Tim Pawlenty's New Deal
On the first truly frigid day of the New Year, a group of Minnesota's state senators gathered in a basement hearing room to listen to a small, nervous woman reel off statistics. The numbers were mind-numbing, but even so the lawmakers seemed unusually listless.
Faced with the largest budget deficit in Minnesota history, a staggering $5.5 billion, the senators were trying to ferret out waste in the state's public healthcare system. It was clear to pretty much everyone in the chilly room that it was going to be hard to find any fat.
The senators wanted to know whether every participant was paying his or her fair share for MinnesotaCare, the state's healthcare plan for the working poor. In response, the woman at the microphone was trying to explain the challenges to tracking month-to-month variations in participants' income. Often the families' cash flow is impossible to predict, she noted, because the workers are hourly, in and out of jobs, or otherwise barely making it.
Earnest as it seemed, the exercise was mostly beside the point. Short of a tax hike, there simply isn't any way to take care of the people covered by the plan and balance the state's budget over the next three years. Indeed, the budget crunch will be felt all over, but the healthcare cuts being contemplated are positively Dickensian: General Assistance Medical Care, the last-ditch program for the truly destitute, may be eliminated; legal immigrants may be dropped from state health programs; people using state health care may no longer be allowed medical procedures not judged to be "cost-effective"; already bare-bones services for the disabled and the elderly will be cut even further.
Pay attention to local news and you're likely to think that this harsh reality is the product of a sour economy. That the dismal stock market alone has stanched the flow of funds into state coffers. That it's Osama bin Laden's fault that Minnesotans can't continue to count on the state's historic quality of life.
It's tempting, too, to blame recently departed governor Jesse Ventura, the architect of the sales-tax rebates of recent years. And it is true that leaving the rebate money in the state's reserve accounts would have softened the coming blow.
But it's also true that over the past five years, the Minnesota Legislature has crafted a series of permanent tax cuts that are some of the largest in the nation, and they're exactly the size of the projected deficit. To add insult to injury, far from providing the promised tax "relief" to the average Minnesotan, the cuts overwhelmingly benefit the state's wealthiest residents.
The leader of the charge to create these regressive tax cuts? That would be Gov. Tim Pawlenty, the man so often quoted in the last month as saying there was no way anyone at the capitol could have predicted the current crisis.
In April 1998, as the Minnesota Legislature prepared to close the last session of Gov. Arne Carlson's administration, the outgoing Republican made a point of publicly applauding the DFL- controlled lawmakers he had sparred with for eight years. "It's obviously been a wonderful session, a well-balanced session," he gushed. "Things did work out."
Indeed, with a $1.9 billion surplus to play with, lawmakers found it easy to conjure something for nearly everyone. They handed down $1.1 billion in tax cuts and rebates and still managed to find $1 billion for big public-works projects and directed new money to education, parks, and roads.
Still, the brand-new house majority leader, Eagan Republican Rep. Tim Pawlenty, was unhappy that his colleagues spent so much of the bounty on services instead of making even larger tax cuts.
He got his way the following year. In April 1999, the legislature passed a 2000-2001 budget that included the largest tax-relief package in the nation: $2.7 billion, or $575 per Minnesotan. (Minnesota uses a two-year budget cycle, called a biennium. The 2000-2001 biennium covered fiscal years that ran from July 1, 1999 to June 30, 2001.) Eager to claim credit for ensuring that lower- and middle-income families were sharing the wealth, DFLers scrambled to sign on and the legislation passed the House 119 to 13 and the Senate 65 to 1.
Nationwide, state governments, flush because of the bullish economy, were cutting taxes. But nowhere were the numbers as dramatic as in Minnesota. Connecticut's cuts were the next largest at $216 per resident. Most states cut rates by about $100 per person.
But in Minnesota the giveaway continued more or less unquestioned. In 2000, Senate Majority Leader Roger Moe brokered an unprecedented "tripartite" deal in which the House, Senate and Gov. Ventura each got to spend a third of the projected $569 million annual long-term surplus. The Republican-controlled House used its third to fund income tax cuts; the DFL-led Senate used its share to increase education funding. Ventura used his to lower car-license tab fees.
The most revolutionary restructuring took place in 2001. After six months of debate, lawmakers passed a sweeping, permanent change to the property-tax system. They slashed the tax rate for homes valued at $500,000 or more and on agricultural and business land. On top of the overhaul, legislators also rebated some $700 million in sales taxes.
House analysts calculated the cost of the cuts made between 1997 and 2001 at $2.78 billion for fiscal year 2005 alone: Property-tax cuts account for $1.74 billion of that amount; lower income taxes for $835 million; and lower car-license tab fees for about $190 million. When critics warned that any slowdown in the economy would send the state into the red, the Republican leadership replied that there was no reason to think that Minnesota's economy would change.
The chickens came home to roost much more quickly than even the legislature's few naysayers had predicted. By the time the 2002 session convened, just a few months after the property-tax overhaul, state economists were predicting a deficit.
Confronted with a shortfall, lawmakers traditionally don't just balance the current budget; they make sure their fixes extend into the next biennium as well. But in 2002, with the leaders of both the House and Senate running for governor and loath to be the bearer of horrific news, that didn't happen. Sen. Larry Pogemiller (DFL-Minneapolis) did propose restoring some of the income-tax cuts, but Pawlenty and Moe instead came up with a plan that took care of the 2002-2003 problems--while leaving the 2004-2005 deficit largely untouched.
They spent most of the state's reserve accounts and cut $106.2 million from health and human-service programs in 2002-2003 and $184.6 million from 2004-2005. The rest of the budget was balanced through such sleights of hand as shifting payments for school districts and local governments into new budget years. In effect, the state floated checks.
When last year's session ended, the lame-duck leaders believed they were leaving a $1.6 billion 2004-2005 mess for their successors. They turned out to be wrong--to the tune of about $4 billion. Two months before Pawlenty was to be sworn in, state economists revised their forecasts. Minnesota was nearly $400 million in the hole for the last six months of fiscal 2003, and would enter fiscal 2004 in July with a $5.5 billion shortfall.
"I can't overstate how difficult this is going to be," the new governor told the Star Tribune. "The magnitude of the problem is immense. If there is a silver lining in all of this, it is that conditions like these create a necessity for change, so it provides opportunity for reform, to streamline government."
All told, from 1997-2001, the Minnesota legislature "allocated" more than $13 million in surplus funds, with $7 billion funding tax cuts or rebates and $2 billion going to the tobacco endowments and state reserve funds. The legislature spent the remaining $3.5 billion on education, transportation, and other services.
Virtually none of the bounty was spent on services for Minnesota's neediest, however. Even though thousands of families were struggling to pay for child care and other necessities while moving off of welfare, a piddling 0.3 percent of the $13 billion surplus went to Department of Children, Families and Learning programs. And despite the fact that medical costs are out of control, funding for health and human-service programs actually fell 0.2 percent.
Yet when news of the projected deficit broke, Pawlenty wasted little time in suggesting that the first thing he'd cut when he began trying to make up the shortfall was Medical Assistance. Minnesota has three programs that subsidize health care. The largest, Medical Assistance, serves as the state's mechanism for caring for seniors, the disabled, and others eligible for the federally funded programs known as Medicare and Medicaid.
The federal government gives states money to help run those programs as the states see fit. Some states simply dole out the money, providing the minimum level of care mandated by federal law. Others, including Minnesota, have chosen to dip into state coffers to pay for better levels of service. Minnesota splits the cost of Medical Assistance with the feds--and receives extra federal dollars to help fund its higher levels of care.
Last year more than 431,000 Minnesotans were enrolled in Medical Assistance. The majority are low-income families, but the vast bulk of the program's expenditures pay for long-term care for seniors and people with disabilities. The number of participants is increasing steadily.
The state Human Services Department also administers MinnesotaCare, an insurance program for low-income families and workers without employer-paid insurance plans. The program is funded by premiums paid by participants, who also may be responsible for co-pays. Enrollment in MinnesotaCare has jumped since the start of the recession; last year the program served more than 150,000 people.
General Assistance Medical Care is the safety net that is supposed to provide for uninsured or impoverished Minnesotans who don't qualify for either of the other programs. GAMC, which is funded entirely by the state, cared for some 36,000 people in 2002; most of them earn less than $554 a month or are facing catastrophic medical bills.
Enrollment in GAMC has skyrocketed since the economy soured. From 2001 to 2002, the number of participants rose 29 percent. And while the program is often thought of as stopgap care for the itinerant, 75 percent of participants work, and the number of children dependent on the aid jumped a whopping 41 percent between 2001 and 2002.
Pawlenty doesn't have to release his proposed budget until February 18, but lawmakers are sure he will propose cutting reimbursement rates for nursing homes and other facilities providing long-term care to seniors and the disabled, to curtail services covered, and to make it harder to qualify for Medical Assistance. Some proposals under consideration would even drop legal immigrants from various programs. There is also talk of the wholesale elimination of General Assistance Medical Care.
Cutting into any of the three programs will be daunting. Lawmakers may be able to stomach the political ramifications of cutting some of Minnesota's "optional services"--prescription drug coverage for poor seniors, and dental, podiatric, and chiropractic care. But beyond that they will be looking at cutting into basic services.
Consider the practical ramifications of eliminating GAMC, for instance. Though Pawlenty has said that some participants could be moved onto MinnesotaCare, many will simply end up with no health care whatsoever. And while that would shave perhaps $264 million from the budget right away, it could prove very costly in the end. Because the uninsured will continue to have medical emergencies--indeed, will have more of them once they are denied the ability to see a doctor as an outpatient--hospitals must either reduce service levels or pass the costs along to someone else. And that someone will be taxpayers in the core cities.
Hennepin County Medical Center and its associated physicians' practice group receive some $37 million a year from GAMC, according to hospital CEO Jeff Spartz. Regions Hospital in St. Paul provides $18 million in care to GAMC enrollees. Spartz is sure that the state budget problems mean that the Hennepin County Board of Supervisors is facing its own fiscal crisis and won't be able to find any extra money to help the hospital.
Compounding the problem is the fact that there are fewer and fewer so-called safety-net hospitals. Some 20 percent of HCMC's patients who come from outside Hennepin County make the trip because they cannot find care in their own communities.
"Eliminating GAMC, all that does is shift costs to Hennepin County taxpayers, because people will still show up at HCMC," says Minneapolis DFLer Linda Berglin, chair of the Senate's Health, Human Services and Corrections Budget Division. "Those people don't qualify for Medical Assistance. These are very low-income people, and when they have an accident we're not going to turn them away. Property taxes would have to pick up the slack, and people would come from all over the state."
At the same time, the number of people in need of state health care will only continue to rise. "Medical Assistance, unemployment insurance, and some other programs like that are supposed to get bigger in tough times," says Nan Madden, director of the Minnesota Council of Nonprofits' Minnesota Budget Project. "There's this idea that if we cut these programs, the problems will go away. And that's not true. They don't go away."
But Minneapolis DFLer Neva Walker, a member of the House Health and Human Services Policy Committee, is quick to point out that given the current political climate, anything that sounds remotely like welfare is an easy target. "Medical Assistance is probably going to be the population that's least able to organize around their issues," she notes. "It's spun in the media that single adults can just go to work. Well, then, it's hard to oppose those cuts."
Which, in Walker's view, is exactly the point. "There was a plan and a vision ahead of time," she says. "There are some people who have been waiting for this for a long time."
Faced with similar deficits, numerous other states--states without Minnesota's supposed legacy of caring for its neediest residents--are beginning to contemplate new taxes. Nevada governor Kenny Guinn, a Republican, has said it would be "political cowardice" for lawmakers to oppose nearly $1 billion in new taxes he hopes will cover a $700 million-plus shortfall and beef up education and human-service programs. A number of other states are proposing hefty hikes on cigarette and gasoline taxes.
In Minnesota right now, public opinion is running against any new taxes, but the Minnesota Budget Project's Madden predicts that will change. "Once the governor has to drop his budget on February 18, people will see what it really means to cut 15 percent from the state budget," she says. "And people will see what the effects are on their community. Once we're talking about specific consequences, people are going to see and no one's going to like it.
"And then it will be time to start to talk about raising revenue," she says. "It's time for the last resort. The consequences are severe enough; it's time to put revenue on the table."
And in fact some DFL policymakers are quietly speculating about ways to raise revenue that might be saleable politically. Some think that might be extending the sales tax to clothing. Others may revisit Ventura's idea of taxing services. A few are reminding colleagues that Republican governor Al Quie, faced with a similar conundrum in 1982, imposed a surcharge on income taxes. (Under such a scheme, all Minnesota taxpayers would calculate their state taxes and then add a certain percentage, say, 10 percent, to the total each year until the shortfall is eliminated.)
Social-services advocates would prefer that the income- and property-tax changes of the past five years simply be undone. Otherwise, they complain, Minnesota will be squeezing its lower and middle classes from both directions: Not only will they feel most of the pain of the cuts to services, they will pay a disproportionate share of the cost of what's left.
"In the past, states have cut their progressive taxes during good economic times but raised their regressive taxes in response to economic shortfalls," warns a recent report by the Minnesota Budget Project. "The result is that tax systems become more regressive over time--that is, low-income persons pay a higher share of their incomes in taxes than do upper-income ones. Our choices in raising revenues should be informed by their impact on low- and moderate-income Minnesotans."
Of course, conventional wisdom is that there won't be any new taxes. For starters, new tax bills must start in the state House, which is under Republican control. And Pawlenty and many other Republicans last year campaigned for office on a no-new-taxes pledge, a stance that the new governor has reaffirmed since the budget crisis began.
"It's just as sinister as it seems," says Kris Jacobs, executive director of the JOBS NOW Coalition. "The goal has been for a very long time to starve this kind of government out of existence. And when I say 'this kind of government,' I mean everything that makes Minnesota a place people moved to."
And with the exception of Minneapolis's Pogemiller, chair of the Senate Tax Committee, DFLers aren't yet talking publicly about raising taxes, either--for two reasons, according to Wayne Cox, head of the St. Paul-based Citizens for Tax Justice, a project sponsored by organized labor. "Their strategy is that you just keep quiet until Pawlenty reveals his budget, and until people see what this is really going to mean," says Cox. "The bad news has to be brought out by the new governor. It's a not a strategy I agree with. They're not serving the public well if they don't come out talking about it now, but there's some logic to their approach."
Cox favors a more straightforward one. "We should be telling people that we don't have the money for these tax cuts," he says. "We need to just go back to the system that worked before. So they made this no-new-taxes pledge. Well, they also pledged not to use tax cuts to cut services. And they pledged there would be no service cuts."
But he's not optimistic. "It may well be that this type of crisis is what's needed to bring about the rebirth of some real civic leadership. Unless some leadership emerges, I think the draconian cuts will become law. They control the governorship and the House, and the Senate is in a much narrower position. I think that the governor is going to get his way.
"It's utterly ironic that you would put the health of the most vulnerable citizens in jeopardy to preserve the tax cuts for the wealthiest," says Cox. "That's not the Minnesota of the past. But perhaps we're about to see that it really is the Minnesota of today."
Life or Death
Real people tell real stories about the state's medical safety net and what would happen without it
By Leyla Kokmen
You've seen the headlines. A state deficit that could soar to $5.5 billion. The enormous expense of Medical Assistance (expected to enroll nearly half a million people and cost Minnesota $2.5 billion by next year). A new governor, quick to target the program to make up some of the state's colossal shortfall.
What these stories often forget to mention, though, is that the state's healthcare programs are about much more than just dollars. They are a safety net that catches people when they fall on hard times. From the homeless, disabled man who needs seizure medication to the retired couple who can no longer afford skyrocketing insurance premiums, these are people who literally have nowhere else to turn. And contrary to conservative stereotypes, many have spent their whole lives working hard and paying their bills. A stroke, a layoff, an accident, and you might find yourself in the same vulnerable position.
Over the past month, we talked to several folks who have, for various reasons, found themselves relying on Minnesota's medical safety net. Here are three of their stories.
One Thing After Another
Joe Johnson says Medical Assistance was about the only thing that kept his family hanging on over the past year. "I just hope they don't cut it too bad. I know the shape I'm in and there are a lot of other people like me," says the 44-year-old husband and father. Without Medical Assistance, he continues, "we'd be so far in debt, we'd never see our way out of it. I don't know if we'd be able to sell everything fast enough."
Johnson's wife, Joan, her pale face peeking out of a sky-blue bathrobe, sits next to her husband. "I would probably not be here," she murmurs.
In July 2001, Joe, a veteran sheet-metal fabricator, quit his factory job in Monticello for a better opportunity in Fridley. His previous job provided health benefits for his family, and his new position would, too--but not before a waiting period had elapsed. Until then, Joe reasoned, he would carry the COBRA insurance from his previous job. The payment would be a hefty $500 each month, but he figured his higher wages (he was now earning $4.50 more per hour) would cover it.
"It was tough to carry the payment. But what I was thinking was, pay for it for three months, then get in full-time there and get on their insurance," he says. "But it hasn't quite worked out that way. It was kind of a gamble."
The gamble might have worked, had it not been for a succession of unexpected events. A few months after Joe started his new job, Joan, 45, learned that the cancer she had fought in 1999 had recurred. Then the couple's 14-year-old daughter, Holly, started suffering from symptoms they would later learn was a rare form of cancer. And, owing to September 11 and the faltering economy, Joe's company began to falter--six months after starting work he was laid off.
Suddenly the Johnsons, who live in a modest home in Becker, 50 miles northwest of Minneapolis, found their middle-class existence in freefall. Joe turned to Sherburne County for help. "The county said to keep the COBRA payment up," he remembers. But with everything going on, Joe missed the 30-day grace period and failed to scrape the money together. "My wife, she was in the hospital for two weeks. It was a Friday. Holly needed an MRI. I went to pick her up. I brought her home. There was not enough time to make the payment. I called on Monday, but they said it was too late. We lost our health care totally."
Although Holly, who had been adopted, was covered through Medical Assistance, Joe and Joan had no coverage and were facing huge hospital bills. Joan needed weekly chemotherapy treatments, but she decided the family couldn't afford them. "I called my doctor and said I couldn't come anymore," she says. "I couldn't afford $6,000 a treatment." Within two hours of that call, the doctor managed to cut through the bureaucracy and Joan was enrolled in Medical Assistance.
A few months later, the Johnsons received a letter stating that Joan would have to reduce her assets in order to qualify for Medical Assistance. "I had to take my name off our vehicles, our house, our cabin in northern Minnesota, our checking and savings accounts--all our assets," she says. "I have nothing in my name now. My whole life was wiped out at that point."
But the tradeoff was coverage for her cancer treatments, which could add precious time to her life. With chemotherapy, doctors told her, she might have a year to live; without it, more like six months.
"It's hard to describe what you've got to do when someone's sick like that, how quickly you get in a hole, and how hard it is to get out of," says Joe, who has since been able to enroll in MinnesotaCare for his own health needs. "I've worked all my life. I've always carried my own insurance. Now I'm trying to figure out how to keep my house without everything going down the tubes."
Last September, Joe was called back to work, though he's still waiting for a position with benefits. "My co-workers complain about the high premiums," he says. "I just want to say, 'Do you have any idea how much it would cost you if you got sick? What are you complaining about?'"
Making sure the kids are alright
"I was looking through some old notes," Shellene Coleman says while sitting in her living room, surrounded by family photos. "When I was in high school, which was 30-plus years ago, I wrote this thing that when I was 40, I wanted to have 10 kids and live in a big house."
The note was a surprisingly prescient. At 53, Coleman lives in a comfortable home in Lauderdale. When she and her husband, Calvin, got married last August ("We had a big African wedding. It was my dream come true," she reminisces), her already large family almost doubled. Coleman has 10 kids; her husband has nine.
Five of Coleman's children are her own; five are adopted or foster kids. Her mother, she explains, runs a foster home, so Coleman always watched the kids without families who landed there--and she understood how important it was for them to have stable, loving environments.
In such a big family, healthcare costs could easily get out of hand, were it not for Minnesota's state healthcare programs. "All the adopted kids and foster kids are covered by state programs," Coleman says, noting that providing health insurance is an incentive for families to take in needy children who would otherwise remain wards of the state. "If I hadn't had coverage, there's just no way. I can't begin to imagine." She pauses for a moment to relive the near-fatal stroke one of her adopted daughters had just over a year ago. "Her bills were $100,000. I don't know what I would have done."
If these kids weren't eligible for state coverage, the family's home life would be a struggle. "It would be quite difficult because of the cost," Coleman admits. Since the wedding, Coleman herself can be covered through benefits offered by her husband's employer, United Parcel Service, and she's been able to scale back her own job as an administrative assistant at a bank. Now she's able to work only part time, to spend more time with the children. "I'm home in the mornings to see them off to school. It helps with the transition. And I'm off one day from work. It makes it a little easier for them," she says. If the state did not provide health coverage for the kids, Coleman says, "I would have to go back to work full-time. I'd have to, to have insurance."
"They all have some medical issues that needed attention," Coleman says, including prescriptions that total more than $800 a month. She ponders what would happen if the programs were cut or her kids were no longer eligible. "It'd be tight. Very tight," she declares. "We would choose to take away some things, do some things differently."
And while she says that even if the state didn't provide health insurance for the kids, she'd still adopt them anyway, she thinks other families might see a lack of insurance as a deterrent. "For the average person, that has to be, because it is so costly," she notes. "People ask about coverage. 'How am I gonna be able to take care of this child? I just live on a budget.'"
"I had nothing"
Five years ago Kathi Kelly was 19, earning $5.75 an hour working in a coffee shop in Willmar. And she was pregnant.
"Those were the most terrifying months of my life," she says. "I was not covered by my parents' insurance, because I had moved out and was not in college. I was facing nine months of bills. I was applying for WIC, food stamps, to make sure I'd have enough to pay the bills and still be able to buy food. I wasn't going to make it."
After a $4,000 hospital stay for an illness and severe dehydration, Kelly applied for Medical Assistance. "The biggest thing I was thankful for in my entire life was Medical Assistance," she says. "It's kind of like throwing someone a blanket. I just had nothing."
By the time her daughter Emma was born, Kelly had moved to Minneapolis to be with the baby's father, Mike. Though the baby's health insurance was still covered by the state, Kelly was no longer eligible because their household income was too high. But because the couple wasn't married, Kelly couldn't be covered by Mike's work benefits.
"He was recognized as being my sole support, but insurance wouldn't cover me. That was frustrating," she remembers. "Even though we knew we were going to be together, we didn't want to get married yet.
"I was just living without insurance," she continues. "I went to a free clinic with a sliding fee."
At first the lack of insurance didn't seem to be a problem, especially for a young, healthy woman. But then at one checkup, Kelly's doctor found cells in her uterus that appeared to be pre-cancerous and wanted to do a biopsy. "I looked at surgery, but I couldn't afford it," Kelly says. Her clinic suggested she apply for MinnesotaCare, and she was happy to learn the program would provide coverage despite her preexisting condition.
"I was worried I wasn't going to get coverage in time," she continues. "And then, if the bills were mounting, what if something really bad happened? Then I'd be leaving bills to my family. Not to mention the fact that I really didn't know what was going on with my body. I was thinking about family members: If a bill mounts up, who can I borrow money from? That weighs you down."
Today, getting health insurance is no longer a constant fight. The couple is married, so Mom and Dad, four-year-old Emma, and 14-month-old Christopher are all covered by benefits from Mike's job as a respiratory therapist. And because Kathi has gone two years without any further medical problems, her preexisting condition label has been lifted. But she still remembers how much the state's healthcare programs helped her when she needed it.
"Without it I'm not sure I would have made it through those times," she says. "Well, you would have made it through, but who knows if you'd ever be able to pay off the bills? Your life would be totally different.
"You need insurance. There's just no way you could live without it. For me [the state's programs have] always been a safety net. In the times I've needed it, it's always been there. People don't see who it's affected and who it's helped. These are programs that should not be cut or cut back on."
The Right Stuff
Minneapolis plays the public safety card to keep state dollars
By G.R. Anderson JR.
Public safety was the phrase of the day three weeks ago in the basement chambers of the State Office Building in St. Paul, when a delegation of city leaders from Minneapolis came to show the House judiciary committee they were down with the cause.
Ostensibly, the purpose of the hearing was to convince legislators that funding for the Minnesota Gang Strike Force, a statewide agency devoted to tracking organized crime, was crucial. Mayor R.T. Rybak testified before the committee, some 50 onlookers, and a host of television cameras. Minneapolis council members and police kibitzed in the gallery with a St. Paul contingent that included the city's mayor, police chief, and a handful of St. Paul police. Other cops and policy wonks periodically poked their heads through the chamber doors. Rich Stanek, a GOP state rep from Maple Grove and member of the Minneapolis Police Department soon to be named as head the state's Department of Public Safety, conducted the hearing with militant efficiency.
The real reason Rybak and Co. had come was to demonstrate that the state's largest city is in the process of streamlining government and finding new sources of revenue to solve its budget crisis. (A budget gap optimistically projected at $55 million over the next five years has already jeopardized municipal services and has leaders leaning toward a wage cap for city employees.)
There is good reason for the preemptive political strike. Gov. Tim Pawlenty has vowed not to raise taxes, despite the promise of a budget shortfall of at least $5.5 billion after inflation. And while everyone stands to suffer from the inevitable budget cuts, it's no secret that in order to stop the bleeding by 2005 the governor will look to curb Local Government Aid (LGA), a program that infuses Minnesota's municipalities with money from the state. Pawlenty, many new Republican legislators, and a powerful suburban electorate come from the suburbs that receive little LGA. Minneapolis, like a good number of older cities and rural towns, depends on it. (Last year Minneapolis received $89.8 million from the state, which made up nearly half of the city's general revenue base.)
That said, it is also widely known that one way to get money out of the state is to tap into the perception that public safety in this time of terror must be ensured at any cost--hence Rybak's appeal for a strike force and the city council's intention to position Minneapolis as the state's focal point for "emergency preparedness."
"We are facing the same financial constraints as anyone," Rybak said in his brief remarks. "But we are focused, first and foremost, on public safety."
Local government aid, created more than 30 years ago, is the state's largest assistance program for its cities--totaling more than $600 million this year. (Pawlenty floated the idea of having cities return some of that money to the state before he officially took office. It went nowhere.) The formula for calculating what a municipality receives has been unchanged since 1992 and depends in part on population, decline in population in the last 10 years, percentage of housing stock built before 1940, and percentage of commercial property tax.
Older cities, like Duluth, Rochester, and the Twin Cities, as well as first-ring suburbs and older, smaller towns, are largely dependent on LGA; newer, fast-growing suburbs, which are largely conservative, receive very little. Some believe the Pawlenty administration could cut as much as 20 to 50 percent of LGA across the board, which would spell doom for Minneapolis.
Over the past 20 years, Minneapolis has seen its stock fall at the state legislature. While out-state and suburban voters have become increasingly Republican and independent, Minneapolis has remained a bastion of DFL liberalism--a wasteful, flaky burden to the state that more and more legislators have come to treat with outright disdain.
In the past, Minneapolis leaders have rightly argued that this negative sentiment, while good fodder for political rallies, doesn't reflect reality. Minneapolis is an anchor for the rest of the state, after all. Aside from being a destination point for sports, arts, and entertainment, city leaders are quick to point out, some 200,000 Minnesotans come downtown to work each day.
Although Minneapolis leaders will continue to remind legislators that their city is an economic engine that drives the region, however, the message will be delivered with a different spin--one that focuses on helping surrounding municipalities in times of crisis. "What we're saying is that you should be interested in keeping Minneapolis healthy and able to respond to your disasters in Eagan or your fires in Edina," says Scott Benson, who chairs the city council's Intergovernmental Relations Committee. "You can look at a fine city like Minnetonka, but really, what is Minnetonka without Minneapolis? You have to have this city to make all the suburbs make sense.
"The gist of our message is where LGA goes in the city of Minneapolis," Benson adds, emphasizing that the city recently unveiled a five-year financial plan for the first time. "It's not that LGA is going to support development of Block E or build a Target store or whatever. LGA really does go to basic city services. And as far as emergency preparedness, Minneapolis serves the entire region."
"It's a strategy right out of the Republican playbook," says Larry Pogemiller, a DFL senator from northeast Minneapolis. "Show you can streamline government. Then make fighting terrorism on a local level a political priority because it's in vogue. How prepared can you be? Is that the major issue for the city? Heavens, no."
Despite his distaste for the strategy, Pogemiller concedes that tacking to the right might be the best hope for Minneapolis, especially given the nature of the legislature and the suburban sentiments of the new governor. What's more, Pogemiller notes, the mayor and many council members were new to office a year ago, and have since learned some lessons; their public-safety agenda is meeting with positive reviews. (It's also worth noting that 70 percent of the city's general fund is used to pay for police, fire, and infrastructure.)
"Last year I was inundated with anti-Minneapolis comments," recalls Rybak. "Now I'm saying, 'Don't carry that history. We have created a tough five-year financial plan; we've dealt with immediate cuts.' Last year we made promises, this year we have a track record."
Still, Rybak and others admit to a certain discomfort with this year's pitch. Last year's "priority issues" for the city were affordable housing and transportation. This year those two "liberal" issues have been relegated to secondary agenda items. This year's priority issues are LGA, public safety, and "accountability and results."
"We have to do these things, to make some recognize we're here to make our state safer," Rybak says, adding that affordable housing is still a main priority for the city. "With a different group, in a different climate, would our emphasis be different? Sure."
So at the judiciary hearing, Rybak made a point of saying LGA has much to do with keeping cops on the street and keeping the city safe. "We don't want to have to make more cuts to public safety," Rybak concluded. "We will try our very best to put our resources into something we really believe in. But we need to partner with you to solve these tough issues."
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