way we are going to be driving up the cost of the system.

CP: We've talked about the outpatient caps on MnCare. Are there any other cuts in that program?

Berglin: The original intention of MnCare was to treat people as they went along, so you could stay in the program [earning] up to 275 of the poverty level, paying a higher and higher percentage of your premium but still eligible. Now these people will fall out at 175 percent of poverty and I had to fight like crazy so they wouldn't cap it at 150. The real tragedy of that is, 175 percent of poverty for a single individual is a wage of about seven dollars an hour. So if somebody at that level is going to get a dime-an-hour raise, they are going to lose all their health care! People should not get penalized for working, but under this policy they will. Some of these people, who know they have a health condition, they are going to have to cut their hours that they work, in order to make sure they can stay in an affordable health care program.

CP: What do you think was the biggest concession you made during the negotiations?

Berglin: MFIP. We are going to rename it the More People In Poverty program instead of the Minnesota Family Investment Program. There will be tens of millions of dollars in grant cuts to the neediest families. There are changes in the diversionary program for work-first. We had said if you have a high school diploma and have been employed four of the last twelve months, then you might have a chance, even in this economy, of finding a job. So go out and try and find a job for four months. But now [work-first is also for] people who don't speak English, who don't even have a GED, have health problems, alcohol problems, mental health problems--those people are not going to succeed in this diversionary program. And it creates a lot of administrative costs to put them through it. People that professionals have already decided are not employable have to be in work search.  

CP: Another cut in the welfare program was $16 million out of emergency assistance.

Berglin: It will create homelessness. Most of that money now goes to help pay the difference in a rent increase so someone has a home while they look for another place that is more affordable. Or it goes for utility problems, a rise in utility rates. Those things help prevent people from being evicted. The more people who are homeless in this program, the longer it is going to take them to get into a state of self-sufficiency, and the more the program costs us. The homeless shelters and the housing advocates all say that if you make emergency assistance more available we will have less homelessness. And it is a big cut. There are so many things that were done.

CP: Is there a political cost for doing all these things? Most of the people affected don't vote very often.

Berglin: MFIP, I think, is going to be difficult, which is why I have to confess that it is one of my biggest disappointments. I have been interviewed by a number of press people. I have mentioned MFIP in every one of them and none of them have printed anything about it. It is not even on the radar screen. They want to talk about MinnesotaCare or people with disabilities. Those are deserving subjects. But MFIP is an equally deserving subject. This was a bipartisan program when it was adopted and there were Republicans like Randy Johnson at the county board that worked with Governor Perpich in putting this together. It has been supported by Governor Carlson and Governor Ventura, and now all of a sudden it is not a good program anymore. It's not about whether it is a good program or not, it is about taking money out of the program so they can put it in the general fund.

CP: Do you think what has just happened is a profound change in the way we approach government? If so, how big a change is it?

Berglin: Pretty big. Some things that were very controversial back in the Quie Administration in terms of budget cuts were not even on the radar screen this year because there were other things so much worse. One of the controversies during the time Quie was governor happened when he eliminated payments for leave days at nursing homes. That's when a patient goes to the hospital for something but is coming back, and the state helps subsidize the bed space while the patient is gone. In Quie's time there were rallies in the Capitol rotunda over eliminating leave days. Well, we just eliminated leave days and nobody's talked about it because there are so many other things that are so much worse.

CP: Why is it suddenly okay to do all of these things?

Berglin: I don't know. I think Pawlenty is hoping that the damage done won't be that visible. It is not like closing the governor's mansion--that is pretty visible. When things happen to people we don't always hear about it. When the children who have their after-school programs cut become pregnant or start stealing cars, people don't see a direct relationship, although studies show there is a connection. And how many people are going to know when six-year-old kids are left home alone because their moms can't afford the rent and the child care and have to go to work?

A lot of people like to think, "I am doing just fine in life, I'm self-sufficient, I made it." But what people don't realize is that whether you are getting your health care through a government program or not, it is subsidized. All of your health care benefits are tax-free benefits, so they are being subsidized by the tax system. The guy in back of the restaurant doing the dishes is working just as hard as you or me. He is just not as fortunate to have employment that brings affordable health care with it. And we rely on people all over the place to do the work and perform the jobs in our economy and we know that many of them don't have health care coverage. But we still have a system of health care that is interconnected, where everybody is dependent on everybody else. And if half of the people don't have health care insurance and are getting their health care without any payment system, I am going to be paying more and you are going to be paying more. It is going to show up on your taxes some way, or on your health care premium some way. You can't escape it.  

For example, this session it was popular to talk about depriving immigrants of health care. But diseases don't know any national boundaries or national origins. And so people who are not going to be receiving health care are going to be at risk of transmitting tuberculosis, venereal disease, maybe smallpox, maybe SARS, and all the rest of us are going to have a problem too. It is not like you can just segment society and make judgments that some people are worthy of health care and some are not. You might be able to make a judgment that some people can afford to take care of themselves and some are not. But at 75 percent of poverty, which is what the Republicans are doing with single adults, losing their outpatient eligibility, that is not a reasonable judgment.

What will happen politically? I don't know. Time will tell. But I can tell you this much. The people, the individual people who are affected by the health care cuts, are important. But as important is the fact that most Minnesotans these days worry about their health care. They worry about whether it is going to be there for them, if they lose their job what is going to happen. That general worrying, I think, translates into the broad population. I'm not losing my health care and neither is the governor, his commissioners, or any legislators. But my neighbor or my brother or somebody that I know will lose it, and it makes me keenly aware that this terrible thing is creeping closer to my door. I think that is the reason a lot of the polls show a lot of support for providing health care to people. The secret is not letting people forget, being ready to correct things when we can, and making the cuts be temporary. That's what I'm fighting for.

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