Support the Minnesota Budget Project on Give to the Max Day

November 16, 2011

It’s Give to the Max Day, when thousands of Minnesotans say a special thank you to the nonprofits they value. Please add the Minnesota Budget Project to your list of donations today. Your gift will help us continue our work advocating for tax and budget decisions that invest in Minnesota and build a prosperous economic future.

Our work takes on special importance in these difficult economic times. The Minnesota Budget Project is out in front calling for a balanced approach that strengthens the building blocks of economic growth: high-quality schools, strong communities, educated workers and opportunities for all Minnesotans to succeed.

Here’s a quick reminder of what your contribution to the Minnesota Budget Project means:

  • You’ll support the timely non-partisan analysis of budget and tax debates that you count on at Minnesota Budget Bites.
  • You’ll support our work to stand up for balanced solutions that include fairly raised revenues. You’ll see us testifying at legislative hearings, talking to the news media, and ensuring that those whose voices aren’t always heard can be part of the debate.

Please make your tax-deductible contribution today!

Your gift today can work even harder because it makes us eligible for $1,000 prizes drawn every hour. Each donation to us – no matter at what time or how often – gives us one more chance in the drawing.

Our work depends on donors like you to step up on Give to the Max Day and year-round. Thanks for your support today!

-Nan Madden


Metro area unemployment hits communities of color hardest, puts state’s long-term growth at risk

October 27, 2011

Racial disparities in employment are widespread and systemic. It’s true across the country, but it is particularly true for the Twin Cities, where black unemployment hit 21 percent in 2010, more than triple the rate for whites, according to a recent report from the Economic Policy Institute (EPI). The Twin Cities ranked second worst among 29 large metropolitan areas in black-white unemployment disparities in 2010, according to the EPI report. And although Twin Cities Hispanic unemployment was relatively low compared to the rate in other major metropolitan areas, it was still nearly double the white unemployment rate, a separate EPI study found.

People of color are a growing part of the state’s population, and failure to address underlying causes of these significant disparities puts Minnesota’s prosperity at risk.

The problem is in part an educational issue. The achievement gap between white students and students of color is well documented in Minnesota – and research finds that individuals with less education are more likely to be unemployed. However, employment disparities exist even when accounting for educational attainment. For example, for Minnesotans under age 35, blacks without a high school diploma had an unemployment rate of 59 percent in 2009, nearly triple the 22 percent rate for whites without a diploma.

We were glad to see a panel at the recent 27th Annual Conference on Policy Analysis shine a spotlight on racial disparities in unemployment. It’s everyone’s problem.

Panelist Carolyn Roby, vice president for Wells Fargo Foundation Minnesota, said racial disparities exist at every educational level. “It’s not enough to say that education is the answer,” she said. “We are leaving talent and potential on the table, untapped.”

Roby urged people to address the impact of “unexamined internal bias.” People need to  become more aware of their own biases, and then examine their impact on hiring and promotion decisions, she said.

Panelist Luz Maria Frias, St. Paul’s director of human rights and equal opportunity, raised several issues concerning racial disparities in employment. One was the issue of long-term unemployment. Communities of color are not only disproportionately unemployed, they tend to be unemployed for a longer period of time, Frias said. One way of helping overcome unemployment disparities would be to make it illegal for employers to screen out applicants with a history of long-term unemployment. Excluding them from the applicant pool adds to a vicious unemployment cycle.

Frias also supported policies making it illegal for employers to screen out candidates with criminal records. The legislation, called “Ban the Box,” refers to the part of employment applications that applicants check off if they have criminal histories.

Minnesota was the first state to pass Ban the Box legislation that applies to hiring public employees. The Second Chance Coalition is working to expand it to private sector employers, too.

Criminal history screening perpetuates racial employment disparities. People of color are involved disproportionately with the criminal justice system. As the Organizing Apprenticeship Project explains in its Legislative Report Card on Racial Inequity, those criminal justice disparities are rooted in unequal disciplinary action between white youth and youth of color for similar crimes.

Business, political and community leaders can pursue multiple avenues to address employment disparities. Reducing educational disparities is one step. But eliminating employment barriers that put communities of color at a disadvantage and being vigilant and courageous in addressing internal biases are also important. Such approaches will help ensure equal opportunities for all and help build stronger communities.

-Scott Russell

New studies tell a familiar story: Racial disparities in assets

October 19, 2011

Two new reports from a national think tank look at financial security and opportunity in Minnesota, and find that Minnesota as a whole does better than the national averages, but worse than national averages when it comes to communities of color. Unfortunately, the story of Minnesota’s deep racial disparities is a familiar one – one you’ve heard from us most recently in our blog on census data on incomes and poverty.

CFED, the Corporation for Enterprise Development, is a leading national think tank on asset development and economic opportunity. Its work is built on the idea that income is necessary for families to get by, but assets are crucial for families to get ahead. CFED finds that 25.9 percent of households nationwide are in “asset poverty,” meaning they do not have enough savings or wealth to meet their basic needs in the event of job loss or other emergency.

CFED’s new Assets & Opportunity Profiles for Minneapolis and Hennepin County and St. Paul and Ramsey County find that Minnesota does better than the national average, but the figures for Minnesota’s communities of color are shocking, and are worse than the national figures. While 20.7 percent of all Minnesota households are asset poor, 58.5 percent of black Minnesotans, 42.0 percent of Latino Minnesotans, 21.7 percent of Asian Minnesotans and 43.3 percent of Native Americans in Minnesota are asset poor. Minnesota’s communities of color are also less likely to access higher education and own their homes.

While low-income households are more likely to be asset poor, the issue goes well up the income scale. Nearly one-quarter of households with incomes of $37,741 to $59,604 live in asset poverty. When families are asset poor, they have fewer opportunities to move up financially through education, home ownership, or entrepreneurship, and are less able to provide the stable environment that supports their children’s education. Lack of family economic security is a threat to the economic vitality of our communities and state.

I had the opportunity to learn more about these reports at a forum held Tuesday by CFED in partnership with Northwest Area Foundation, Legal Services Advocacy Project and the Greater Twin Cities United Way. In addition to providing analysis of assets and opportunity in our area, CFED and other participants talked about policies that can support Minnesota families to learn, earn, save, invest and protect. Minnesota has done well in some of these policies, including a strong state Earned Income Tax Credit and partnerships that promote its use and connections to free tax preparation, financial education and access to mainstream banking services.

Public policies play a role in determining who has the opportunity to build assets, as do employers, financial products, incentives and education. However, CFED finds that our nation’s approach to asset building is “upside down” because it provides the greatest support for asset building to those with the highest incomes, primarily through the tax code. In FY 2009, the federal government provided an average of $95,820 to support asset building by households with incomes over $1 million, yet only provided an average of $4 for asset building to households with incomes of $10,000 to $15,000.

As we’ve seen in our analysis of this year’s budget outcomes, this is an area where the state has reduced its investment. For example, state funding was eliminated for Family Assets for Independence in Minnesota (FAIM). Low-income participants in FAIM get their own savings matched with state and federal funds to help obtain post-secondary education, purchase a home, or start a new business. The loss of nearly $500,000 in state funds in FY 2012-13 will likely mean the loss of a matching grant from the federal government.

The participation in Tuesday’s forum of elected officials at the city, county and state levels, and other community partners, is a good sign. But we can – and must – do better. In order for our region and our state to be economically competitive in the future, all Minnesotans must have the opportunity to gain the education and economic stability that enables them to thrive and make their greatest contribution in the workforce.

-Nan Madden

State revenue and cash flow steady, but economic worries remain

October 12, 2011

First the good news. The State of Minnesota started out the first quarter of the FY 2012-13 biennium with higher-than-expected revenue. From July through September, the state collected $59 million above estimates, up about two percent from earlier projections, according to the state’s October 2011 Economic Update. Corporate income tax, individual income tax and sales tax receipts all exceeded forecasted levels.

While revenue is up slightly, Minnesota’s cash reserves remain low. Still, state financial experts reported at a legislative hearing last week that they do not expect that it will be necessary to take any administrative actions or turn to short-term borrowing in order to cover our bills during the current fiscal year. (State leaders took out a line of credit in 2010, just in case.)

The national economy continues to be the problem. The October Update reiterated concerns raised earlier this summer:

While most economists expect the U.S. to avoid a recession, real GDP growth over the next six to nine months is expected to be very slow…Forecasters’ major concern is that the tepid growth rate now seen likely through at least mid-2012 leaves the expansion dependent on the absence of extraordinary events and the avoidance of policy errors both in the U.S. and in the Eurozone.

State economist Tom Stinson says Minnesota will likely face a new deficit for the current biennium, MPR reported. When Governor Dayton and the Legislature made FY 2012-13 budget decisions, the national economy was expected to grow at a somewhat respectable pace – 3.2 percent growth in GDP in 2011 and 2.9 percent in 2012. The latest GDP growth estimates have been cut by about half, to 1.7 percent for 2011 and 1.4 percent for 2012. The steep drop in economic growth means a decline in state revenues, which increases the likelihood that a deficit will open up within the current biennium.

Federal and state leaders need to steer a careful course. This subdued level of economic growth assumes Congress will extend the expiring employee payroll tax cut into 2012, a proposal that is part of President Obama’s jobs bill. Stinson said last week that if Congress fails to extend the payroll tax cut, it would further reduce GDP growth expectations by one percent in 2012, resulting in a virtually no-growth scenario nationally.

We’ll know whether the state will face a deficit in the current biennium – and the size – when Minnesota Management and Budget releases the November Forecast. And on January 24, the Minnesota Legislature will reconvene. Given the current fiscal instability, policymakers need to focus on supporting Minnesota families struggling in the slow economy, and investing in the future economic health of the state.

-Scott Russell

President Obama’s proposed jobs bill would support jobs, economic growth in Minnesota

September 27, 2011

The American Jobs Act proposed by President Obama could create or support more than 26,000 jobs and inject at least $1.5 billion into Minnesota, according to estimates by the Obama Administration. Those jobs include teachers, police, firefighters, engineers, construction workers and more. The Jobs Act is a package of tax cuts for employers to provide incentives for hiring, infrastructure investments, assistance to those looking for work, and tax cuts for individuals.

The proposed strategies include some of the most effective ways to support economic growth. The Center on Budget and Policy Priorities reinforces in a recent statement:

We need to boost the economy in the short run by enacting legislation that would, for example, extend unemployment insurance benefits and the temporary cut in payroll taxes beyond their scheduled expiration at the end of this year, provide more assistance to states to temper their need to impose more layoffs and cut more spending to balance their budgets, and create programs that would put people back to work on projects such as renovating and modernizing America’s schools. Such temporary policies would help boost growth and employment now without adding significantly to long-term deficits and debt.

Some of the main components of the bill, and the impact on Minnesota estimated by the Administration, are:

Tax cuts for employers

  • Payroll taxes would be cut in half for employers’ first $5 million in wages. In Minnesota, an estimated 120,000 employers would benefit from this cut.
  • Employers who increased their payroll (by adding new workers or increasing the wages of current workers) would pay no payroll taxes on up to $50 million of the increased payroll.
  • Employers would receive tax credits of $5,600 to $9,600 for hiring unemployed veterans, and a $4,000 tax credit for hiring long-term unemployed workers.

Infrastructure investments

  • The bill invests $50 billion in highways, transit, rail and aviation. The highway and transit portion alone would provide an estimated $608 million in Minnesota and support a minimum of approximately 7,900 jobs.
  • Layoffs of up to 280,000 teachers nationwide would be prevented. The bill would also support hiring thousands more teachers and keep police and firefighters on the job. Minnesota would receive an estimated $504 million. These funds would support up to 6,900 teacher and first responder jobs.
  • At least 35,000 public schools nationwide would benefit from school infrastructure investments. Minnesota’s share totals $275 million and would support up to 3,600 jobs.
  • Hundreds of thousands of vacant and foreclosed homes and businesses would be rehabilitated. Minnesota could receive approximately $101 million, and could apply for more through a competitive bidding process.
  • Facilities at community colleges would be modernized. Minnesota could receive $88 million.

Pathways back to work

  • The Unemployment Insurance (UI) system would be reformed to help the long-term unemployed transition back to work. An estimated 71,000 Minnesotans are among the nation’s long-term unemployed.
  • Unemployment Insurance benefits would be extended, preventing at least 13,400 unemployed Minnesotans from losing their benefits during the first six weeks.
  • Low-income youth and adults would access work opportunities or obtain job training in growth industries through the Pathways Back to Work Fund. This could place 6,500 Minnesota youth and 1,700 Minnesota adults in new jobs.
  • Hiring discrimination against the unemployed would be prohibited.

Tax cuts for workers

  • The payroll tax cut passed in December 2010 would be expanded to cut workers’ payroll taxes in half in 2012. A typical Minnesota household with an income of around $56,000 would receive a tax cut of approximately $1,740.

When releasing the Jobs Act, President Obama emphasized that the bill would not add to the federal deficit. He proposes to pay for the bill through tax changes including new limits on itemized deductions for high-income Americans (individuals with incomes above $200,000 a year and families with incomes above $250,000 a year), by closing tax preferences for the oil and gas industries, and by changing the depreciation rules for corporate aircraft.

While it is highly unlikely that Congress will approve the entire bill, discussions have begun on Capitol Hill to determine whether agreement can be reached to pass parts of the bill. The continuing weak economy and high unemployment increase the pressure on the Administration and Congress to act.

-Steve Francisco

Racial disparities grow in Minnesota as poverty increases, household income declines

September 22, 2011

Earlier this month, we learned the distressing (but not surprising) news that poverty is increasing and median household income is declining in Minnesota. The U.S. Census is out with another report showing even worse news. Minnesota has an unfortunate history of racial disparities, with communities of color experiencing worse economic outcomes than their white counterparts. Thursday’s release of the American Community Survey (ACS) reveals that racial disparities in the state continue to grow.

In 2010, 11.6 percent of Minnesotans were living in poverty, up significantly from 9.5 percent in 2007 (just before the last recession). This overall number hides the much deeper levels of poverty within Minnesota’s communities of color. In 2010, 17.8 percent of Asians were living in poverty, as were 24.4 percent of Latinos and 37.2 percent of blacks. Although poverty among white non-Hispanic Minnesotans increased from 7.1 percent in 2007 to 8.4 percent in 2010, poverty among American Indians increased from 30.7 percent to 39.5 percent.

Income disparities also continue to persist in the state. In 2010, the median household income for the Latino, black and American Indian communities fell significantly below the statewide median household income for whites. And those gaps are growing. Among white non-Hispanic households in Minnesota, median income fell by five percent between 2007 and 2010. However, black households experienced a 16 percent drop in median income and American Indian households a 22 percent drop. In 2010, the median household income for both of these communities stood near $27,000, less than half the statewide median of $55,459.

Minnesota tends to come out ahead when we examine national averages, but it is shocking to see how our communities of color are faring compared to other states. The poverty rate among white Minnesotans remains significantly below the national average for whites, while the poverty rate among blacks, Asians and American Indians is significantly higher than the national average for these communities. For example, among blacks and American Indians, Minnesota’s poverty rate is at least ten percentage points higher than the national average.

The persistent disparities between whites and people of color in Minnesota contradict our most deeply held values. Minnesotans believe that hard work should pay off, that people who work full time should be able to support their families, and that everyone who is willing to work should have the opportunity to succeed. The levels of economic inequality we are facing is not simply the inevitable result of a bad economy. The problem has been compounded by poor policy choices that have increased the challenges facing already-struggling families. The new data again put the pressure on state and national leaders to address racial disparities.

-Christina Wessel

Minnesota losing ground on poverty, income and the number of uninsured

September 16, 2011

It seems oddly appropriate (and a little inconvenient) that I was out of town at a conference on the day the U.S. Census Bureau released the latest statistics on poverty, income and health insurance coverage in the United States. It reminded me that for many years, fellow policy wonks from other states have looked at Minnesota with envy as a place that consistently ranks high on almost all of the good stuff, and ranks low on almost all of the bad stuff (although it’s important to acknowledge that these rankings overlook the deep racial inequities that have long plagued our state.)

But Minnesota is starting to lose its great reputation. With the release of the U.S. Census Current Population Survey (CPS) on Tuesday, we can look back and see that 2000-2010 represents a decade of decline for Minnesota. The CPS offers a preliminary look at state-level trends. Our poverty rate and level of uninsured may still be below the national average, and our median income remains above the national average, but we are headed in the wrong direction.

Poverty in Minnesota is on the rise. Over the last decade, the percentage of Minnesotans living in poverty has risen from 6.5 percent to 10.8 percent, according to preliminary statistics from the U.S. Census Bureau. That means one out of every ten Minnesotans is living below the poverty line (a stunning $22,113 for a family of four). With the threshold so low, it’s not surprising that families with incomes above the poverty line still struggle to meet their basic needs. Sadly, many are living with that reality: one out of four Minnesotans is surviving on an income below 200 percent of the poverty line ($44,226 for a family of four).

We are also seeing a dramatic drop in median income in the state. The preliminary data released by the U.S. Census Bureau shows that over the last decade, Minnesota’s median income fell from $65,120 to $54,785, after adjusting for inflation. That’s a drop of more than $10,000. Only Michigan experienced a larger decline in median income over the decade. More definitive state-level data on income will be released September 22 as part of the American Community Survey.

To complete the trifecta, the share of Minnesotans without health insurance has increased 2.1 percentage points over the last decade, hitting 10.2 percent in 2009-2010. How people are getting health coverage is also changing. The share of Minnesotans receiving employer-sponsored health care has fallen by nearly nine percentage points over the last decade. Public health insurance – like Medical Assistance – has picked up much of that slack, thereby preventing an even sharper increase in the number of uninsured Minnesotans.

You might think that times have been very tough, and surely every state is facing the same bad outcomes over the last decade. That’s not the case. Many states have managed to hold their ground in the face of two recessions, and a few states have even managed to show improvement (North Dakota and West Virginia saw an increase in median income, and Massachusetts reduced its percentage of uninsured). 

The economic turmoil that has contributed to the increase in poverty and fall in median income may be beyond our ability to influence, but Minnesota’s policymakers can make better choices to reduce poverty, build the middle class and improve the state’s economic future.

-Christina Wessel

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