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Minnesota Loses Jobs For Second Straight Month
For the first time since Feburary 2010, Minnesota’s economy lost jobs two months in a row. The North Star State shed 11,400 jobs in April after dropping 3,300 in March.
Data from Minnesota Department of Employment and Economic Development
The jobs reports for the last six months have inspired optimism. If that trend had continued, it would have relieved worries about the state’s economic growth. But with the significant losses in April, that relief may have to be put on hold.
Trade, Transportation, and Utilities (TTU) and Government were the hardest hit in April. With weakness in trucking and wholesale trade, TTU dropped 5,700 seasonally-adjusted jobs. The drop in this sector exemplifies the greatest weakness in the private sector in 2013: weak demand. Consumers cannot afford to buy more things, and businesses are not betting that they consumers will anytime soon.
Government jobs contracted by an additional 2,000. After finally returning to pre-recession employment levels at the end of 2012, the government sector, which includes all levels of government as well as public school employees, has fallen in each of the last four months. The contraction this spring has largely been driven by cold spring and federal sequestration. The later than usual spring has delayed the opening of municipal parks and golf courses, and the hiring has also been delayed.
April was not solely a gloomy month for the state economy, however. Unemployment fell one-tenth of a percent to 5.3%, the labor force participation rate ticked up to 70.9, and the number of unemployed Minnesotans fell below 160,000 for the first time since June 2008.
A main reason that it took a full five years for unemployment to drop below pre-recession levels is that only two of Minnesota's five largest sectors have grown since then. Jobs in Health Care and Professional and Business Services have increased by 43,000 and 15,000, respectively.
Data from Minnesota Department of Employment and Economic Development
On the other hand, three of the largest sectors in the state are still shrinking. There are 6,400 fewer government jobs in Minnesota than in 2008, or about 2% of the total, although employment in this sector has remained much more stable than other areas of the economy.
Manufacturing and Trade, Transportation, and Utilities have only barely begun to recover from their low points in early 2010. Both sectors are highly dependent on the health of consumer spending, since they include making, transporting, and selling products. Seeing these two large sectors struggling to increase employment again points to the mediocre nature of the recovery. As jobs and household wealth have stagnated, consumer spending has not grown fast enough to spur producers and distributors from adding many jobs.
The Minnesota labor market is improving, but slowly and not without set-backs. Five years later, the state has not recovered from the Great Recession.
Posted in Economic Development | Related Topics: Job Growth Unemployment
Tax Cuts for Transportation?
Tea Party stalwart Rand Paul, son of Ron and a U.S. senator from Kentucky, has proposed a new way to pay for transportation projects. This is good news, of a sort: a government-shrinking, tax-averse conservative acknowledging that public infrastructure indeed should be supported by public funds.
What's not so encouraging is Paul's financing method—huge tax cuts for corporations. Say what? He'd slash the tax rate for repatriating overseas capital to the states from its current level, as high as 35 percent, all the way down to 5 percent. Presumably, he thinks we'd get a windfall of homesick money far exceeding the trickle now shedding one-third to repatriate. As if by supply-side magic, the rate goes down and collections skyrocket, covering existing revenue while producing new riches for roads and bridges.
Given the track record of similar right-wing cut-tax-and-then-spend schemes in the past, that happy outcome is anything but assured. What's more, for years, U.S. multinational corporations have been pleading for as little as a one-day repatriation tax holiday. Perhaps Paul's bill just puts a popular face on an extreme pro-capital fiscal policy.
As transportation policy, as well, his idea comes with at least two major drawbacks:
- Deeply discounted repatriation might provide one-time revenue, but roads and bridges need never-ending funding. Even "one-time" construction of a new highway puts government on the hook for costly maintenance as far as the eye can see.
- Looking to deep corporate pockets for transportation money would put one more stake in the heart of what's left of the user-pays principle. With taxes on driving frozen nearly everywhere, roads and bridges nationwide now draw at least half their funding from non-user sources. In the long run, this isn't good for either our mobility or our prosperity.
In fact, nationwide transportation funding is looking more and more like our own Vikings stadium finance fiasco: We'll be sure to get the goodies we want, but heaven forfend that we pay for them out of the obvious pockets.
Posted in Transportation | Related Topics: Transportation Funding
Improving Access, Easing Hunger
Encouraging some people in poverty to access assistance programs like food support (formally the Supplemental Nutrition Assistance Program, or SNAP) can be tough. This is especially true of senior citizens. While about 65 percent of eligible Minnesotans participate in SNAP, only 41 percent of eligible seniors do. The reasons for this disparity are plentiful: stigma, lack of awareness, the desire for independence, and the challenges of applying, to name a few.
One recent change will lower that last barrier. Minnesota recently introduced a streamlined application for seniors age 60+ that consists of only two pages. The standard SNAP application for most participants is eight pages long plus seven pages of instructions. (The standard application also screens for health care and cash assistance, which is convenient if you want to apply for multiple programs but cumbersome if you only need one.)
Once someone submits their SNAP application, they must go through an interview with a county benefits determiner. Minnesota offers a phone-interview option, meaning that homebound seniors can still easily apply. They can even designate another person (like a family member or care aide) to do their grocery shopping for them.
Minnesota’s eventual plan is to offer a shorter SNAP application for people of any age, which would be a terrific step towards ending hunger in Minnesota. Increasing SNAP investment is a smart move, especially considering that it’s paid for with federal dollars, not state. Studies show that every $5 in new SNAP benefits generates up to $9 in economic activity—and since benefits are spent at local grocers, local communities reap the rewards. Improving access to nutritious food also lowers health-care costs. Every time we make it easier for people to utilize the benefits for which they are eligible, we make a better Minnesota.
Posted in Economic Development | Related Topics: Social Services Nutrition
MN Goes Green and You Should Too!
I have a lot of favorite things that come with summer weather, and one of them is browsing a farmers market in sunglasses and sandals. The St. Paul Farmers' Market is great on a Saturday morning and tomorrow morning (May 18th) is going to be one of the best all year. This is because they (along with a lot of other really great partners) are sponsoring MN Goes Green from 9 a.m. to 6 p.m. at the St. Paul Union Depot, just one block away from the market.
MN Goes Green is a FREE event to promote sustainability and green living in Minnesota. In one day you can see green fashion, bring in damanged items to flex your Fix-It muscles, hear informative speakers, and learn the best ways to source local groceries. I have been involved in the environmental movement for over 10 years and I can tell you, there is always something new to learn to improve your life and the health of the planet.
With so many environmental stressors facing our earth, it is important for Minnesotans to do our part to effectively use and conserve common pool resources. Our air, water, and land need to continue supporting future generations as they have supported us. This will only happen if we take sustainability by the reigns and make environmentally conscious decisions. So come on down to MN Goes Green tomorrow morning and take your steps to becoming a responsible enviro-citizen!
Posted in News & Notes | Related Topics: Sustainability
Another Sign Affording College is Not Getting Easier
It’s mid-May, meaning that college admissions decisions are out and most high school seniors have committed to their college. Now comes the worst part: finishing the last few weeks of high school!
That might seem like the worst part to the students themselves (I know it was for me), but a few more weeks of American History are a breeze compared to navigating the world of financial aid. With the price of college rising and wages stagnating, financing college is becoming more difficult.
There are subsidized loans, unsubsidized loans, and loans to cover the expected family contribution (which is more than many families can afford). There are Pell Grants, but those are covering less of students’ needs. As if that weren’t enough, The Atlantic reports that some colleges and universities are using financial aid dollars for relatively wealthy students while leaving students with financial need under piles of loans.
A handful of private colleges are restructuring their financial aid systems, however. While the New America Foundation report singles out small private colleges and public universities in the Ohio River Valley, private universities with large endowments have more flexibility.
I was lucky enough to study at Washington University in St. Louis (whose endowment is almost as large as the national economy of Cyprus), which is doing just that. Families that earn less than $60,000 per year are not expected to take out the loans included in the FAFSA financial package, which are replaced with grants funded by the university. Harvard University (with an endowment the size of Bosnia and Herzegovina) has taken its efforts even further. The Cambridge, Mass. college not only replaces loans for families making less than $60,000, but has a sliding pay scale based on income. Families making $120,000 are only expected to pay 10% of their income out-of-pockets and that percentage slides down, until incomes of $60,000 and less pay 0%. The key in the coming years is to translate the successes of these small, rich schools to the wider university system.
Experiments are going on in a few financial aid offices around the country, but the report is damning. The idea that elite institutions are tagging financial aid for already elite students undermines a basic tenant of education in the United States: that gifted students can reach the upper echelons of education as long as they put in the effort. As The Atlantic article says, the incentives are there for private colleges to continue these practices. The continued political pressure on the Pell Grant program only impedes the overcoming these issues.
Addressing financial aid distribution at elite universities might be putting the cart before the horse. Analysis from a few months ago shows that lower-income students, for the most part, never get to the point of receiving financial aid packages; they never apply to those schools in the first place.
Posted in Education | Related Topics: Higher Education
Agreement on Fourth Tier Emerges
Yesterday morning’s Hindsight post regarding the ongoing tax and budget negotiations at the State Capitol speculated that the difference between the House’s offer of a 9.11% fourth tier income tax rate and the Senate’s offer of a 10.5% rate could be settled by agreeing to the 9.85% rate proposed in Governor Dayton’s budget. That turned out to be exactly what state policymakers decided to do.
Last Sunday, House and Senate leaders and Governor Dayton announced that they had agreed to limit the state income tax increase to the top two percent. However, left unsettled was the question of how much revenue would be raised from this income tax increase. At a press conference last night, that unsettled piece of the income tax increase was nailed down with the announcement of the 9.85 percent.
For taxable income above $250,000 for married joint filers, $200,000 for heads of households, and $150,000 for single filers—income that would fall in the new “fourth tier”—the tax rate would increase from 7.85 percent to 9.85 percent. This rate increase is projected to generate $1.1 billion in new revenue during the upcoming FY 2014-15 biennium.
The income tax surcharge contained in the House omnibus tax bill will not be part of the final tax deal. Governor Dayton and House and Senate leaders also stated at last night’s press conference that any new revenue above projected levels in the November 2013 and February 2014 state budget forecasts would be dedicated to paying back the K-12 school funding shift. If these revenue improvements are not sufficient to retire the entire K-12 shift, leadership said that they would pass legislation to pay back the remainder of the shift in 2014.
Also announced at last night’s press conference was an agreement to accept the House proposal to increase the state’s cigarette tax by $1.60 per pack, which would generate $371 million in FY 2014-15. However, another House proposal—an increase in the alcohol tax—is not included in the final tax deal.
The agreement announced at last night’s press conference will repeal some, but not all, of the corporate tax loopholes targeted in the House and Senate omnibus tax bills. However, the precise list of loopholes to be closed is not yet known, although a legislative source has indicated that the corporate tax haven loophole will not be among those repealed.
The House-Senate Tax Conference Committee will meet again tomorrow to work out unresolved tax issues, including property tax and sales tax items. Time is of the essence, since Monday is the last day of the session that the Legislature can pass bills.
However, with the income tax provisions agreed on today, a critical piece of the progressive agenda has been nailed down. Even with the increase in regressive cigarette taxes, Minnesota’s overall state and local tax system will become less regressive by virtue of the fourth tier income tax announced last night. Revenue from this tax increase will help to restore critical public investments to education, economic development, infrastructure, and property tax relief that have been allowed to languish for a decade.
Posted in Fiscal Policy | Related Topics: State Budget Business Tax Income Tax
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The Invisible Bike Helmet
In the great debate among bicyclists -- helmet or not -- a couple of young Swedish women may have come up with a way to split the difference. Their invention, in limited commercial rollout but backed by $10 million in venture capital, mimics automobile airbag technology: out of sight until needed.
The Hövding invisible bike helmet is worn in a pouch around the neck until embedded sensors detect the start of a tumble. Then it deploys into a large, hoodlike cushion to protect the head from impact.
This could appeal to appearance-conscious riders but may not settle a deeper-seated argument over the best approach to bicycle safety. In much of bicycle-friendly Europe and by some U.S. cycling enthusiasts, helmets are disdained as falsely signaling that biking is inherently very risky. In this camp, as well, it's believed that helmets unfairly put the responsibility for safety on bicyclists rather than on drivers or public provision of separate lanes for two-wheelers.
On the other hand, many bicyclists consider helmets a common-sense response to actual dangers. This week's Ride of Silence, commemorating cyclists killed or injured in crashes, requires helmets, even though the ride won't exceed 12 m.p.h. And a young Minneapolis bike commuter I know says he could have died several times in spills but for his helmet.
At Minnesota 2020, we think helmets are the smart choice for anyone traveling by motorcycle or bicycle, just as seat belts make eminent sense for motorists and their passengers.
Taking on what they called an "impossible" challenge, Swedes Anna Haupt and Terese Alstin developed the 1½- pound battery-powered pop-up helmet as part of a master's degree thesis. Be sure to check the crash-test video on the link above. No word yet, though, on U.S. retail availability. In Scandinavia, Germany, Switzerland and Turkey, it lists at about $520, and about $75 for stylish extra airbag shells.
Posted in Transportation | Related Topics: Bicycles Community Safety Road Safety
Differences Remain Between House and Senate Tax Negotiators
After a day of trading offers and counter-offers, members of the House and Senate tax conference committee met last night to discuss their outstanding differences. The third and most recent House offer and the subsequent Senate offer remain significantly apart.
House Tax Committee Chair Ann Lenczewski and lead tax negotiator for the House expressed concern over the magnitude of the differences in the fourth tier income tax rate between the House and Senate. Over the course of negotiations yesterday, the difference between the two bodies in terms of the fourth tier rate narrowed; however, the fourth tier rate in the last Senate offer is 10.5 percent (generating a projected $1,482 million in additional revenue in FY 2014-15), compared to 9.11 percent in the last House offer (generating a projected $707 million).
The fourth tier tax rate proposed by Governor Dayton in his revised budget is 9.85 percent. Based on the agreement reached by the Governor and House and Senate leadership last Sunday, the new fourth tier rate will apply to taxable income in excess of $250,000 for married joint filers, $200,000 for heads of households, and $150,000 for single filers; filers with taxable incomes above these levels comprise the top two percent of all Minnesota households by income and currently enjoy a significantly lower state and local effective tax rate than other Minnesota taxpayers.
House conferees noted that the House members were uncomfortable with the size of the fourth tier income tax rate proposed by the Senate and argued that a rate this high would not be necessary if the Senate would remove some of the additional “tax expenditures” from its budget. House negotiators specifically cited increased funding for the historic tax credit and angel investment credits as examples of new tax expenditures that could be removed from the Senate’s offer.
Senate conferees—lead by Tax Committee Chair Rod Skoe—argued that the higher income tax rate proposed by the Senate was necessary because—under last Sunday’s leadership agreement—the new rate would not kick-in until very high income levels and thus would not generate sufficient revenue at a lower rate. (In the Senate omnibus tax bill, the higher income tax rates would have applied to taxable income in excess of $140,960 for married joint filers—significantly lower than the $250,000 threshold agreed to last Friday.) Senate negotiators also defended the additional tax expenditures in their offer, arguing that they were useful economic development tools.
House conferees urged the Senate to consider the House’s proposed increase in alcohol taxes, proposed to be six cents per drink in the most recent House offer (down from seven cents in previous offers), which would generate $289 million in new revenue in FY 2014-15. In addition, the House negotiators asked the Senate to agree to the House proposed cigarette tax increase of $1.60 per pack, compared to the Senate’s proposed increase of $0.94 per pack.
Chair Lenczewski defended the increase in the alcohol tax on the grounds that it would help to pay for the societal costs associated with excessive alcohol consumption. She also argued that the House’s higher cigarette tax per pack would not only generate $371 million in new revenue ($72 million more than would be generated by the Senate’s offer of $0.94 per pack), but would reduce the incidence of smoking, especially among price sensitive teens.
Chair Skoe responded by noting that both cigarette taxes and alcohol taxes are highly regressive, falling most heavily on those Minnesotans with the least ability to pay. (This is confirmed by the 2013 Minnesota Tax Incidence Study; in fact, the cigarette tax is the most regressive of all state taxes.) Skoe also noted that the alcohol tax would affect nearly all Minnesotans, thereby deviating from the Governor’s goal of only increasing taxes on the top two percent.
Both the House and Senate negotiators are making reasonable points. While tax credits and other tax expenditures are promoted on the basis that they will create jobs and promote economic development, it is difficult to prove that the generate any more economic activity than would have occurred in their absence. On the other hand, if the final tax agreement relies too heavily on regressive excise taxes and not enough on progressive income taxes, it is possible that it will not make progress in reducing the regressivity of Minnesota’s tax system. Reduction in tax regressivity is a goal embraced by the House, Governor, and Senate.
A possible compromise would be to settle on the fourth tier income tax rate proposed by Governor Dayton—9.85 percent. This is approximately half way between the rates proposed in the most recent House and Senate offers and would generate a project $1,119 million in FY 2014-15. In addition, the new tax expenditures in the Senate proposal could be trimmed and the magnitude of the cigarette and alcohol tax increases in the Senate proposal could be reduced. This compromise could allow the negotiators to reach the $2.05 billion revenue target agreed to last Sunday, while at the same time reducing the regressivity of Minnesota’s tax system.
If the tax conference committee fails to reach an agreement soon, the final decisions could be “kicked upstairs” to the Governor, House Speaker Paul Thissen, and Senate Majority Leader Tom Bakk. Today promises to be a busy day for the tax conferees.
Posted in Fiscal Policy | Related Topics: Minnesota Legislature State Budget Income Tax
Liberty and (Environmental) Justice for All
I remember saying the Pledge of Allegiance almost every day during my K-12 tenure. The part that always stuck with me was ‘…liberty and justice for all.” The part I always took for granted was ‘…the United States of America.” When you think of America you think of 50 states and DC. Yet scattered throughout the U.S. are dozens of sovereign Native American Nations. So where does state and federal power stop and tribal jurisdiction begin?
As my interest in the environment grew, I began researching how Minnesota and our many Tribal Nations interact on federal and state environmental policies. What I discovered was a tangled set of policies. Minnesota and 5 other states have been given civil and criminal jurisdiction over tribal lands (minus the Red Lake Nation in Minnesota) through Public Law 280. This transfer of federal power to state power means that state environmental policies are seen more as ways to prohibit certain actions rather than to regulate a way of life.
The remaining Federal environmental policies mandate certain protection and remediation efforts on tribal lands to protect the livelihood of Tribal Nations who choose to exercise their subsistence rights (such as fishing and gathering). Some Tribal nations have applied for the ‘Treatment-as-a-State” designation in Minnesota to allow them to enact federal policies on their own land instead of state implementation. Different Tribes have gained ‘Treatment-as-a-State’ status for different federal policies.
What makes all of this so interesting to me is that Tribal lands are supposed to be sovereign. So why does the federal government and the state of Minnesota have any say on environmental issues at all? From what I can tell, it is more a product of habit than actually following written law. With pipelines being run through Tribal lands, when the majority of people on that land don't want them, I think more can be done to protect Tribal lands. The tangled web of policies is not easy, but it is a start. To uphold 'Liberty and (Environmental) Justice for all' in the environmental realm, Tribal nations need their voices to be heard.
Posted in News & Notes
Senate Makes Counter-Offer to House
Senate tax conferees have responded to the House offer—summarized in a previous Hindsight post—with their own counter-offer. The two plans are in agreement on some issues and diverge on others.
The Senate is proposing a fourth tier income tax rate increase significantly larger than what is being proposed by the House. The Senate offer would raise nearly $1.6 billion in FY 2014-15 from the fourth tier income tax on the wealthiest two percent of Minnesotans, nearly three times more than would be generated in the last House offer and significantly more than would have been generated under the Senate’s omnibus tax bill. Both offers include the income tax surcharge, but it is not clear if the level of the surcharge is identical.
While the Senate offer proposes a large fourth tier income tax rate increase, it has a significantly smaller cigarette tax increase—94 cents per pack (generating $299 million in FY 2014-15) as opposed to $1.60 in the House offer (generating $370 million). The Senate offer does not extend the cigarette tax to “little cigars” or increase alcohol taxes, as the House offer does.
Both the House and Senate offers would exempt local governments and other entities from the sales tax. However, the list of what would and would not be exempted is not identical. Among the provisions in the Senate offer that is not in the House offer is the sales tax exemption for capital equipment purchases. Under current law, purchases of capital equipment is subject to the sales tax; this tax is later refunded. The Senate proposal would exempt capital equipment upfront, thereby reducing administrative hassles by eliminating the need for a refund. The upfront capital equipment exemption does have a significant one-time cost to the state of $140 million in FY 2014-15, but a significantly smaller cost in subsequent biennia.
Like the House offer, the Senate offer proposes extending the sales tax to warehousing and storage services. In addition, the Senate extends the sales tax to electronic and commercial repair and maintenance and to telecommunications equipment. Net of the sales tax base expansion and the new exemptions, the Senate offer would generate $48 million from the sales tax in the FY 2014-15 biennium and considerably more in the second biennium (FY 2016-17) as the cost to the state of the upfront capital equipment exemption declines after the initial biennia.
The Senate offer repeals some corporate tax loopholes, but not as many as the House offer does. Not included among the loopholes closed by the Senate are the foreign royalty subtraction and tax haven provisions. While the House offer would generate a projected $394 million in FY 2014-15 from corporate loophole closing, the Senate offer would generate only $108 million.
Click here for a link of items in the Senate’s tax offer. It is difficult to compare the items in this offer to the items in the House offer because of different ways in which the items are categorized and caution should be used when doing so. For example, the total FY 2014-15 projected revenue increase under the Senate offer is $2.05 billion, compared to $2.92 billion in the House offer. However, this difference is due to the fact that the House adds the one-time revenue from the income tax surcharge to its FY 2014-15 revenue total, while the Senate does not. Ignoring this difference in how items are tallied, both offers are generating a similar amount of new revenue in FY 2014-15, although the Senate appears to be generating somewhat more in the FY 2016-17 biennium.
The initial House and Senate offers are part of an ongoing negotiation that will extend for at least another day. Offers and counter-offers will be traded between House and Senate tax conferees until a final tax agreement is reached. The final agreement of the tax conference committee—referred to as the “tax conference committee report”—should be completed before the weekend.
Posted in Fiscal Policy | Related Topics: Minnesota Legislature State Budget Income Tax