Growth & Justice Blog

Inequality, education and innovation: U.S. higher on the first, slipping on the other two

Sometimes the anti-tax, anti-government zealots will actually concede that the United States is an outlier in economic inequality and becoming more unequal all the time. But they hasten to insist that this is a function of a meritocracy, and that our weak economic security system and low taxes foster creativity, initiative and innovation, from which all boats will rise.

But during a period marked by historic tax cuts and federal-state disinvestment in education, the U.S. has slipped in average education attainment (largely provided by taxes and government) and there are signs it may be slipping in innovation too.

The U.S. has dropped to 10th on the Global Innovaton Index, behind nations such as Sweden, Finland, Denmark, the U.K. and the Netherlands, all with much superior economic security entitlement. The index is an annual analysis published by Insead, an international business school, and the World Intellectual Property Organization, a United Nations Agency. The index is comprehensive and takes into account dozens of factors, including business sophistication, human capital and research, and creative output.

I like the analysis on these rankings by Education Week blogger Jason Tomassini, who says this:

"So, if we didn't know already, in order to create innovators through education we need to increase rigor in Science, Technology, Engineering, and Math instruction; teach students business acumen and entrepreneurship; and lower class sizes. Get to it!

Oh, and there's another factor we should watch out for: We are No. 2 in the world in video uploads to YouTube. According to the Global Innovation Index, this is a good thing, but I can't see the harm in dropping a few spots before next year." 

Let's allow that there might be a trade-off for public-sector size and private-sector growth rates, and in the extreme too much government and prohibitive tax rates might well stifle creativity and incentive.   I personally think people tend to be more creative and productive when they are relatively secure, and know they will have health care and enough to eat, even if they take a risk and fail. That's how a retired Swedish businessman explained it to me when I visited there three years ago, as I wrote in an op-ed column inspired by his creative analogy of economic efficiency to humane handling of hunting dogs.

--Dane Smith

 

Another Minnesota voice for post-secondary completion, and an even-handed critique of for-profit higher education

Back to School for Grown-Ups is a relatively new enterprise in Minnesota that shares our zeal for dramatically increasing post-secondary attainment, with special emphasis on grown-ups of all ages who need to re-think, re-educate and re-train in a fast-changing economic world.

The key principal in the firm is Laura Gilbert, who produces books, blogs, research papers, presentations and counseling, all providing sound advice to young and older adults who are trying to navigate the ever trickier and more expensive path to four-year "sheepskins" or other higher-ed credentials.  Her book, "How to Save $50,000 on College" is a pocket-sized guide that cuts through a lot of the confusing fog and expensive obstacles to higher-ed completion.

Gilbert is a life-long learner whose biography fits her philosophy.  She picked up her credentials in stages, starting with a triple major in music from Metropolitan State in the Twin Cities, a master's in industrial relations in mid-career, and a PhD in educational psychology much later in life.

Among her more important contributions recently are a thoughtful white paper, "For-Profit Education Under Scrutiny: Issues and Challenges," issued earlier this summer.  Gilbert succinctly summarizes some of the more appalling abuses of the "bad actors" in the fast-growing field, providing a lesson in how privatizing the classic public and nonprofit functions of education, health and welfare comes fraught with risks.  Her charts showing comparative cost and value for public, private nonprofit, and for-profit rather strongly make the case for the former two rather than the latter.  But Gilbert also acknowledges the strengths of responsible for-profit models, especially through online learning, and concludes that expensive and prone to abuse as they can be, for-profits are a legitimate route and have become a "mainstay" of our sytem.

Gilbert's work features a sharp cut-to-the-chase style and she has a good sense of humor, as her blogs on the Larry Crowne movie attest.  Like many higher-ed enthusiasts who loved the premise of a laid-off "UMart" retail worker going back to school for a degree, Laura and I were disappointed in the "nice" but rather boring and implausible movie.  How can you fall so flat, with such an uplifting concept, and Tom Hanks and Julia Roberts?  And I agree with Gilbert that it would have been a lot more fun to send Buzz and Woody (those souls of aging obsolescence, from the Toy Story trilogy) back to school.

--Dane Smith 

 

No sector can do "it" unless we all do something

Dane Smith was engaged all last week with Peter Nelson of the Center of the American Experiment in an MPR Insight Now online debate and broadcast on the proper roles of government and the private sector. MPR asked, "If the private sector can do it, should the government get out of it?"

Meanwhile, I was doing what I do every Thursday — volunteering in the preschool run by People Serving People — the largest and most comprehensive, family-focused shelter in Minnesota. It brings together public dollars, private philanthropy and other community resources to help homeless families get back into stable housing. Its Early Childhood Development Center provided provided childcare and learning experiences for 698 children in 2010.

[You can read more about my adventures at PSP and the Catholic Outreach Day Center in Colorado here, in The Shelter Report feature of my personal blog. This work is a great antidote to getting too abstract and policy-wonky when it comes to issues.]

We took kids from the pre-school out to the Minnesota Landscape Arboretum. I wrote about a boy I met on my trip there a year ago. This time was different because we had a smaller group of children and more volunteers.

Our field trip was mostly uneventful and unstructured — spent walking around the grounds, looking at flowers, splashing hands in fountains, climbing structures, watching koi swim around and keeping kids away from several batches of goslings — so I'm not certain how much the kids got out of it. Or the adults, for that matter.

It's hard for both the adults and the kids to adjust to each other for the first time. The adults leave their corporate headquarters, come into a busy urban homeless shelter and get matched up with a small child, usually of a different race. The kids have enough turmoil in their lives that they aren't in a hurry to bond with yet another stranger who shows up out of nowhere.

But I shouldn't be jaded just because green plants and garden follies aren't on my personal must-see list.

There isn't any grass where these children are living now. There are no ponds or flowers or squirrels and geese. Their shade comes from tall buildings and a lone tree in the playground. So it's not surprising when a new discovery would evoke a child's heartfelt "Bee-YOU-tee-ful!"

The field trip was sponsored by a major corporation in the news for its political contributions, and lately, its union-blocking efforts in New York. The volunteers were all from the company's legal department. In my regular life, I'd want to talk to insiders about those issues, but this wasn't the place. Nor did I get a chance to ask them about their motivations for and quality of their volunteer experience.

Still, it got me thinking.

The Arboretum has the University of Minnesota attached to its name. It receives 12 percent of its budget from the U, and the University Foundation manages its $23-million endowment. A walk through its grounds will turn up familiar names of private benefactors who provide most of its support — MacMillan, Cargill and Wurtele, Xcel Energy, Comcast and Best Buy — but there are also smaller, four-figure donors, including Seward Co-op, and lots of people who send in $25. 

If you allocated a portion of all the contributions that enabled these kids to see this Bee-YOU-tee-ful place, the line items in the spreadsheet would have to list state and local governments, corporations, wealthy people, small donors, volunteers, nonprofits and celebrities. If this were funded entirely by the state, a governor facing a budget shutdown would likely have to declare this place a "non-essential service."

Thanks to the small government orthodoxy sweeping our state houses, we get hung up on an unbridgeable dichotomy between what the government should do and what the private sector should do.

The beautiful reality in this community is we are working alongside each other all the time, in ever-changing combinations of public and private, with funding by taxpayers, customers, supporting members, individual givers, foundations, church congregants, kids and adult volunteers.

We should all take a deep breath once in a while to give each other credit, while recognizing the limitations of any one sector going it alone.

— Charlie Quimby

What if Ayn Rand had to dig her own two-holer?

(Note: We hereby introduce Chuck Brown - a former business manager, a former city council member for the southern Minnesota town of Olivia, and a novelist – as a guest blogger for Growth & Justice.)

Conservative columnist Jason Lewis’ professed love for Ayn Rand and her novel, Atlas Shrugged, (Star Tribune, Apr. 17) struck a chord with me, but probably not one he intended.

Rand has long been deified by those who use the worship of individualism and capitalism (see this NY Times summary of her influence on right-wing business leaders) to deny the notion of common good and the enormous value of that which we do collectively, i.e. through our good governments. But Lewis, like Rand, goes even further to suggest that anything done collectively or altruistically results in a loss of freedom. In Lewis’ world “productive thinkers” are to be valued to the extent that we dare not ask any sacrifice of them or seek to limit the windfalls from their achievements. “Productive thinkers” sounds a bit like today’s sainted “job creators” who, we are told, will take their bat and go home, or somewhere else, if the game isn’t played exactly by their rules.

I’m not against productive thought any more than I’m against job creation, though it occurs to me that we can also have productive thoughts and create jobs when we work together, Rand and Lewis notwithstanding. But my chief aim here is to dispute the notion that all collective acts result in a loss of freedom. I’ll begin with some very basic and personal observations.

The first thing I do when I get up in the morning is turn on the lights. The second thing I do…well, I won’t go into detail on the second thing, other than to say that it concludes with a flush. The third thing I do is turn on the water and brush my teeth. Now my point here is that the first three things I do each day involve a good or service that I purchase from government. Most folks may not buy electricity from a municipal utility, as I do, but many of us in rural Minnesota do, and our basic power supply throughout this nation is properly regulated by public agencies. And most of us now are hooked up to clean and efficient "government-run'' water and sewer systems. These are things we have chosen to do collectively, not because we are knee-jerk collectivists, but because it simply made the most sense. It was the best way to get that particular job done in a way that produced value for the largest number of people. Ayn Rand may have found digging her own well and having a two-holer in the backyard to be more to her philosophical liking, but I can’t see how she could claim that I’ve lost freedom by enjoying public works. I might even argue that the convenience of these systems adds freedom, granting me time for things I want to do rather than, say, dig my own two-holer.

Public safety and common good requires that we obey the law and pay taxes, but only criminals risk serious loss of freedom in our democracy. The rest of us enjoy the freedom of an orderly society ensured in large part by taxes and governments and public works. National defense, one of our largest collective "government-run'' endeavors, has as its primary focus the defense of our freedom. Then of course there’s public education, which accounts for about half our state-local tax dollars, and it’s hard to imagine how we might be freer without it. In fact, the sages tell us, education sets us free.

We Americans are exceptionally individualistic, and so Ayn Rand and rugged pioneers and cowboys will always be part of our thinking. But many of our greatest national achievements have been collective efforts, and that’s not likely to change, even in the land of the free.

-Chuck Brown

 

Reverse privatization improves emergency, fire services

GRAND JUNCTION, COLORADO — As a part-time Colorado resident (but income-tax-paying Minnesotan), I keep an eye on developments in governance and tax policy out here. After all, this is the birthplace of the Taxpayers Bill of Rights (TABOR), and Colorado's experience offers some lessons to Minnesota legislators who might get overly excited about managing state revenues and budgets by referendum.

Last week I ran across a story that might give pause to those who are enamored by the prospect of privatizing public services.

In Grand Junction, starting two years ago, the city fire department has done a sort of reverse privatization — taking over ambulance services once run by a private company and assuming the role as sole ambulance provider for roughly 1,200 square miles of the Grand Valley.

Critics blasted the city’s takeover of emergency medical services because it was estimated to cost taxpayers $1.55 million over five years. They also panned the ouster of American Medical Response and the company’s 28 employees who served the community for a decade.

By all accounts, AMR had done a good job. I talked with police and county sheriff officers who praised the reliability of service and competence of the company's workers. Area hospitals were concerned, too. 

But two years later, criticism in this conservative community of about 120,000 has melted away. Ambulances get victims to the hospital faster. Fire stations are better staffed (with 35 people per day versus 21). Crews going to fight fires respond faster, and captains on the scene are able to better coordinate efforts and oversee safety.

And the department is operating in the black.

Assuming responsibility for taking medical patients to the hospital and between medical facilities has generated more money for the Fire Department than first anticipated. Operations Chief Jim Bright said he expects the department to end the year with a $250,000 fund balance.

 

One former AMR worker who now works for the department said even though AMR provided high-quality emergency medical services during its tenure: “I saw the side of things where it was always down to the very bottom dollar.”

The dollars still matter, but now they're all going back into the community and the people being served.

— Charlie Quimby

Dakota County: Taking the long view pays

When local governments are under pressure to do more with less, it's tempting to focus on service cuts or fight over taxes, rather than tackle the long-term job of self-assessment and continuous improvement. Dakota County is one local government making sure it's looking at the big picture.

Last week, according to an article in ThisWeek, Dakota County commissioners reviewed the county's report card from the Minnesota Council for Quality. The evaluation will be used by the county to improve its operations.

Taking a strategic and systematic approach to improvement is a mark of good leadership. Dakota County should be congratulated for showing its commitment to delivering value to its constituents.

According to the county, its net price of government — measured as property tax levy as a percent of personal income — has decreased over the past decade [Download ReportCard.pdf]. Over the last four years, it has had the lowest county property tax rate in the state, supported in large part by growth of the county's tax base.

But part of that performance must also be due to good management practices.

In 2006, Dakota County became the first county in Minnesota to participate in the Minnesota Quality Award process established in 1991 and based on the Malcolm Baldrige Performance Excellence assessment. Early state winners were manufacturers and service companies, but in recent years emphasis shifted to helping organizations progress, and now schools and health care centers make up most of the participants.

The Malcolm Baldrige National Quality Improvement Act was passed in 1987 as a response to foreign competition and to inspire American businesses to adopt practices to improve productivity. Applying business practices in the public sector sometimes gets a bad rap, especially when "privatization" initiatives reinforce the customer model of government

in which the relationship between government and citizens is characterized as arms-length transactions rather than shared governance. This relationship undermines the legitimacy of public goods, makes long-term investments more challenging, and raises expectations that any new revenues will have immediate, direct benefit to the individual.

But the Baldrige program reflects good government principles, such as planning with a long-term view, understanding expectations, defining outcomes, measuring effectiveness, adopting best practices and being accountable for results.

Whether or not they follow the Baldrige approach, local governments can certainly benefit by following Dakota County's lead.

— Charlie Quimby

One place high fliers get a nearly free ride

Aviation isn't the first area we think of when we talk about transportation infrastructure in the state, but it's on my radar now.

On MPR's Midmorning today, one of the guests threw out an interesting number. Private aviation accounts for 15 percent of the costs to control our airspace, but provides only 3 percent of the funding. That's because the revenue formula is driven by commercial passenger ticket taxes.

I was driving as I listened, so don't quote me on the details. But the principle is pretty clear. A private jet carrying four people through airspace must consume nearly as much air traffic control attention as a commercial airliner, but the users of the private craft don't pay in proportion to that use.

Remember this example next time someone tells you it's unfair to ask high earners to pay higher taxes because they consume less government service.

— Charlie Quimby

Can philanthropy replace public funding of services?

The New York Times has a story about GiveWell — a nonprofit started by two young former hedge fund analysts — which studies charities and ranks them on their effectiveness. Unlike other philanthropic rating services that rely on tax forms filed by nonprofits, GiveWell applies more sophisticated financial analysis  to gauge outcomes achieved with the money.

Most would agree that developing better measures of performance for nonprofits would be a good thing, because it would increase accountability to donors and could help the organizations improve.

Although GiveWell itself doesn't make this point, its attempt to rate the efficiency of nonprofits raises the question of how we evaluate government efficiency — and whether there's any equivalence between the two.

The public sector, too, should be open to effectiveness measures — especially when the information can be used to improve the value of public services.

Under Gov. Arne Carlson, Minnesota used to do a very good job of this. That effort was cut from the budget after 2002, and since, we've heard mostly about lowering costs, not improving outcomes. (The Times story noted that funder bias against paying for administrative costs discourages nonprofits from collecting and evaluating the performance data GiveWell seeks.)

One anti-government talking point claims that charity is a good alternative to government spending. But what data supports that contention? Are smaller nonprofit service models scalable to a size that can serve all citizens across the state? And if they are, will citizens voluntarily fund them to a sufficient level?

Even in generous Minnesota, it doesn't seem that charitable giving can provide for substantially more public sector services.

In 2005, individuals, foundations and corporate giving programs gave a total of $5.1 billion in charitable contributions, according to the recent Giving in Minnesota Report. Using the report's data on institutional giving and applying the national average to individual giving, Minnesota contributes just slightly over half of the $5.1 billion to non-religious programs.

So let's say there's a $2.6 billion total capacity of voluntary private giving to fund existing education, health and human services, arts, environment, public affairs and other programs. That's equal to about 15 percent of the state budget.

What are the chances that any sort of tax cut would double present philanthropy? Even if we did muster another $2.6 billion in giving, it would equal only about half the state's annual health and human services spending.

The nonprofit sector simply doesn't have the capacity now to serve all Minnesotans, and a system of voluntary funding would come nowhere near equaling the government's capacity.

Growth & Justice is developing a project to help better understand when government is being effective and how we can make it more accountable to us donor-taxpayers. We'll keep you posted.

— Charlie Quimby

Five voices of nonpartisan reason

Every time I've been moved to post here in the past week, a good op/ed has appeared to momentarily cool my jets. In case you've missed a few, may I recommend:

• Jay Kiedrowski, former state finance commissioner under Gov. Perpich says: Let's stop the state's fiscal roller coaster.

Reducing variability should not be a partisan issue. It is a good-government issue. Wouldn't it be better for public officials all across the state to focus on service and innovation rather than on how they will survive the latest cuts or how they can justify more money?

• Charlie Weaver, executive director of the Minnesota Business Partnership, in Funding isn't everything — nor is it the only thing, speaks in favor of looking more strategically at school funding and considering investing in cost-effective reforms. He also compliments Growth & Justice for highlighting research about effective practices.
• Chaska Superintendant David Jennings fires back at Michael Wigley of the Taxpayers League of Minnesota.

It is actually the word "public" that bothers him more than the word "schools." It seems he simply does not believe in any public expenditure of taxpayer dollars. He instead believes we will all be better off when our futures are left in the hands of corporate America and the enlightened few who share his views and his economic stature.

• John S. Adams contributes one of the best explanations I've seen about why a focus on current spending represents shortsighted financial stewardship. As much as I've written on the topic, I'm embarrassed to admit I never drew such a clear and convincing parallel between business finance and state budgets. If you only have time to read one link, click this one.
• Economist Edward Lotterman provides a clear run down of why forgiving some subprime mortgage interest hikes might be the best of some not very appetizing policies choices.

And we're pleased to note that two of those voices echoing Growth & Justice positions belong to former Republican legislators.

It's not that all privatization is bad, but pass on the robots

[via Lincoln Institute of Land Policies] An article in the LA Times (registration required) describes the latest beachhead in the privatization of government services: Fulton County Georgia.

Newly established cities have been carved out of the large county that encompasses Atlanta and unincorporated areas north and south. The affluent, white, northern tier began a secession movement, to retain tax money that had been flowing into the city.

It's not where they're spending the money, but how that's of interest here:

Instead of establishing bureaucracies, the new cities have chosen to outsource nearly all government services to private corporations, making this the nation's most ambitious experiment in privatizing city administration.

For decades now, the county has been racially and economically split, with the north predominantly white and affluent, and the south predominantly black and poor. Although the first three new cities were formed in the north, charges of elitism and racism have faded to some extent as communities in the southern part of the county have sought cityhood too.

The dramatic and rapid shift toward an all-city county has sent shock waves through county government.

With potentially no unincorporated areas, county commissioners are, among other things, considering replacing the Sheriff's Department with a privately contracted jailer. And they are looking at replacing the seven county commissioners with a five-member panel.

Fulton County would continue to collect taxes and provide countywide services such as courts, health centers and senior services.

            [...]

Yet the movement's aim does not appear to be lowering taxes or unraveling bureaucracy. Despite their differences, the new cities all seem to share a desire for greater regulation, particularly when it comes to zoning.

One city has only five people on its staff, and contracts for basic services including tax collections, planning and zoning, and parks and recreation. Another farms out administration, public works and community development.

It remains to be seen how these smaller and fragmented duchies will fare as part of one of the nation's largest metroplexes. And whether private contractors can deliver more for the taxpayer dollar, not just now, but over the long term.

— Charlie Quimby