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


Minnesota to receive $430 million for health care and education

August 13, 2010

Congress has approved and President Obama has signed into law a bill that will send $430 million to Minnesota to help pay for health care and to save public school teachers’ jobs. The breakdown is $167 million for education and $263 million in additional funding for health care provided by Medicaid.

As we have frequently blogged, federal aid to the states is an effective way to help support the economic recovery, as it prevents deeper state budget cuts and related job losses, both of which are a drag on the economy. The nonpartisan Congressional Budget Office has found that temporary federal assistance to the states is, in fact, one of the most effective measures the federal government can take to create jobs and increase demand in the economy. The extension of the federal matching rate for Medicaid is paid for, or offset, by reductions in other spending so that it will not increase the federal deficit.

Minnesota has already received nearly $1.3 billion in additional federal health care dollars thanks to an increase in the federal share of funding for Medicaid in the economic recovery act, funding that has protected health care for thousands of Minnesotans and has saved jobs in the health care sector. The original increase in federal funding for Medicaid will expire December 31, 2010. The new legislation extends the enhanced federal Medicaid funding for an additional six months, through June 2010.

The new legislation also includes additional federal support to local school districts to prevent imminent teacher layoffs. The funds must be used to preserve elementary and secondary education jobs. The U.S. House Committee on Education and Labor estimates that Minnesota could receive $167 million that would be used to fund approximately 2,800 teacher positions. The additional federal aid for education comes with maintenance of effort requirements that Minnesota must keep K-12 and higher education spending at 2006 levels or maintain K-12 and higher education spending at their 2006 share of total revenues.

As it stands, approximately $240 million of the $263 million in new Medicaid money will flow into the state’s general fund. This creates a cushion if a new deficit opens up in FY 2011, and could reduce or eliminate the need for short-term borrowing or additional budget cuts. If not needed to fill a budget gap in FY 2011, these additional federal Medicaid dollars could be used to improve access to health care for struggling Minnesotans.

The remaining $23 million goes in part to enhanced payments to the MinnesotaCare program and in part to counties to reimburse them for small Medicaid contributions. The state will have to spend a small amount of money (probably less than $10 million) to meet federal maintenance of effort  requirements to get the Medicaid money.

The bill passed the U.S. Senate last week by a vote of 61 to 39, with both Minnesota Senators Amy Klobuchar and Al Franken voting “yes.” On August 9, the U.S. House of Representatives passed the bill by a vote of 247 to 161. Representatives Ellison, McCollum, Oberstar, Peterson and Walz voted “yes” and Representatives Bachmann, Kline and Paulsen voted “no.”

-Steve Francisco and Scott Russell

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Governor’s recommended E-12 budget would do little to help struggling students and schools

February 13, 2009

The future success of our state’s economy hinges on our E-12 school system. Yet Minnesota has work to do to ensure all children have the opportunity to learn and succeed. There are large racial and income disparities in educational achievement. Low-income children are twice as likely to not be ready for kindergarten compared to children from families with the highest incomes. Business leaders recognize that closing this gap is not only the right thing to do, but the smart thing to do: the Itasca Project, a group of about 40 Minnesota CEOs, asserts that reducing racial and income disparities is critical to preserving Minnesota’s strong economy and business competitiveness.

Making sure every student succeeds is one of the fundamental challenge before policymakers, but I can’t help but feel that this important topic is getting lost in the black hole-that-is-the-budget-deficit.

Certainly schools across the state are in survival mode after years of budget austerity and cuts to programs and staff. State funding for E-12 education has actually declined since 2003, dependence on local property taxes to fund education has increased and school revenues have dwindled. (see our analysis of state spending on E-12 in the 2000s for more on this). Just recently the Rochester school board closed their latest budget shortfall by eliminating 30 teaching positions and increasing class sizes from Kindergarten to grade 6. The Anoka-Hennepin school district, which has a $15.8 million budget deficit, slashed 130 teacher jobs and will cut down on textbook purchases, bus services and other expenses.

In the Governor’s state of the state address last month, he touted that he would “improve” E-12 education, which would be one of the few budget areas to receive more money. Yet few of the Governor’s budget recommendations (read them yourself here) address educational disparities, instead focusing on bumping up funding for schools with good test scores while students in other schools are left behind:

  • The most substantive recommendation from the Governor on E-12 education is to turn back the clock to 2003 and re-enact a budget gimmick we used the last time the state faced such a large deficit. The Governor would shift over $1.2 billion in state aid to school districts that is supposed to go to schools in the coming budget biennium to the FY2012-13 biennium. Sounds like a relatively painless accounting sleight of hand, right? Not quite, it’s more like a taking-away-of-the-buck from already cash-strapped school districts, which could force some into drawing down their cash reserves or short-term borrowing (made more expensive by tight credit markets – the Governor’s own budget points this out). Bottom line: This measure is a short-term fix for the state’s budget woes, just delays the deficit problem to the next biennium, and may worsen school district finances. Note: As in 2003, I expect the DFL budget proposal will include this budget gimmick too.
  • Spends more money on expanding the Governor’s Q-Comp program to all school districts, but partially pays for it via higher local property taxes. The Q-Comp program is a 2005 initiative from the Governor that involves restructuring teacher pay, professional development and performance pay. Recent reports from the Legislative Auditor and the State Education department have differing things to say about whether this program improves student achievement. Currently, less than a quarter of all school districts participate in Q-comp – the Governor wants to require all school districts to participate (not clear if the teachers’ union has a say in this). The expansion would cost the state more than $40 million in FY 2011, and $109 million in FY 2012-13. However, though the state would require each school district to apply to the Q-Comp program, it would not entirely pay for Q-comp funding:under the Governor’s plan, 35% of Q-Comp funding would come from an “optional”  local levy – that is, the school district would be authorized to increase local property taxes to pay for the Q-comp program. So, no tax increases at the state level, but local tax increases are ok…?
  • Eliminates the Arts High School at the Perpich Center for Arts Education. The St. Paul-based school, which is a public, tuition-free school for 11th and 12th graders with an arts-centered education, would be turned into a charter school. Net savings to the state: $2.2 million in FY 2010-11.
  • Spends $91 million on schools that improve test scores as part of a new “pay for performance plan.” The program would reward charter schools and school districts that have increases in certain standardized test scores with more general education revenue. This leaves out a swath of schools, including those schools where all students are proficient in test scores, as well as schools that need the most help getting their test scores up.
  • Dedicates a modest amount of money to various programs to establish stricter teacher licensing requirements and new training programs, but on the other hand would create a less rigorous “alternative route” to teacher licensure. Commissioner Seagren noted in testimony to the House E-12 committee that 40% of teachers will retire in the next 10 to 12 years, and they need to be proactive in filling the gap. I’m sure we are all for well-trained teachers, I was just left a bit confused by the Governor simultaneously proposing greater standards and requirements to become a teacher, while proposing an alternative route to teacher licensure that is less rigorous. Beyond addressing teacher licensure, the Governor would spend $2 million on creating online courses for Advanced Placement coursework training for teachers.
  • Spends $10 million on a new pilot program for an intensive summer school for 8th graders that are tested as not yet proficient in math or reading. This would reach 2,000 students in FY 2010 and 4,000 students in FY 2011 (there about 63,000 public school 8th graders in Minnesota). This additional spending, though small and only a summer program, is at least targeted towards helping struggling students.

In summary, few of the Governor’s new E-12 spending initiatives are targeted towards lessening educational disparities. His most substantive budget recommendation is a budget gimmick to delay some of the budget deficit pain. In that sense, his recommendations fall far short of addressing the central challenge facing our state today.

-Katherine Blauvelt

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