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Foundation group throws out big ideas to shake up state budget talks

The ability to deduct mortgage interest on state income taxes will cost Minnesota more than $1 billion in lost revenue next biennium. Yet research shows that it has little effect in promoting home ownership — the law’s original intent. Eliminate that tax write-off, and it helps solve the state’s current budget dilemma. (Yes, it’s also political suicide.)

OK, never mind. How about this? State special-education programs are snarled with bureaucracy and family contention. How about reducing paperwork, figuring out ways to reduce misidentifying students and making a more family-friendly system?  One recent analysis suggests that could save the state $330 million in a biennium.

Wait. Wait. Here’s one more. The state of Minnesota could team with other employers to fundamentally change the health-care marketplace. Instead of paying on a fee-for-service model, it could get health-care providers to bid on a flat rate for a year’s worth of health. That way, the state would pay for health, not reimburse for sickness, and get a stronger focus on preventive care.

These are some of the big ideas that five Minnesota foundations have put on the table for discussion. It’s an effort to stir the pot and take a fresh look at Minnesota’s budget problem.

The Bush Foundation, the Minneapolis Foundation, the St. Paul Foundation, the Northwest Area Foundation and the Minnesota Community Foundation partnered with Public Strategies Group to develop the ideas and initial savings estimates.

More than 100 community leaders attended an event last week at St. Thomas University’s Minneapolis campus, where the ideas were thrown out for discussion. Everyone got a binder titled: “Minnesota’s Bottom Line: Better Results for Dollars Spent.”

The next steps are not certain. The foundations are trying to be a catalyst for conversation but not the primary movers. Sandy Vargas, president of the Minneapolis Foundation, told the audience the work wouldn’t get done if the foundations own it. “We need shared vision and shared responsibility,” she said.

Peter Hutchinson, president of the Bush Foundation, said in an interview that private foundations have very clear guidelines: They can’t lobby. The foundations hope that the new ideas will get people interested in something other than what seems to be the available budget choices: big cuts or tax hikes that may or may not be sustainable.

More ideas
The library stacks are full of reports with great ideas that never went anywhere. This latest set of ideas could go out with a bang, a whimper and maybe a success or two. But give the foundations credit for thinking big and throwing out controversial ideas. (Note: They refer to the ideas as the beginning of a conversation, not recommendations.)

Other ideas developed by Public Strategies Group included:

• A massive redesign of the state’s Medical Assistance program through seeking a full-scale federal waiver. (Net savings $233 million in 2012.)

• A hard review of the state’s tax code to see whether the tax breaks still on the books are delivering the kind of public benefits originally intended.

• Using community interventions and chemical dependency treatment for lower-risk, non-violent offenders to reduce the need for future prisons and reduce recidivism. (Net savings: $14 million in 2011.)

• Creating cost-sharing agreements between cities, counties and schools. (This idea is already moving in the Legislature.)

For more details on all nine ideas, see the Citizens League web site. The Citizens League moderated the event at St. Thomas and could play a continued role in fostering the discussion. President Sean Kershaw said his organization hasn’t made a commitment, but it’s interested.

People had the opportunity to attend small groups on the ideas that caught their attention. Discussions were animated and most people stuck around for the full three hours.

Jan Malcolm, former Minnesota Commissioner of Health and current chief executive officer for Courage Center, attended the group that discussed state efforts to change the health-care reimbursement model.

“This is primarily about health care costs and we have to get our arms around that,” she said in an interview. “The data are so compelling, we ought to be able to. We are not getting the value for what we are spending.”

Tom Kingston, president of the Wilder Foundation, attended the small group meeting to discuss eliminating the home mortgage deduction on state taxes. While controversial, he said it was the easiest for people to understand.  “The policy objectives are not being met,” he said.

During the session wrap-up, Dane Smith, president of Growth & Justice, a progressive economic think tank, seemed most eager to push the agenda. He arrived with a handful of copies of Growth & Justice’s recently released report “Governing With Accountability.” (PDF) He said it covered some of the same ground the foundations had.

“We are committed to furthering this conversation,” he said.

Comments (1)

  1. Submitted by Mark Broin on 05/06/2009 - 11:34 pm.

    Thanks for the heads up on Foundation ideas to close Minnesota’s revenue gap. Elimination of the mortgage deduction was one of their suggestions, since according to “research”, the interest deduction does little to stimulate home ownership…its intended purpose. I’d like to see those studies, as an unofficial poll of 26 of my friends and co-workers really raised their hackles when told they might lose their mortgage interest deduction on their homes or cabins. Maybe the foundations and businesses don’t care, because they can deduct all their costs as business expenses. I have also heard the suggestion came up at the legislature to eliminate the “relative” homestead deduction and the deductibility of real estate taxes. Another absurd idea, according to my unofficial polling. Most of us felt if these issues were seriously considered, it would stimulate us all to work very hard at replacing those legislators who supported the ideas. It was the strongest response I’ve heard in years from most of these voters.

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