Thursday, April 1, 2010

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.

Thursday, February 11, 2010

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.”

Monday, January 11, 2010

Let's quit playing Kick the Can!

When I was a 6-year old kid back in New York, one of my favorite games was kick the can; and my favorite place to play was in the alley across the street. As the alley was actually the back of the retail storefronts and restaurants facing the street, there were plenty of dumpsters back there and consequently, an endless supply of cans. But equally important, the alley was actually several blocks long and ended at a dead end; so there was never a question when the game was over. When you hit the dead end, the game was done.

Kick the can is also a rather useful metaphor for what many believe our Governor and state legislators have been doing with the state budget for a majority of this just-ended decade. Beginning with a large budget deficit after the dot-com bubble and the 9-11 attacks, our public officials have been regularly kicking our budget woes from biennium to biennium, patching it together with one-time funding fixes (remember the tobacco endowment or our budget reserves?); selected budget cuts to local governments; accounting shifts and most recently, federal stimulus funding. I suppose the rationale for continually pushing our budgetary troubles further into the future was the hope that by the time the bills actually came due, that the Minnesota economy would be out of the doldrums and once again humming along. But like the alley’s dead end back in New York, as the Legislature re-convenes this month it’s clear that this game is over.

The dead end actually came into view back in December when the state budget forecast documenting a $1.2 billion shortfall for the remainder of the current biennium. In essence we learned of a $240 million deficit for the remainder of FY 2010 and a whopping $916 million deficit in FY2011; thereby erasing any rational hope that the Minnesota economy is on the verge of roaring back. Further, what was most disturbing about this forecast was that 72 percent of the projected deficit is from the loss in personal income tax revenues; further suggesting that the employment picture will remain tepid for some time to come. As it is often said about income taxes, you don’t have to pay them if you don’t earn the wages.

But what about the FY 2012-13 biennium, surely by then the economy will bounce back; right? Well to be honest, because we have been continually shifting significant expenses from biennium to biennium, we have been starting each biennium with the debt of the past biennium. In addition, the federal stimulus dollars dry up at the end of FY 2011. Accordingly, the budget picture actually worsens for the 2012-13 biennium, with the current forecast of a $5.4 billion deficit.

And just in case you may think that we didn’t see this trouble coming, let me assure you that you are wrong. In fact, our state economist Tom Stinson and our state demographer Tom Gillaspy have been preaching how Minnesota’s shorter-term economic cycles have merged with our longer-term demographic cycles for so long that many of us have come to name their regular presentations as the “Tom & Tom” show. And what is most ironic is their presentation has been a regular feature of the Legislature’s annual policy conference at the beginning of each legislative session. Yes, that’s right. At the beginning of each session, legislators come together for a day to learn about the economic trends, demographic trends and the overall outlook for the state. But given the way this budget situation has been handled, you’d never know that the Tom & Tom show has been a staple of this legislative event every year for the past 3 years.

So now as the legislature convenes to address this budget dilemma, let’s vow to stop playing kick the can with the state budget. As there are no more one-time fixes to be found, no more accounting shifts to be made, and no more stimulus funds, let’s finally have a serious discussion about how we Minnesotans collect our taxes and spend our revenues. Through such discussions legislators may find that they might consider taxing some items or services that are currently exempt. And even more likely, as they prioritize our state programs and expenditures, they may find that there are some programs that just can’t be prioritized as high as they used to be given the current fiscal realities.

But most importantly, if the discussion is truly going to be serious, Republican members can’t label every proposed tax enhancement a “job killer” nor can Democrats label every proposed spending cut a confirmation that Republicans are only looking out for the wealthy. As we begin this new decade, we Minnesotans deserve a more serious discussion than that.

Saturday, December 5, 2009

Joining the ranks of the Underserved


In early November, after more than a year in the making, the Minnesota Ultra High-Speed Broadband Task Force released its report to both the Legislature and the Governor. And as the Task Force member appointed by Governor Pawlenty to represent rural citizens throughout the state, I was particularly pleased with both the focus and priority the Task Force placed on meeting the broadband needs of rural Minnesotans who find themselves in areas of the state that are both unserved or underserved by incumbent broadband providers.

But the real irony that unfolded shortly afterwards makes these issues quite real and personal for me. For you see, after spending a decade as a high-speed broadband user and a telecommunications researcher, I moved out to a beautiful farmstead in early December just a few miles from the campus where I work. But the consequence is now that I am 2 miles down the gravel road; I am just out of the reach of both the incumbent telephone and cable companies that provide the majority of the broadband services in the region.

Now don’t begin to feel too sorry for me as I still have my mobile broadband card, so I’m not completely offline. But both the connection speed (well under 1Mbps) and the reliability are far from ideal. So now that I have personally joined the ranks of the broadband underserved, I am counting on the Minnesota Legislature to carefully read and begin to implement the Task Force’s recommendations. And with that in mind, allow me to share with you the elements of the broadband report that give me hope.

A Focus on Ubiquity – One of the areas that the diverse Task Force members found complete unity and consensus on was that high-speed broadband service must reach every home and business across Minnesota. Not just the homes in town; but every home everywhere in Minnesota. It’s a very clear, unambiguous and positive statement for rural Minnesotans all across the state.

Setting a Minimum Connection Speed – For the residents of the last farmstead at the end of the gravel road, few concepts are more important than defining a minimum connection speed. That’s because you can bet that that’s the speed they will likely receive. Accordingly, it’s important to set a minimum speed that is sufficient for those remote residents to access telehealth services, engage in distance education services and functionally access many of the essential services that broadband allows us to access. For you see, people who live in remote places and have poor access to broadband services typically have poor access to a variety of other services as well. It’s simply the disadvantage of distance. But broadband is a unique technology that often allows us to transcend the disadvantages of distance, by bringing services right into our homes.

So ensuring a minimum connection speed is vital; and for the Task Force, that minimum speed was 10-20 megabits per second. But equally important, the Task Force set an adjacent goal for Minnesota to be in the top 5 states in both connection speed and broadband penetration. So in fact, that minimum connection speed is really a moving target that must regularly be increased if Minnesota hopes to achieve and then maintain a “top 5” ranking.

Prioritizing the Unserved First – A final element of the report that is equally important to rural Minnesota is the focus on prioritizing public investments in broadband deployment. The truth is that there simply isn’t enough money, public or private to “fiber up” the state as many would like. In fact, the costs are somewhere between enormous and staggering! So the development of public/private partnerships will be required to effectively finance these projects. But where to begin? Where the need is highest? Where the return on investment will be highest?

Well, in this case the Task Force was once again clear and unambiguous when they noted that we should first address the needs of the residents living in unserved areas of Minnesota, where broadband currently has no reach; next address the needs of the underserved areas; and finally address the remaining needs of the state. With this priority in mind, the Task Force is clearly placing rural Minnesotans at the front of the line.

So when the Minnesota Legislature once again convenes in February, there will be many who will help breathe life into this new report and help encourage the Legislature to implement many of these recommendations. And rest assured that I will be one of them because this time it’s personal!

Tuesday, December 1, 2009

The Problem with Universalism

The Minnesota Hi-Speed Broadband Task Force has now spent the past few months listening to a variety of public officials and others who have provided comment and testimony regarding broadband deployment throughout the state. And through this process it’s become clear that for a growing number of Minnesotans, ubiquitous access and universal adoption of broadband is a significant goal. But when you really think about it, this notion of universalism increasingly permeates much of our public policy today. Within the current public debate about health care reform, universal coverage is a goal that both Democrats and Republicans publicly seem to embrace; and in our national discussion about public education we want to ensure that absolutely no child is left behind.

It’s interesting that in a capitalist culture that focuses on competition, product differentiation and market share that we seem to be romancing the values of universalism. For example, for many years economists defined the term “full employment” to actually mean an unemployment rate of 5 percent or less. I simply don’t ever recall back in the 1990s seeing public officials at the state or federal level wringing their hands over the 3-5 percent of the work force that were jobless. And public schools with a 90 percent graduation rate used to be a source of pride and held up nationally as an example of what is right with our public school system. Sure, we aspire to100 percent graduation rates, but there just seemed to be an understanding that while no one wants to leave a child behind, that reality often trumps aspiration.

Returning universal adoption, I am reminded that virtually all former innovative technologies still have yet to reach the goal of universal adoption. This is true for even some of our most mundane technologies. For example, we have yet to achieve universal adoption of a telephone in every home, a microwave in every kitchen, or a car in every garage. For the simple reality is that there are a variety of factor that help explain why people choose to adopt some technologies and take a pass on others. Age, income, culture, tradition, religion, education and awareness all come into play.

The late Everett Rogers wrote the seminal book on the adoption and diffusion of innovative technologies. Rogers was an Iowa farm boy who earned his doctorate in the 1950’s trying to understand why some farmers adopted some obviously beneficial technologies while others did not. A decade earlier when agriculture was transitioning from planting varietal seed corn to hybrid seed corn researchers understood that both the yield and the drought-resistant characteristics of the hybrid seed made it far superior. Yet it took many years for farmers to adopt this new technology. From these and other studies, Rogers argued that the adoption of any new technology actually occurs in a series of predictable stages which culminates in an “S-shaped” curve, where the adoption of a new innovation starts out very slowly until it reaches a critical mass; at which point the adoption rate soars, only to tail off and stabilize. Most importantly however, was that Rogers never suggested that any technology will achieve a 100 percent adoption rate. In other words, regardless of the benefits of the innovation there will always be some non-adopters. A good example is the recognition that even today; some parents choose not to immunize their children against a variety of serious and contagious diseases.

So how do we rationally address this increasing attention to universalism in policy when all the evidence suggests that such universalism is unreasonable and unattainable? Well, first we need to recognize that defining anything less than 100 percent as failure makes a fine aspirational goal, but it makes poor public policy. Whether defined as a zero-tolerance drug policy, universal adoption, or no child left behind; policy is always best implemented when it is guided by rational discretion over aspirational ideology.

Tuesday, November 24, 2009

I'm no techno-genius

Well, I finally managed to get back into my blog after months of trying. For some reason I just couldn't remember my password and instead of simply utilizing the password assitance technology offered by Google, I was sure I would be able to evenutally remember it. Now after 4 months, I finally gave up and used the technology assitance.

Needless to say I have months of commentaries backlogged, so I will post them over the next few weeks.