Governor Should Build Institutions and Policies that Last

His book, Overburden, is a good read.

Some additional commentary from Mn Publius

Q. What should the state government do to solve our transportation challenges? Please address toll lanes, light rail, bus rapid transit and increased construction to add more lanes.

Thissen:There is wide agreement that Minnesota must continue to invest in its transportation infrastructure. The Legislature made an important start when it passed the transportation bill last spring. The gas tax increase is constitutionally dedicated to build roads and bridges and adding more capacity is important. But we must also expand transit options including light rail and bus rapid transit. I have supported toll lanes.

Q. Would you support the educational reform measures expected to be proposed by the K-12 Education Finance Division in the House in 2009?

Thissen: We need to look hard at how we fund our schools. The underlying premise of the House K-12 “Second Minnesota Miracle” – a shift from reliance on local property taxes to greater reliance on state resources – is worthwhile, but I will not support the proposal until I see additional details. Any reform must be tied to clear standards for measuring the success of our investments in education.

Q. Health care costs continue to rise and more and more people are being squeezed out of the system or finding that they cannot afford insurance. How can the state address this growing problem?

Thissen:The health care reform package that the Star Tribune labeled the “prize” of the last session takes important steps in that direction, but there is more to do to reduce costs and increase quality. We need to change how we pay for health care – we shouldn’t pay doctors to do procedures; we should pay them to care for the patient. And we should adopt an affordability standard which sets an expectation that no Minnesotan should pay more than a reasonable percentage of his or her income on health care.

Q. Protection of the environment sounds good on an election platform, but tell the voters what you would specifically propose for your district and the state to accomplish this.

Thissen: I have a record of votes for cleaner water, cleaner air and cleaner energy. For instance, I chief authored legislation to reduce phosphorus in our lakes and streams. I was an early advocate for renewable energy standards. Our top priority should be cleaning up and maintaining our waters – perhaps our most valuable resource – through reduction in pollution sources, investment in municipal treatment plants and lakeside land management.

Q. Should the state government play a role in encouraging investment in alternative-energy businesses that would bring so-called “green collar” jobs to Minnesota? If so, how?

Thissen: The state government does have a role to play in building a green economy, primarily through investment in basic research and development on our university campuses. My primary concern is that we focus on areas where we have a clear and natural strength, rather than chasing the latest fad.

Q. In what ways, if any, should the Legislature/state assist in jump-starting the state’s economy?

Thissen: State government cannot turn a sour economy around by itself. But it can take advantage of opportunities where job creation and proper public investment intersect. For instance, in many communities across the state, housing is substandard. Our state should be investing and getting people to work to transform those communities with high quality housing.

The key to economic success in Greater Minnesota are manufacturing, processing and other businesses which grow by adapting to the needs of their customers in a global, competitive economy.  How do we help those entrepreneurs?

One difficult challenge for our rural businesses, particularly manufacturing and processing businesses, is the lack of resources to make the jump from a thriving small local business into a thriving medium-sized regional business that brings more jobs and more dollars into the community.  Instead, successful local businesses are bought out – or driven out of business – by larger companies from outside the region.   To avoid that, we must find ways to attract patient investment capital to rural Minnesota businesses. 

Tax incentives for “angel investors” are one way to attract targeted investment in rural Minnesota.  But the tax incentives cannot stand alone because such an approach ignores another critical economic dynamic that hurts small-town Minnesota – the exporting of homegrown wealth to other regions and states.  Instead, a portion of the tax credits should be targeted to regional investment pools governed and funded by local residents for investment in locally-owned businesses.

When out-of-town venture capital funds invest in a small-town businesses, the rewards of business success flow into the investors’ pockets and out of the community.  This exacerbates the torrent of wealth that already is pouring out of our rural economies.  According to a study on food and farming in southeast Minnesota by the Crossroads Resource Center, $800 million is annually drained from that region as families import farm inputs and food while exporting commodities. 

Instead, we must envision a future where groups of neighbors along with local businesspeople and banks invest their wealth in successful local businesses that have the potential to jump to the next stage.  Imagine a locally focused mutual fund, governed by local residents, funded by local residents and invested in local businesses.  Forward-looking leaders in southeast Minnesota are germinating the idea in that region.

The reality is that rural Minnesota has immense natural resources and homegrown wealth.  But it is dispersed instead of concentrated and illiquid instead of readily accessible.  The real key to sustainable rural communities is to create a mechanism to tap into that existing wealth and combine it in investment pools large enough to sustain local business expansions with local dollars.

To achieve that vision, two obstacles must be overcome.  First, there are transactional costs associated with pooling resources of small local investors.  Second, small businesses require more patient capital – a willingness to wait longer to see a return on investment.  Both factors likely mean a lower overall immediate return on investment than comparable investment opportunities.  An investment tax credit targeted at locally-controlled regional investment pools would even the playing field and leverage the wealth of Minnesotans to create sustainable, prosperous communities across the state.

For More Information:

H.F. 361 (2007-08)

“Rising health care costs play a key role in the economic insecurity Minnesota families are feeling,” said State Rep. Paul Thissen, chair of the House Health and Human Services Policy Committee. “With health care becoming more and more unaffordable, many are forced to make difficult choices when it comes to providing for their families.

It was also helpful, however, for someone from the metro area to hear first hand about the economic challenges facing the timber industry.  

Mill managers told us that some local mills would be shutting down soon due to lack of lumber supply.  It is not that lumber is not available; instead, loggers are simply waiting to harvest and sell until timber prices go back up.  (Prices are at historic lows due to the housing crisis, credit crisis and related slump in the construction industry.)  Ironically, because private loggers are waiting for a price recovery, prices for timber on public lands are above what the market would otherwise support.  Plainly,m a difficult stretch for the industry.

Looking ahead, folks at the Expo focused on renewable energy both because it is a cost-driver and because biomass-based energy production is a future important market for wood products.  Expo-goers also had concerns about workforce development issues.

RELATED INFORMATION:

Portions of Timber Industry Suffering, Brad Swenson, Bemidji Pioneer, September 12, 2008

The legislation establishes a sliding scale affordability standard that sets 6% of income as the cap at 300% of the federal poverty guideline and at 8% of income at 400% of the federal poverty guideline.

There was significant analysis underlying the establishment of this standard. More information can be found here.

But what does it mean practically. Here are some examples: For a single adult, 300% FPG is about $31,000. Six percent of $31,000 is $1,860 per year. The JOBS NOW COALITION has calculated that a metro area single adult will spend $18,228 per year on essentials of food (no meals out), housing, transportation and clothing. The number does not include life insurance or retirement savings; big ticket items like washers, dryers, other basic household repairs; no entertainment; no gifts.

In addition, a single adult making $31,000 will pay approximately $6400 in taxes. After accounting for those expenses and subtracting out 6% for health care, the individual will be left with about $12.50 per day for all other expenses. And I would reemphasize that the totals include NO SAVINGS for retirement which is simply creating a bigger disaster for all of us in the coming decades.

(As an aside, the average 27-year old single male adult will pay $3,622 for health insurance in a year for an individual policy. A 57 year old female will pay $6,112 — about 20% of the person’s income.)

Using a similar analysis, a single adult at 400% FPG will be left with $26 per day (or $12.50 a day of you factor in a minimal retirement savings).

A family of three at 300% of FPG (about $53,000) will pay $3,100 for health care under the 6% affordability standard. Using the same analysis, that family will be left with $8 a day to cover school expenses and activities, to save for college and to cover all the other “non-essential” expenses described above. A family of three at 400% will have about $13 left for everything else, assuming the family does save a minimal amount for retirement.

The point of the analysis should be clear: these affordability standards are not unreasonable when one considers the real lives of families in Minnesota. See this Familes USA Report for more information.

In 2006, a family would need a $65,000 income to purchase a median priced home. A median priced apartment could be rented on an income of $28,000.

Compare that to the approximate median earnings of the following occupations:

Childcare worker $18,000
Registered Nurse $64,000
Middle School Teacher $43,000
Nursing Aide $25,000
Retail Salesclerk $20,000
Cashier $18,000
Office Clerk $28,000
Food prep Worker $17,000

After discussing the number of individuals who lost jobs recently, the report offered the following assessment:

“People that have been able to retain jobs are having a tough time as well. The cost of housing prohibits many hard working families from making ends meet. Five of the occupations listed will be the fastest growing sectors between now and 2016, according to the Bureau of Labor Statistics. While all of the occupations listed are projected to be within the top 20 fastest growth occupations, only two can affordably rent a median-priced apartment and only one can afford to own their home.”

Certainly, most families today have two income earners so the numbers are perhaps not quite as dramatic. Nonetheless, it is clear that the cost of housing — and the need to create affordable housing — must be taken seriously when considering the fundamental question of economic security.