The Real Power of Rural Voters

Now that the Minnesota State Legislature is about to go back into session we will undoubtedly hear remarks about the continuing loss of political clout across rural Minnesota. Such is typically the case when the decennial census figures are released and the task of legislative redistricting and reapportionment occurs. There’s just no getting around the fact that since the mid-20^th century, rural legislative districts have been getting larger and larger, while the number of rural legislators gets fewer and fewer.

For many of us it doesn’t seem that long ago that the majority of legislators lived in rural Minnesota. But as the rural population migrated to the Twin Cities and to our regional Metro areas, the number of legislators from truly rural districts has dwindled to slightly more than one-third. And while there was once a time when the legislature was filled with active farm operators, today there are none (at least I don't think there are any left). Accordingly, this reality has rural Minnesotans concerned that fewer and fewer of our legislators truly understand their concerns. But within this context, allow me to suggest an alternative hypothesis; that being that while the numbers don’t stack up well for rural Minnesota, the politics certainly does. In fact, I would argue that in some ways the political success of both Minnesota Democrats and Republicans over the past few years has rested firmly in the hands of rural voters. Allow me to explain.

In 2006 and 2008 when the DFL gained firm control of both the Minnesota House and Senate; and likewise in 2010 when the Republicans gained control of both houses, political pundits talked about the advent of a political “tsunami.” In other words, they suggested that political sentiment and dissatisfaction created an overwhelming push in one direction (in 2006/2008 to the left and in 2010 to the right) with little regard to the individual attributes of particular legislators. So in the recent 2010 elections some have argued that as long as you had the Republican endorsement you had a good chance of finding political success.

But let’s step back a moment and look more clearly at this political tsunami district by district. It is here you will see districts such as those in the Twin Cities core (e.g., districts 58-67) where the DFL didn’t lose a single House or Senate seat. Likewise, in many of the Twin Cities suburban districts (e.g., districts 32-36) Republicans have had an equally solid hold on their seats. For you see redistricting over the years has created many politically safe districts for both parties. As a result, the real battle for control of the Minnesota Legislature actually lies in those swing districts. And over the past decade the majority of those swing districts were located in rural Minnesota.

To more clearly demonstrate my point; let’s take a look at the election results for the Minnesota State Senate. On the morning of Election Day November 2, the DFL held a commanding majority of seats 46-21; but by the end of election night the GOP held the majority of seats 37-30. Sixteen of the Senate’s 67 seats (24%) changed partisan affiliation; all from Democrat-to-Republican. It represented the first time in close to 40 years that the Republicans held a majority of seats in the Minnesota Senate. So if there was ever a political tsunami – this was it!

But where exactly did this tsunami come from? A close look at the 16 Senate seats that changed partisan hands show that approximately two-thirds (10) were in districts located outside the Twin Cities and far from the suburbs. In other words, it was rural Minnesotans that created this tsunami and tipped the balance to the GOP. Similarly, it was the same rural voters that took the GOP majority away from the House in 2006 and provided the DFL with what was believed to be an insurmountable majority in 2008. Given this reality do you still want to argue that rural Minnesotans are politically powerless? While rural voters may be unorganized (politically, that is), they are far from powerless.

So what should rural Minnesotans do with all of their newly-recognized political power? Well here’s a thought: As the Legislature begins the important work of balancing a deficit-ridden budget, it will be necessary for all Minnesotans to tighten their belts and accept some level of sacrifice to get out of this mess. But we will also expect our legislators to ensure that the budget is not disproportionately balanced on the backs rural Minnesota communities, colleges, hospitals, nursing homes and school districts. For you see, rural voters have already shown that they can both giveth and taketh away.

Private Gains and Public Losses

In a previous posting I suggested that looking back a year or more from now we may come to view July 2010 as an important turning point for the Minnesota economy. With a strong gain of 19,000 private sector jobs in July, Minnesota businesses clearly made a statement that a jobs recovery was taking hold. It was the type of performance that portends a break in the old cycle and the beginning of a new one. At the same time, far less mentioned was the observation that along with the gain of 19,000 private sector jobs in July was a loss of 9,100 public sector jobs.

Interestingly, the new trend that appears to be emerging is far more complicated than simply a substantive recovery of jobs in the private sector. As I have often noted, while the Minnesota economy is a reflection of the production, sale and distribution of goods and services in a global marketplace, our state and local budgets are best described as political instruments. As a result, a state budget is the culmination of dozens of political decisions often made by a handful of political leaders – some good; some not so good. And while macroeconomic theory tells us that economies find their equilibrium, no such theories govern the political ideologies or whims in constructing a state budget. Accordingly, there is no reason to assume that the Minnesota state budget will necessarily reflect the recovery taking hold in the economy. So allow me to suggest that the good news in this new trend will be the continuation of private sector job growth; and the bad news will be continued reductions in public sector employment.

Why am I so gloomy about public sector jobs? Well, there are three factors that are affecting my outlook. First and foremost is the current state budget situation. With a budget deficit greater than $5 billion (note that this column is being written prior to the release of the November state budget forecast), it is simply impossible to responsibly address such a large deficit without further public sector job losses. These losses will occur in state agencies, higher education institutions and school districts, as well as within county offices and city halls. Second, the current political sentiment appears to be conducive to those who advocate that government at all levels have gotten too big and need to be “right-sized.” And third, this is actually the continuation of a trend that has been steadily occurring in Minnesota for the past decade. In fact, our annual state workforce reports often highlight the reduction in state employees since 2001.

Interestingly, when we talk about reducing the size of government, more often than not, people look at the size of our state expenditures to reflect the size of government. But does that really make sense? For example, we can reduce the gas tax in Minnesota and significantly decrease the funds we have to build and repair our state roads and highways. But while that reduces overall state expenditures, is that really reducing the size of government? Similarly, we can whack our human services budgets and greatly decrease state Medicaid reimbursements to nursing homes. But with one of the fastest growing cohorts in the state being those who are 85 and older, is that what we mean by reducing the size of government? I don’t think so. So as this agenda of downsizing government commences, it is likely that it will be reductions in the number of public employees that best reflect its success.

And with that in mind, one region that may disproportionately feel the negative effects of this downsizing is the Mankato/North Mankato metropolitan area. While we typically do not think about it, the Greater Mankato metro is home to close to 4,000 state-funded jobs. This includes employees such as those at the State Hospital in St. Peter, MnDOT employees at the District 7 Office in Mankato, as well as MnSCU employees at MSU and South Central College. In fact, it is the highest concentration of state-based jobs outside of the Twin Cities metro; with St. Louis County and Stearns County being the two other high concentration areas outside of the Twin Cities.

So if this new trend of private sector job growth and public sector job losses emerges, what will its effect be? Well first, it may significantly reshape the composition and culture of the workforce in these regions, as many of the jobs lost will be highly skilled; requiring college and graduate degrees. But equally important, it will seriously “handcuff” the regions' ability to reduce the regional unemployment rate, if we find that one public sector job is lost for every couple of private sector jobs gained. Like dancing the cha-cha, it’s two steps forward and one step back.

A Quisling; Really?

Yesterday it was reported in the Star Tribune that GOP Chair Tony Sutton responded by saying, "There's a special place in hell for these quislings," in his reaction to the news that a dozen former Republican legislators have thrown their support to Independence Party candidate Tom Horner for Governor. So the first thing we all did is run to our dictionaries to find out what the heck is a quisling?

From Dictionary.com:

–noun
a person who betrays his or her own country by aiding an invading enemy, often serving later in a puppet government.

Origin: 1940; after Vidkun Quisling (1887–1945), pro-Nazi Norwegian leader.

So a quisling is essentially a traitor.

Mr. Sutton has been profiled many times in the press since his election to the Chair of the Minnesota Republican Party and the term that keeps being repeated is "no holds barred." I can see why. But it is precisely because of this type of behavior why so many moderate Republicans are distancing themselves from Mr. Sutton and candidate Emmer. While we all expect to have differences with our political opponents, they are not the enemy. And it is this type of thinking that has made the Minnesota Legislature so dysfunctional.

These type of folks see the election as a war to win for their party's benefit. Let me be clear: They are not interested in solving Minnesota's problems. They simply wish to dominate the elected offices for their political benefit and the favor of their benefactors.

What they failed to understand is that Minnesotans are actually a well-educated lot and see past the rants. And it is because of such rants and tactics that Emmer has peaked. It's over for him.

It's no secret that I am a Horner supporter. I think he's the best chance thoughtful Minnesotans have. But what continues to impress me the most, is that while he has taken the negative shots from both the left and the right, he has yet to air a negative response.

Now that's truly Minnesota Nice!

The Digitally Distant

I have no doubt that looking back several years from now that 2010 will be viewed as a landmark year in terms of the deployment of broadband technology throughout rural Minnesota. Due to the passage of the federal American Recovery and Reinvestment Act (ARRA), more than $7 billion dollars were appropriated nationwide to support the deployment, access and adoption of broadband technology; much of it targeted toward rural America. It is a level of technology investment that can best be described as unprecedented. And to date here in Minnesota, municipalities, counties, nonprofit organizations and state agencies have been working together with local and regional broadband providers to secure more than $400 million of these funds.

I have been following the deployment of broadband technology throughout rural Minnesota for more than a decade now, and I can say without hesitation that while we cannot yet state that broadband is ubiquitous, overall, it is fair to say that it is increasingly accessible. Accordingly, this large infusion of technology investment just may be the final push toward ubiquity. Data from several sources seem to support this notion. For example, state broadband maps from Connect Minnesota suggest that only 6 percent of households still have no access to a broadband service; while a recently released report from the Center for Rural Policy and Development documents Internet connectivity rates among rural households at an estimated 70 percent.

What is most interesting about this infusion of federal funding is that much of it is targeted to some of the most rural regions in Minnesota. A good example is the recent announcement of an $82 million award to deploy digital fiber throughout Lake, Cook and northern St. Louis counties. Anyone who has ever ventured up the north shore to Grand Marais, the Gunflint Trail, or the Boundary Waters Canoe Area can attest to the remoteness of this Northeast Minnesota region. In fact, a recent study commissioned by the Blandin Foundation found that while only 8 percent of rural households who are online still connect with a dial-up connection, in Cook County dial-up still represents 25 percent of their Internet connections. Accordingly, these large investments in such remote places just might make the difference in changing the broadband map.

However, while watching this activity is certainly exciting, I must caution as a social scientist that increasing the availability of broadband does not guarantee the adoption of broadband. In fact, the adoption of any technology or innovation is far more complicated than that. Rather adoption is dependent upon a variety of factors including cost, relevance, culture, interest and in some cases, even religion (e.g. the Amish have yet to adopt electricity). And with 70 percent of rural households already online it is important to take a closer look at those who have yet to log on to the Internet.

Analyzing data of those rural households who have yet to even report having a working computer in their home finds that almost 70 percent are 65 years of age or older; 91 percent live in a household of 2 or fewer people; 94 percent report having no school-age children living in their household; and 46 percent report a household income under $25,000. Equally important is the strong correlation between Age and Income, where 64 percent of rural residents who report having a household income of less than $25,000 are also age 65 or older. This “double whammy” of older age and lower income will certainly create a barrier to technology adoption that may not easily be overcome.

So as we applaud this new level of technology investment that will digitally launch some of our most rural places into the 21st century, we must equally understand that the work is far from over. For the “build it and they will come” strategy will not likely work for those who are currently the most “digitally distant.” Rather we need to address some of the fundamental demographic and socio-economic factors, not just the technology factors. And it is organizations such as the Mankato-based PCs for People that can help lead the way. This local group of social entrepreneurs collects and refurbishes used computers for redistribution to thousands of low-income Minnesota families. That along with the hands on training they provide to these families is just the type of hand holding and support that will be needed to increase adoption rates beyond their current levels.

Not familiar with PCs for People? Well the next time you are online “Google” them.

Why Horner?

Yesterday I was contacted by the Horner campaign asking me to put down in words why I am supporting Tom Horner for Governor. Below is my response:

I can’t recall a time in recent Minnesota history when so much was riding on the outcome of a gubernatorial election. While our state economy is finally in a somewhat steady but tepid recovery, we face a massive budget deficit. And if that is not enough of a challenge, the long-term demographics of an aging and ethically changing population will tax our public services, our current and future workforce and our public infrastructure. To say that we need a governor with real vision, leadership and a record of accomplishment seems like an understatement. For the truth is that in spite of what Garrison Keillor may tell his national audience each week, we Minnesotans know that our state has been slipping on many key parameters for some time. Can we really call ourselves “above average” anymore? I’m not so sure.

For most of the past decade we seamlessly transitioned from one budget deficit to the next, with no effort to truly or honestly balance the budget. Remember when we used to have a substantial budget reserve; a massive tobacco endowment; or a sizable surplus in the health care access fund? It really wasn’t that many years ago, but they are all gone because our state officials and legislators chose to throw one-time money at recurring budget problems. Instead of honestly addressing our needs with real budget cuts and/or real revenue enhancements, they chose to take the politically easy route with the use of one-time funds, accounting gimmicks and shifts. Who in their right mind would call that sound political or fiscal stewardship?

To be honest, I don’t envy our next Governor as it is not going to be easy. We are going to need a Governor who is willing to make very difficult decisions and ask us all to sacrifice a bit to successfully get through this mess. And I mean all of us. Not just the wealthy through higher taxes and not just the poor through draconian cuts in service. Not just the struggling rural communities through cuts in police, fire and essential services; and not just the local taxpayer through higher school levies. But all of us together.

Benjamin Franklin was famously quoted as saying at the signing of the Declaration of Independence, “We must all hang together, or assuredly we shall all hang separately.” It is time for a new kind of leader to bring Minnesotans together; a leader with creative vision and skills. We need a leader who is more interested in pragmatically solving our problems than simply getting elected. And I believe that Tom Horner is that kind of leader. I have known Tom Horner for several years and have always admired his creativity, his leadership and his ability to bring diverse views to consensus. Equally important, I do not believe that at this critical point in our state’s history that we can rationally expect the representatives of the two parties that made this mess to fix it; they are simply too polarized. That is why centrist Democrats, Republicans and Independents who deeply care about the future of this state are standing up for Tom Horner. I am pleased to be one of them.

The best Subway in Minnesota

As some know, I spend a heck of a lot of time in my car, clocking around 48,000 miles per year. From Crookston to Duluth, to Slayton and Zumbrota. It's an incredibly big state and I love it all. As a result, I've probably stopped at more than 50 different Subway sandwich shops all across the state. Some have been stand alone shops, while others are in in truck stops, gas stations or strip malls. But there is little doubt that Subway is my favorite when I'm on the road, as I find it quick and easy; and if you leave off the lettuce, it's pretty easy to eat at 70 mph without making a mess.

While my intent was never to become a Subway sandwich aficionado, in many ways that's exactly what I have become. So with that in mind, I want to tell you that I have designated the Subway in Ada, MN along State Highway 9 as the best Subway in Minnesota. I've must have stopped there at least 15 times and the bread is always fresh, the store is always clean, the tuna is the best I have ever tasted and the cookies (a must!) are always soft and fresh.

So congrats Ada! You have a great Subway store.

A Turning Point for the Minnesota Economy?

As we look back it just may turn out that July marked a real turning point for the Minnesota economy. As we all know, for the past few years the Minnesota economy and its job outlook has been in retrenchment, or at best going sideways.  But beginning in mid-2009 some signs of recovery began to emerge, with job growth one month and retrenchment the next.  Temporary workers were showing up on payrolls and the signs of a recovery taking hold were there.
 
Then came the month of July when the Department of Employment and Economic Development reported that Minnesota had a net gain of 9,800 jobs.  Pretty impressive in itself, until you realize that during the same month we also lost 9,100 government jobs.  Many of these government jobs were temporary census workers, but clearly not the majority.  So for a net gain of 9,800 jobs to occur, this actually meant that the private sector created almost 19,000 jobs in July. Now that’s a pretty good month!  In fact, Minnesota has now gained almost 30,000 jobs in the past 12 months; a pace not matched in almost 4 years.
 
If you currently examine our economy within the national context, you’d have to come to the conclusion that while the recovery is slower than we would like, it’s really not doing too bad.  We’ve now recovered more than 25 percent of the jobs lost in the recession and our unemployment rate of 6.8 percent is almost 3 percentage points lower than the national rate of 9.6 percent. And while a 6.8% unemployment rate is still high, let’s remember that several other states are still stuck in double-digits.  And of course, it wasn’t that long ago when a 4-5% unemployment rate was viewed by many as “full employment.”
 
Of course, you’d never know that the economic recovery is on track if you listen to our politicians and public officials.  With a substantial budget deficit at the state level, it’s easy to blame the economy for this situation.  But the reality is that the Minnesota economy and the Minnesota state budget are two entirely different things.  The economy of course is a reflection of the production, sale and distribution of goods and services continuously circulating throughout a global marketplace.  As much as government tries, it really cannot make an impact on the economy as quickly or as comprehensively as politicians would have you believe.
 
The state budget on the other hand is a political instrument, reflecting the culmination of dozens and dozens of political decisions and compromises; some good – some bad.  But unlike the economy, a small group of political leaders can make a huge impact on the state budget. Choices to raise taxes, lower taxes, use one-time funds to temporarily resolve recurring problems, or shift expenses into the next budget cycle are all political decisions. So the next time your local legislator or public official wants to blame the economy for our budget woes don’t let them off so easy.
 
In the end no one knows for certain what the remainder of 2010 will bring, but my guess is that the economy and the job outlook will continue to incrementally improve until we reach a full recovery.  But when we are fully recovered, don’t expect everything to look like it did prior to the recession.  The reality is that some of our business sectors will never fully recover and the overall employment composition in Minnesota will have changed. This may be especially true within some regional areas across the state.  And looking a bit further out, demographic shifts, educational attainment and other socio-economic characteristics of the workforce, along with the integrity of our regional and state infrastructure will all influence the future economic and employment outlook for Minnesota.
 
Many economists and pundits are now calling this emerging economic configuration the “New Normal.”  I think they are on to something.
 

What I want in a Governor

I don't think I can recall a time in recent history where the stakes have
been higher for a gubernatorial election.  With the Minnesota economy in a
steady, but fragile recovery; a whopping $6-7 billion state budget
deficit; and a massive wave of baby-boomers about to retire, the need for
a leader with vision and skills is essential.
The truth is that our state economy, while weakened, is not doing that
bad.  Our state budget on the other hand is a mess because both Democrat
and Republican leaders have mismanaged it for most of the past decade.
Putting the needs of their party ahead of the needs of their state, our
leaders have been content to kick the can down the road, while praying
that the economy takes off again.  Too bad it didn't work.
So as I listen to the current crop of gubernatorial candidates all I hear
is the same old tax the rich message from one party; and a trickle down -
starve the beast message from the other.  This is not leadership.
I want a new kind of leader for a 21st Century Minnesota.  I want a leader
that is not bound and censored by party officials.  I want a leader who
wants to solve problems - not just win elections.  I want a leader who
cares about the well-being of our small rural towns, as well our Fortune
500 companies.  And I want a leader who is not shy about telling me that
we all will have to sacrifice to get out of this mess.  I want ... Tom
Horner as our next Governor.

Having the Courage not to Pander

I’m sure that over the years in his role as a political strategist and communications professional, Tom Horner has helped dozens of political candidates prepare for a major speech, debate or similar event. Of course, the first rule for such preparation is always the same – know your audience. As a result, political candidates are advised not to talk about cutting Medicare or means-testing Social Security when addressing the AARP; nor are they going to discuss the merits of alternative teacher licensure when giving a speech to the Education Minnesota crowd; and they certainly won’t discuss cutting producer payments when meeting with the members of the Farm Bureau. Some may view such strategy as smartly tailoring their message, but often it’s no more than pandering. In other words, just tell the crowd what they want to hear.

So why was Tom Horner the only candidate to go into the tent at Farm Fest last week and tell the crowd that he believes that it is time to end the subsidy payments to ethanol producers? Political suicide; or is Tom Horner what we used to call a “straight shooter?” You know what I mean, the kind of guy who will give you the same answer to your face as he would behind your back. Well … I really can’t tell you what Mr. Horner was thinking, but I can tell you that it takes a lot of courage not to pander when facing 1,000 farmers deep in the heart of Minnesota’s First District.

But if you think about it, it fits perfectly with the straight talk we have heard from Mr. Horner to date. He’s the only candidate who has outlined a plan for tackling our looming budget mess; or reforming our taxes; or financing a Vikings Stadium; need I go on? Maybe it’s that Horner has nothing to lose; or maybe he realizes that we are in such a deep budget mess that Minnesotans can’t afford anything less than straight talk? I don’t know; but I can tell you that if you watch the political ads from the other candidates you would never know that our state is facing a $6 billion deficit. All they want to do is tell you that they will invest more in K-12 education or alternative energy jobs. With what money … WE’RE BROKE! Heck even Candidate Emmer, who never saw a state budget line item that he wouldn’t cut, couldn’t look the farmers at Farm Fest in the eye and tell them that we can’t afford the ethanol subsidies anymore.

I don’t know about you, but I’m tired of being pandered to. All I want is a candidate that will give me a straight answer to a straight question – and then try their best to follow through if they are elected. From what I can see, Tom Horner is the only candidate that passes that test.

Private Troubles vs. Public Issues

There’s little doubt that between now and the mid-term elections, all we are going to hear about is record high unemployment and jobs, jobs, jobs. And during times like these, I can’t help but think about the late C. Wright Mills. Mills was a Texan and one of America’s most influential sociologists. His 1959 classic, The Sociological Imagination, should be required reading for both policy makers and those who aspire to be.

One of Mills’ fundamental concepts was both the distinction and connection between one’s “private troubles” and societal “public issues.” Simply put Mills would argue that if you come home one day to learn that your teenage daughter is pregnant, that’s your private troubles. On the other hand if 25 percent of the teenage girls at the local high school turn up pregnant, it’s a public issue! In other words, at some point we cross a threshold and come to understand that we are dealing with more than personal failings; and therefore the solutions need to be structural and societal. And I couldn’t help but think of Mills during the summer-long debate regarding the extension of unemployment benefits to workers who are categorized as the long-term unemployed.

Those who opposed the extension of benefits regularly cited two reasons. The first was simply that if Congress wishes to extend these benefits they should identify a mechanism to pay for it. That sure makes sense to me. But other voices opposed to the extension of benefits seemed to suggest that allowing unemployment benefits to expire was precisely the medicine needed to get the long-term unemployed off the couch and on to a payroll.

How anyone can be immune to the fact that the national unemployment rate is still above 9%; that there are currently 5 applicants for every job opening; or watch on the nightly news the thousands of unemployed Americans lining up at job fairs all across the country is beyond me. Using Mills’ framework, I guess they still view being unemployed as one’s private troubles instead of a public issue.

But allow me to give you one more reason for extending unemployment benefits that may not have been emphasized to date. That being, in some ways it is a more direct jobs stimulus than any of those that have been proposed to date. Allow me to explain.

As every business person knows, there are two commonly used figures that summarize the health of a business: the “top” line and the “bottom” line. The top line reflects the demand for the goods and services a business produces and sells. A growing top line means that demand for your products is increasing. The bottom line however, takes into account the sales reflected in the top line, but also factors in the costs of production and delivery. So the bottom line more accurately reflects the business’s net income.
Both figures are extremely important, but top line growth is much more important when you are trying to stimulate job creation. Think about it this way, government tax credits or the relaxation of certain regulations may in fact help improve the bottom line and make the business more profitable. But increased business income does not really motivate business owners to hire more workers. Rather, the primary event that really motivates business owners to create more jobs is a significant and sustained increase in sales (the top line). If factory orders or showroom sales increase to the point where the business cannot meet this growing demand in a timely fashion, they hire more workers. It’s often that simple.

Returning to the issue of the unemployed, the reality is that providing the extension of benefits not only keeps households afloat during tough times; but because unemployed workers are typically cash-strapped, funds paid in unemployment benefits will quickly be re-invested back into the local economy to pay for rent, utilities, groceries, gasoline, clothing, etc… In other words, it helps directly increase the top line of local businesses; supports local demand and improves the chances of local job growth. On the other hand, the majority of jobs programs comprised of tax breaks and incentives for business owners may in fact reduced business expenses and improve their bottom line, but if it doesn’t increase business sales, it won’t serve to stimulate any new jobs.

So how long do we continue to extend benefits to the long-term unemployed? After all, where does it end? Well if Mills were alive today he would likely suggest that if you are unemployed when the unemployment rate is below 6 percent, that’s your private troubles. But as long as the unemployment rate hovers close to 10 percent it’s a matter of public policy.

Is Tom Horner the Guy?

Like many policy junkies, I've been doing my best keeping up with the twists and turns of the 2010 Governor's race. I read a lot in the papers, check out the blogs (both good and bad), and went to some of the gubernatorial forums. But with each passing day I find myself more drawn to the campaign of Tom Horner than I ever would have expected. In general I have always thought of myself as a slightly left-of-center independent voter with a greater propensity to vote for the democratic candidate; but have had no regrets voting for Arne Carlson, Dave Durrenberger, or G.H.W. Bush.

My greatest concern is with the state of our state budget. However, unlike others I am not concerned with the state of the Minnesota economy, which seems to be in a reasonable recovery mode, although it's not recovering as fast as people may like. Besides, there is little that government can do to significantly accelerate the economy ... So why worry about it?

On the other hand, our state budget is an area where we do have a bit more control, so I have been looking at the candidates, with an ear open to learn what their thinking actually is in this regard. To be honest, the bar I set is not very high! I am not looking for a candidate's grand plan for balancing the budget, for I know that they don't really have one. But I want to have a sense of their direction and understand why.

And it is in that context that I find myself drawn to Tom Horner. Maybe it's because he doesn't have a political machine to censor him, or maybe it's just his way of communicating, but I find him to be both thoughtful and refreshingly candid. And it's not just that he's not a Democrat or not a Republican. Let's be honest ... The Independence Party is not much of a party, nor do I understand what they stand for. But in his campaign to date, he has not only shared what direction he wishes to take the State ... But WHY!! And for me, I see his logic and it makes sense.

As The Rural Guy, I didn't really see myself embracing a politician from Edina. But I think this guy gets it. He gets it with his pick of Jim Mulder as a running mate; he gets it with his thinking on LGA; and he gets it with his ideas on tax reform.

Finally, I read the results of a recent survey of Twin Cities business people who were asked which candidate would be best equipped to handle the state budget situation and Mr. Horner was ranked first. Then these same business people were asked who was likely to win the Governor's race and Mr. Horner ranked fourth. I'm not sure what exactly to make of that, other than Mr. Horner has a lot of work to do.

But I think I want to help this guy.

Riding into the Sunset

In 2008 the Minnesota State Legislature passed a bill creating the Minnesota Ultra-High Speed Broadband Task Force. But unlike many other laws passed that year, the legislation creating the task force also set a date for its ultimate demise. Known as a “sunset clause” it is a provision in legislation that terminates or repeals all or portions of a law after a specific date, unless further legislative action is taken to extend it. So on March 31, 2010 (our sunset date), a congratulatory set of emails were circulated by all task force members celebrating a job well done and our ride into the legislative sunset.

I mention this now that the endorsed candidates for Governor have begun traveling around the state making their case to voters, unions, editorial boards, or just about anyone who will listen. And given Minnesota’s current budgetary mess, they are being pointedly asked what programs need to be cut; what agencies need to be consolidated; and possibly, what agencies need to be abolished. To no one’s surprise, few are volunteering details, but more importantly, none have suggested any structured method to answer these important questions.

It’s not that Minnesota has been unable to occasionally initiate governmental reforms. Remember when we used to have a State Treasurer, a Department of Economic Security, a Department of Employee Relations or the agency known as Minnesota Planning? It’s just that we all know that once a government program, commission or agency is created in law, over time it develops a constituency that advocates for its continuation and growth. As a result, abolishing or consolidating agencies becomes a legislative battle royale. So what would happen if most government programs, commissions and agencies came with a sunset provision; where after a specified period of time the program or agency would simply go away unless further legislative action were initiated to extend its life? Well believe it or not, some states have done just that.

In 1977 the State of Texas established the Texas Sunset Advisory Commission; a group comprised of six state senators, six state representatives and two public members. Along with the creation of the commission came the requirement that most state agencies and boards that are not constitutionally-mandated would be required to be reviewed by the commission every 12 years. So each year approximately 20-30 state agencies, boards and programs are reviewed by the Sunset Commission and their recommendations are provided to the state legislature as to whether to continue, consolidate or abolish the agency.

According to a 2009 report (http://www.sunset.state.tx.us/guide.pdf) since its first set of sunset reviews in 1978, 337 agencies have been recommended for continuation, 35 agencies and their functions have been completely abolished; 23 agencies have been abolished and their functions transferred elsewhere; and an additional 12 agencies have been consolidated with similar state agencies. With that said, it is also important to bear in mind that conducting a thorough review of a state agency and its programs is not cheap. According to the same report, since 1982 the Commission has spent nearly $29 million; or more than $1 million per year. But the report also claims that through its recommendations and associated legislative action, the Commission has saved the State of Texas $784 million. A quick Google search shows that similar sunset commissions are currently active in both Florida and Alabama; and back in 2000 the California State Assembly created a similar Joint Legislative Review Committee, but it apparently no longer exists today.

Here in Minnesota a somewhat similar structure can be found in the Legislative Audit Commission; a bipartisan Commission comprised of 6 House members and 6 Senate members equally divided by Democrats and Republicans. Under the leadership of Legislative Auditor James Nobles, the commission’s work is viewed as nonpartisan, objective and extremely credible. However, the functions of the Legislative Audit Commission are more ad hoc in nature; taking on a handful of specific projects each year at the request of the legislature.

So as the election season gets into full swing there will undoubtedly be more talk about state agencies and programs that should be consolidated or eliminated to help reduce the upcoming budget deficit. For me the establishment of a Minnesota Sunset Commission may seem gimmicky, but if it were structurally positioned with the Legislative Audit Commission, we would likely get an objective, thoughtful approach to a task that is typically far too political.

Looking for a Good Idea

The names are familiar to many Americans: Polaris, Marvin Windows, Arctic Cat, Digi-Key, Christian Brothers and Central Boiler. Others, such as Mattracks are just beginning to brand themselves across the nation. Together, they represent a cluster of businesses in Northwest Minnesota that employ thousands of workers. They are an economic developers dream; just the kind of businesses they want to recruit and develop in their communities. These are businesses that bring high levels of capital investment, thousands of first-earner incomes and substantial tax revenues.

Yet the reality is that none of these businesses were recruited to northwest Minnesota. Rather, they simply started out with an interesting idea and were encouraged by friends and family. They often started in a garage, pole barn or shack; but their founders had the drive and determination to never give up. They are in reality, a historical artifact of their region the same way that the Mayo Clinic is a historical artifact in southeast Minnesota. The truth is that there was nothing particularly special about Rochester, Minnesota that allowed the Mayo Clinic to grow into the world-renowned organization it is today. Nor was there anything special about Warroad, Minnesota that allowed Marvin Windows & Doors to blossom there. Instead what was truly special were the people who came upon a good idea and didn’t let go of it.

I note this because now that the Minnesota economy has stalled a bit, local and regional economic development organizations are being looked upon to come up with more innovative strategies to move their regional economies forward. For example, in southwest Minnesota some development organizations have identified the renewable fuels and energy industry as their focal point. Blessed with the assets of quality soils and a strong west wind, there’s much to be said for that strategy. Similarly, after a year-long study, the Southern Minnesota Regional Competitiveness Project is mobilizing its resources around its identified assets in healthcare, biosciences, manufacturing, high technology, food and agriculture. And in southeast Minnesota along the Highway 52 corridor, a unique partnership anchored by the University of Minnesota and the Mayo Clinic hope to make the corridor a biotechnology juggernaut. But regardless of the region or the sectors, the approach seems somewhat similar: identify regional assets; examine potential economic opportunities and try to craft a coordinated strategy to maximize the probability of success.

Now contrast that approach with the IDEA Competition in Northwest Minnesota (IDEA stands for Ingenuity Drives Entrepreneur Acceleration). Sponsored by a dozen regional organizations and facilitated by the Northwest Minnesota Foundation, the approach is based upon the observation of what has worked in northwest Minnesota for decades; and that is simply stated: bring us your best ideas. It is not bound by specific industries or service sectors, but rather by two questions: first, is there a promising breakthrough idea; and second, is the entrepreneur truly committed to developing their business in northwest Minnesota? That’s it.

Each year dozens of entrepreneurs and start-ups bring their best ideas to the selection committee comprised of business executives, finance organizations, business professors, foundation executives and economic developers. And through an iterative process they select the entrepreneurs and breakthrough ideas they hope will become the next Marvin Windows & Doors. This past May, five new entrepreneurs were selected, each receiving an initial $10,000 award. But of course, the real prize is not the $10,000, but rather it’s the regional recognition and the connections to financiers and resources to assist in the commercialization and development of these new business start-ups.

As Wade Fauth, Vice President of Grand Rapids-based Blandin Foundation noted, “The type of innovative thinking that drives business creation often comes down to the vision of a single individual. This strategy focuses on uncovering some of the most promising ideas and providing them with the support needed to be successful in the marketplace.”

Finding the next Polaris, Schwans Foods, Taylor Corporation, Digi-Key or Cirrus Design is never easy. In fact, some might argue that it is nearly impossible. But in Northwest Minnesota they appear to be taking a very different approach. Instead of trying to second guess the industries or products of the future, they are using a strategy steeped in the history of their region. Simply put: Invest in those people with the best ideas and have the drive and determination to never give up.

The Boomers are Getting Tired

In 1998 Tom Brokaw authored a book chronicling the accomplishments of the American cohort known as “The Greatest Generation.” These children of the Great Depression, World War II soldiers and liberators were clearly remarkable not only in their accomplishments, but in their passion for chasing the American dream. This generation raised our collective standard of living, established the American suburbs and left an unmistakable mark on both American and world history. But in spite of their achievements, it may turn out that it will be their children, the “Baby Boomers” who will leave a longer lasting impact on American society.

These boomers, who were born between 1946-1964, represent the largest demographic cohort in American history. Often characterized as the “pig in the python,” the boomers have owned this country for a generation now. Reared in the turbulent 1960’s with a disdain for the status quo, they are not only the largest, but the best-educated, healthiest and wealthiest in American history. Collectively, they represent a truly remarkable and successful professional class. But time does not stop for anyone; and the leading edge of the boomers who were born in 1946 know all too well that they will begin turning 65 in 2011. Over the next three decades these boomers will redefine what it means to a senior citizen in America. Unfortunately, regardless of their efforts to redefine retirement and senior citizenship, the sheer size of this cohort transitioning into their senior years will greatly tax our current health care system and have a serious impact on the Minnesota workplace.

For years now the largest demographic cohort in Minnesota has been school-aged children; i.e., those between the ages of 5-17. This demographic group is not only large, but they demand a great deal of public services; and as a result, the financing of our public K-12 education system has been the largest single expense category in our state budget. But according to our state demographer, within 10 years there will actually be more residents in Minnesota aged 65 and over than there are children between the ages of 5-17. The impact of such a large cohort transitioning their heath care needs from private insurance to public insurance (through Medicare and Medicaid) will challenge our state and federal budgets.

According to our state economist and the most recent state budget projections, Minnesota’s economy grows on average 3.9% per year, while its state expenditures on health and human services has been annually growing on average 8.5%. As a result, over the past 10 years the health and human services budget has ballooned and has overtaken higher education spending and the majority of other expenditure categories. Further, this growth has occurred without the influence of boomers transitioning to senior citizenship. So the question is, as the number of boomers overtakes the number of school children in Minnesota, will the health and human service budget become the single largest expenditure category in the budget? Left alone, will there be adequate future funding for K-12 education, roads and bridges, economic development, etc., or will health care expenditures overtake everything?
Of course the other concern is the issue of replacing this well-educated and talented group of boomers as they transition out of the work force and into retirement. Clearly, the departure of boomers from the active workforce will leave a very large hole to fill and worker shortages will once again become evident. And while that may be good for future job-seekers, there is a real question as to whether this future workforce will be qualified to fill many of the highly-skilled jobs that these boomers are exiting. Unfortunately, the prospects are not good.

Current demographic projections suggest a dramatic slowing of the growth of our future workforce, with migration becoming the single largest source of future workers in Minnesota. But unlike Minnesota’s economic immigrants of the past who came from Iowa, Wisconsin and the Dakotas, the majority of our current immigrants come from East Africa, Southeast Asia, Mexico and Eastern Europe. Unfortunately, these new Minnesotans are not currently experiencing the academic success needed to fill these higher-skilled jobs being exited by the boomers; and that may have a critical impact on the types of future businesses that we will develop and grow in Minnesota.

Just as the baby boomers take on the task of redefining senior citizenship in America, their demographic transition may collaterally redefine the future of Minnesota.

Becoming a Broadband Leader

Recent articles and editorials in a variety of newspapers and blogs have expressed concern about Minnesota’s standing and direction in its deployment of broadband technology. Specific concerns seem to fall into two categories; that Minnesota does not seem to be as competitive in its efforts to get its share of the $7.2 billion in stimulus funding dedicated to broadband development; and second, that the leadership and direction from our Governor in this regard is both confusing and unclear.

Regarding the Governor’s action, I must admit to some confusion myself. For those who don’t follow this closely, governors across the country were asked to provide their input on the many stimulus proposals submitted from their respective states; and our governor did just that. However, Governor Pawlenty chose not to publicly disclose his input to the federal government; which creates some confusion in helping us better understand his vision for the State of Minnesota in this regard. At the same time, while keeping his thoughts confidential is somewhat unusual, I really do not believe that it had a meaningful impact on the competitiveness of the collective proposals from Minnesota.

Regarding our standing as a state, I am not overly concerned that we are collectively lagging behind; or that we will not be receiving our fair share of the federal funding pie. First, it has been clear to me that relative to most other states, Minnesota as a whole has always been in pretty good shape. Sure we have rural areas that are both digitally unserved and underserved, but all states that have large rural tracts are in that position. In fact, the initial data and maps produced last year by Connect MN indicated that a large majority of Minnesota is well served, with reasonably good connection speeds. In other words, we have a good base to work from.

Looking forward, there’s much to be excited about given the numerous broadband activities occurring all over Minnesota. First and foremost was the passage of a bill by the legislature establishing statewide goals and leadership for broadband development. Senate File 2254 was sent to the Governor for his signature in late April.

I am also encouraged by the broadband projects that have already been funded and the proposals that are currently being reviewed for funding. Some selected projects underway include:

• A $6.3 million project being lead by the C.K. Blandin Foundation to increase awareness, provide training and increase broadband adoption among households and businesses all across rural Minnesota.
• A 2.9 million initiative conducted by the University of Minnesota to establish public computer centers in multiple low–income neighborhoods in Minneapolis and St. Paul. These centers will provide digital literacy training and access to immigrant and other low-income populations.
• A $12.8 million project by the Southwest Minnesota Broadband Group to expand the current fiber-to-the-premise network deployed in Windom to the communities of Jackson, Lakefield, Round Lake, Bingham Lake, Brewster, Wilder, Heron Lake and Okabena. When completed, this fiber project will provide state-of-art Internet connections to these rural communities that surpass the current capacity of many metro-area communities.
• A $1.4 million project by the Minnesota Valley Improvement Corporation in Granite Falls to expand their wireless broadband network to unserved and underserved parts of South Central and West Central Minnesota.
• A $43 million project by the Northeast Service Cooperative to create a 915-mile fiber backbone that will cover 8 counties in northeast Minnesota. Once in place, the fiber backbone will allow local broadband providers to have a quality access point from which they can serve their customers.
• And finally, Qwest Communications recently announced their application for a $350 million grant to enhance broadband capacity in their 14-state region. If funded, approximately $54 million is set aside for Minnesota.

It is also important to remember that this is just the first round of these federal broadband grants and loans, which focused primarily on unserved areas. As we move into the second round, projects to enhanced underserved regions as well as more competitive areas will follow.

As stated in the recently passed Senate File 2254, Minnesota aspires to be one of the top five states in the nation in universal access, connection speeds and broadband adoption. Projects like these and the ones that will follow are precisely what we need to do to achieve that goal.

Another Focus on Rural Broadband Adoption

On March 25th the U.S. Dept. of Commerce announced the awarding of a $4.7 million grant to the Grand Rapids-based Blandin Foundation, to conduct a statewide broadband development project across rural Minnesota. Through this grant, the Minnesota Intelligent Rural Communities (MIRC) coalition will bring a network of resources and support to rural Minnesota individuals and communities—especially those unemployed and seeking employment, small businesses, coalitions of government entities, and local leaders.
The EDA Center at the University of Minnesota, Crookston will serve as the lead evaluator for this large and broad-based project. Go to: http://broadband.blandinfoundation.org/news/news-detail.php?intResourceID=1208 to learn more.

The Health Care Outlier

Outlier\ noun – a statistical observation that is markedly different in value from the others of the sample.

Now that the National Health Care Bill has been signed, I think it is fair to conclude that few policy issues are more politically polarizing. One side argues that the federal government needs to have an increased role to ensure access to all Americans and help lower costs; while the other side suggests that allowing market forces to work more freely would have the effect of lowering costs and increasing access. And the recent news that several health insurers were proposing to increase insurance rates to individual policy holders by more than 30% seemed to simply have the effect of throwing gasoline on an already blazing fire. In fact, one of the most frequently heard questions in this debate is, “can we afford to turn over 16 percent of our economy to the federal government?”

Certainly, we all know that health care and health insurance is plenty expensive; but have you ever wondered why it has grown to be 16 percent of our gross domestic product (GDP)? Well a report that was released last year by the Organization for Economic Cooperation and Development (OECD) sheds some interesting comparative data on this (see http://www.oecd.org/dataoecd/46/2/38980580.pdf ).

As noted in the OECD report, total health care spending accounted for 16.0% of GDP in the United States in 2007; by far the highest share among the 30 OECD nations. The U.S. was followed by France, Switzerland and Germany, which allocated respectively 11.0%, 10.8% and 10.4% of their GDP to health care. Interestingly, the OECD average was almost half of the U.S. percentage at 8.9% of GDP.

Looking at per capita health care costs (expressed in U.S. dollars and adjusted for purchasing power parity) the report documents that the United States ranks far ahead of other OECD countries, spending $7,290 per person. This is more than twice the OECD average of $2,964. In second place was Norway, spending $4,763 per capita and in third place was Switzerland, spending $4,417 per capita.

For the overwhelming number of OECD nations, public health care expenditures far exceed private expenditures. Some would clearly call this a government takeover of the health care sector. For example in the United Kingdom where they have a National Health Service, more than 80 percent of all health care expenditures are public. This is true for most OECD nations; while the United States is the exception, with the majority of its health care expenditures in the private sector. But looking at the weight of this data on its surface seems to make you wonder, if freeing up market forces is the most effective way to decrease costs, then why is the U.S. with its focus on competitive, private sector health care so much more expensive than these other similarly industrialized counties?

One possibility maybe lies in the adage, “you get what you pay for?” After all, maybe the reality is that while our health care is much more expensive than in other countries, our superior health outcomes are worth the added costs? Unfortunately, here the report goes on to document that in fact compared to the OECD average, the U.S. actually has fewer physicians per capita, a lower life expectancy rate and a higher infant mortality rate. In other words, we’re paying a lot more but receiving a lot less. And if that doesn’t bother you, the non-partisan Congressional Budget Office estimates that if left on its current trajectory, health care costs will rise over the next 25 years to 31% of GDP. It’s not exactly the value proposition Americans deserve.

So while the politicians here in Washington continue to batter each other back and forth in an effort to turn this issue toward their political advantage in November, let’s at least agree on one thing; while being an outlier in some instances might be flattering, this isn’t one of them.

No More Business as Usual

It’s not exactly breaking news that Minnesota’s state budget is facing some unprecedented difficulties; but this time I believe that the change needed will likely be transformational in its consequence. By that I mean that with a current billion dollar budget deficit and a lurking multi-billion dollar deficit through 2013, it’s fair to say that our public officials simply will be unable to successfully meet this challenge using “business as usual” tactics; a tweak here and a tweak there, just won’t do it.

As I noted last month, if we are going to successfully meet this current budget challenge, we need to stop thinking about the solutions in terms of tax increases or tax cuts. Rather, we need to serious talk about tax and expenditure reform. We simply need to rethink how we choose to collect our tax revenues and how and where we choose to spend it. Sooner or later our public officials will have to have that conversation, and when they do there are some issues important to rural Minnesota that they will have to address:

The Fate of Local Government Aid – Local Government Aid or LGA has been a tremendous help to small rural communities (and some large ones too), and was intended to serve as a statewide equalizer to assist local governments in meeting their essential service needs without completely overburdening their local taxpayers. This is especially true in rural communities where the property tax valuations are quite modest and there is a disproportionate percentage of lower-income and fixed income residents.

But LGA has grown over the years into a program that is ripe for reform. In fact, LGA today provides well over half of the funds of many community budgets. So the question is, does LGA simply help these communities or are metro and suburban taxpayers actually paying more than their fair share? It’s a question that legislators have debated for quite some time, with rural legislators strongly supporting the current system. But how safe can LGA be when Minnesota’s most recently elected Senator from rural Waseca unabashedly states that LGA is an unfair transfer of wealth and that it undermines accountability by allowing rural city councils to spend money they don’t have to tax for. As Senator Parry was quoted as saying “LGA to me is nothing but a credit card.” (Mankato Free Press, Jan. 22, 2010).

So as the legislature prioritizes and discusses its future spending, look for LGA to occupy a place in the discussions.

Prioritizing Capital Bonding Projects – During “even numbered” years communities from across the state regularly compete in hopes of getting a capital improvement project placed in the state’s capital bonding bill. From small community ice arenas to the new Guthrie Theater, legislators carry these local requests to the State Capitol where there are typically 3-5 dollars in requests for every one dollar available. But in more recent years it has been increasing difficult to secure a place in the bonding bill as local projects are out of favor, replaced by projects with “regional or statewide significance.”

To be fair, there is certainly logic to this prioritization scheme, and I envision such logic being used more in the future – not less. But we also need to ask, outside of a flood control project, or the development/ improvement of a statewide facility such as the sex offender treatment facility in Moose Lake, what type of project originating from a small rural community can actually meet this test? We simply need to revisit the goals of a state capital bonding bill and the role of local projects in it.

Consolidation, Consolidation, Consolidation – When I first arrived in Minnesota I was often asked why there are 87 counties and shouldn’t we consider county consolidations; we’ve all heard similar concerns. But like the school consolidations throughout the Midwest in the 70’s and 80’s look for a serious and broader consolidation effort over the next few years. Sure … the 87-county question will return, but also look for a much broader set of consolidation efforts. City-county service consolidation and the regionalization of our human service infrastructure will be hotly pursued. But don’t be surprised to also see further consolidation of statewide offices, schools and school districts; college campuses and state-owned infrastructure.

Change is never easy; and that is especially true for large-scale transformational changes. The temptation for elected officials to avoid such discussions and make every effort to try to constructively “tweak” the status quo is great. But at some point it will become obvious that we have no other viable alternatives. It reminds of the words of Winston Churchill, who toward the end of World War II was quoted as saying, “You can always trust the Americans to do the right thing … after all other alternatives have been exhausted.”