We Get What We Pay For

We Get What We Pay For

Minnesota needs to restore the integrity of its own brand.

I’m a relative newcomer to Minnesota, having moved here, in the dead of winter, in 1980 from barley-soaked, industrial-smelling Milwaukee. (It stinks less there now, since most of the breweries and a lot of those smelly factories have moved out, replaced by unsold condos and ever more bars).

When we set down in the Twin Cities, I was struck by the quiet self-assurance of the people here. It was that whole Keillor ethos: “above average,” “quality of life,” “the Minnesota miracle.” At first I thought it was self-delusion, but in time it bore itself out.

I found this to be a place with a confident, diverse, and socially responsible business community; good schools (even in the core cities, which I found amazing); a high regard for the environment; and a thoughtful approach to growth. At the time, there was this thing called the Metropolitan Council that actually did broad-based regional planning. Even as a reporter in Milwaukee, I had known it as a model for the nation.

Over the years, I’ve looked at this community from a variety of angles: as a journalist at the Star Tribune, a securities analyst at an investment bank, an assistant treasurer on the corporate side, and a small-business owner in the public- and investor-relations business. I’ve even looked at it as an outsider, having spent a year away in St. Louis at a bank trust department on the institutional investment side of the fence. I’m hoping these various perspectives help to inform the name of this new column: “Context.”

Accuse me of growing jaded in my old age, but Minnesota isn’t the same place it was when I first moved here. In spite of what the ubiquitous “best” lists say—highest educational achievement, 32nd in obesity, whatever—Minnesota is inextricably slouching toward “average.”

The financial services industry, in the 1980s a huge, pulsating presence in downtown Minneapolis, has withered under an onslaught of mergers, move-outs, and regulatory changes that did away with a thriving culture of small investment banks, the sources of capital for dozens of local start-ups.

We were the home of once-great companies—Pillsbury, Northern States Power, Northwestern Bell, IDS, Norwest, Northwest Airlines—now merged and puréed into larger organizations.

Ben Jaffray’s “sidewalk business culture” is less personal; the corporate movers and shakers more transient or absent from the local scene and less invested literally and figuratively in our community; the “old money” that used to anchor some of our key institutions (such as the daily newspapers) gone. Instead, Nicollet Mall is a restaurant culture, and Macy’s doesn’t bother to scrape the gum off its sidewalks. Dayton’s never let that happen.

Most significant, Minnesota’s local and statewide government, the DNA of the “Minnesota Miracle,” has lost its progressive edge and confidence. Yes, we are currently enjoying a record season of road repair, but that’s mostly because of federal stimulus money rather than any state-inspired policy commitment. Our lakes are stagnating, our schools are buckling under crushing budget constraints. Again, if it weren’t for federal aid to cities and counties, we’d be in a heap of trouble right now.

Perhaps I’m feeling this way because of four years of a steroidal entertainer as governor and another eight depressing years of a one-note governor intent on driving down taxes. The latter, in particular, has succeeded admirably, not only in driving state income taxes lower than they used to be, but also our quality-of-life rankings. Congratulations, we’re now “average.”

According to the 2009 State Budget Trends Study Commission, Minnesota’s population and employment growth have slowed considerably since 2002 relative to the 1990s. Both our growth in per capita personal income and per capita gross domestic product have more recently begun to lag national growth, for the first time in more than a decade.

According to a 2007 University of Minnesota Study aptly titled, “Long Gone Lake Wobegon,” since the early 1990s (there’s that date again) we have seen “a significant structural slowdown in the growth of spending in academic R&D in Minnesota . . . . Minnesota is no longer ‘above average,’ and the University of Minnesota has lost considerable ground on a range of research spending metrics and is now lagging behind many of its peer group of universities in other states.”

Interestingly, in that same period our tax structure has become more and more regressive, with Minnesota’s wealthiest taxpayers paying about 9 percent of their income in state and local taxes, considerably less than the 12 percent paid by those in the middle, according to the Minnesota Department of Revenue’s Tax Incidence Study. Our true bottom-line investment in public stuff—total state and local dollars for public purpose as a percent of income—is about 10 percent lower than it was in the 1990s, according to the Price of Government statistics compiled by Minnesota Management and Budget.

In the early 1990s, about 17.5 percent of personal income in Minnesota went to support state and local government, according to the Price of Government study. Today that has dropped to 15.5 percent. If that doesn’t sound like much of a decrease, consider this: Had the percentage remained at 17.5, another $4.5 billion would have been available for state and local government in Minnesota annually, taking us a long way to erasing the $5.8 billion budget deficit that our bumpkin legislature has, in its most recent feat of spinelessness, punted into a nonelection year.

How is it that we’ve allowed this to happen?

How is it that we are left with the spectacle of a Republican candidate for governor—one who makes our current Summit Avenue Resident (thank you, Garrison) look downright Keynesian—who won’t or can’t specify how he would solve that problem? With the notable exception of Mark Dayton—and before he acquiesced to the self-destructive will of the DFL Machine, R. T. Rybak—the rest of the candidates in the race offer few, if any, concrete solutions.

Then there’s Mr. Pawlenty. He is in the process of leveraging his “no new taxes” dogma into a cockamamie presidential run. I only hope that when the national media get ahold of him, they ask him a question or two about the famed “Minnesota Mediocrity” he has helped bring upon the state.

This used to be a state of creative, forceful, legislative leaders. These were people who implicitly understood what this state was about; that Minnesotans were, in fact, willing to pay for top-quality government services and recognized that this was a key element of what made Minnesota special.

Our legislators and whoever is elected governor need to develop a spine and ask Minnesotans, particularly those most able to pay (which, by the way, includes me) to finance the sort of government that made Minnesota the North Star state: a shining example of how government can have a measurable, positive effect on peoples’ lives. We, as citizens, have to truly embrace the fact that there’s no free lunch in that regard.

Minnesota in its first century and a half—and when I ended up here 30 years ago—stood out among the states as a progressive model, molded by public-minded and egalitarian Scandinavians and Germans. They firmly believed in business and capitalism, but also that government had a responsibility to equalize opportunity and outcomes.

As Dane Smith, president of the local think tank Growth & Justice puts it, “We need to stop looking south or to other less successful states, and start restoring the integrity of our own brand: pro-business for sure, but also progressive, innovative, and communitarian.”