Improving federal and state policies can expand immigrants’ contributions to Minnesota

Throughout our country’s history, immigrants have played important roles in strengthening our economy and shaping our communities. They are our neighbors and coworkers who have come to the United States seeking a better life for themselves and their families. Many have been here for years and their children may be American citizens.

We recently released three issue briefs outlining the ways undocumented immigrants currently strengthen our economy, as well as how federal and state policies could be improved to meet growing workforce needs while increasing opportunities for workers and young people.

President Barack Obama’s proposed executive action would create a temporary legal status for 30,000 undocumented immigrants who have deep ties to their communities in Minnesota. The action would expand Deferred Action for Childhood Arrivals (DACA) to cover people who entered the United States before they turned 16 and have lived in the country continuously since 2010, and create Deferred Action for Parents of Americans and Lawful Permanent Residents (DAPA), covering undocumented parents whose children are U.S. citizens or lawful permanent residents. Both DACA and DAPA allow eligible immigrants to apply for work authorization and deferred action for three years.

Providing stable status to millions of immigrants through the president’s 2012 and 2014 executive actions would improve the U.S. economy by an estimated $230 billion over ten years, and Minnesota’s economy by an estimated $1.7 billion.

Obama’s executive order, currently on hold in the courts, would allow eligible immigrants to work in jobs that better align with their abilities, build their skills and earn higher wages. As a result, immigrants given temporary legal work status would be expected to see a 5 to 10 percent increase in their wages, bringing many families closer to making ends meet and benefiting local communities. The executive action also acknowledges the investments made in young people who have grown up here, allowing them to further their educations and careers.

On the state level, we look at the impact of expanding access to driver’s licenses to all Minnesotans, regardless of their immigration status. Some 83,000 Minnesotans cannot get driver’s licenses, which can make it difficult for them to reliably get to their jobs or school. Ensuring everyone can access driver’s licenses can strengthen our labor force and make our roads safer. With a tightening job market and labor shortage on the horizon, Minnesota can’t afford to leave eligible workers on the sidelines.

All three briefs are available on our website:

-Clark Biegler

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Together we can build a strong economic future for all Minnesotans

A bright future for Minnesota is built on a strong foundation:

  • Sound public investments that create opportunity and broader economic security across Minnesota;
  • Policies that build a strong economic future for us all, by ensuring Minnesotans, regardless of where they live, can get good jobs and move up the ladder into the middle class; and
  • A fair tax system that funds the priorities Minnesotans value.

For nearly two decades, the Minnesota Budget Project has provided credible research and analysis that identifies clear policy solutions that deliver progress toward these goals, such as making child care more affordable so that parents can work and children can thrive.

Community leaders like you know you can rely on our sound assessments of the state’s budget, economy and tax landscape to inform the work you do every day to make our state one where all Minnesotans can thrive and prosper.

We invite you to join hundreds of thousands of Minnesotans in making our state even better by supporting the Minnesota Budget Project during GiveMN’s annual Give to the Max Day.

Act now and your donation could do more: donating today qualifies the Minnesota Budget Project for one of the hourly $1,000 Golden Tickets and a $10,000 Super-Sized Golden Ticket.

Your generous donation will truly make a difference in the lives of your neighbors. With your support, we will continue to work towards a future where all Minnesotans have access to opportunity and economic well-being. Join us today.

With sincere thanks,
The Minnesota Budget Project Team – Nan Madden, Clark Biegler, Ben Horowitz and Laura Mortenson

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Even with health insurance, out-of-pocket costs challenge family budgets

An asthma attack, a broken leg or diabetes can easily put a family’s financial health at risk, even when that family is insured and earning enough to put them well above the federal poverty line. That’s why the Governor’s Health Care Financing Task Force should focus its work on providing more affordable health care for hard-working Minnesotans.

In a recent blog, I presented data showing that even when families receive assistance in paying for their health care premiums, they have little resources to spare after paying for food, rent and other basic necessities. And premiums are only part of the picture. Families also face out-of-pocket health care costs sooner or later.

In insurance lingo, “out-of-pocket costs” refer to the non-premium expenses associated with getting health care, like when you pay to fill a prescription at the pharmacy or your co-pay at a doctor’s visit. Wonky discussions of health care often focus solely on either premiums or out-of-pocket costs, but that’s an incomplete view of how much families actually spend.

The Affordable Care Act limits how much health plans can require a family to pay in out-of-pocket costs in a given year. Unfortunately, that maximum is more than two months’ worth of a moderate-income family’s earnings — and that’s before paying for monthly premiums.

Consider the following example: a single individual earning about $30,000 a year has a $6,600 maximum limit on their out-of-pocket costs. They might hit that cap after being diagnosed and treated for cancer, but this wouldn’t be an accurate representation of their total health care expenditures. Factoring in the premiums for a typical health insurance plan bought on MNsure, their actual health costs could be closer to $9,000 over the course of the year. That’s almost a third of their income.

A person can face high costs even without a new health care need. For example, in the plans I reviewed on MNsure from the first two “tiers” of health insurance, the total annual cost of managing diabetes for a moderate-income family can range from $5,600 to $8,400, including out-of-pocket costs and premiums. A diabetic Minnesotan with a $16-per-hour job would face spending a sixth to a quarter of their income to manage their chronic condition.

These expenses exemplify why the Health Care Financing Task Force must focus its efforts on bringing down health care costs for Minnesotans. Broken bones and diabetes should not force anyone to make trade-offs between filling a prescription and filling the fridge.

-Ben Horowitz

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Even with assistance, low- and middle-income Minnesotans face burdensome health care costs

Without assistance, many Minnesota families would be unable to afford health care. Even families with earnings well above the federal poverty line struggle to meet their basic needs before paying their health insurance premiums. Comparing monthly premiums with the cost of other necessities in a family’s budget puts the work of the Governor’s Health Care Financing Task Force in its most appropriate context.

I recently joined Children’s Defense Fund-Minnesota in presenting to two working groups of the Governor’s Health Care Financing Task Force. We combined data about the cost of health care with data about the price of other family essentials. Today, I’m writing about premiums — I’ll post about out-of-pocket costs next week.

Our presentation focused on three representative families. All three were made up of two adults, a two-year-old and a six-year-old, and lived in Ramsey County — the only difference was their incomes. For our analysis, we looked at families eligible for Medical Assistance, MinnesotaCare, or federal tax credits that can be used on MNsure, Minnesota’s health care exchange.

We used the Economic Stability Indicator, a tool maintained by Children’s Defense Fund-Minnesota, to calculate the costs faced by each family to meet their basic needs. The Indicator draws on a wide range of data to estimate the price of things like housing and food, and includes public supports that can reduce the burden of a family’s basic expenses.

The Indicator shows that for families qualifying for Medical Assistance and MinnesotaCare, the costs to meet their bare-bones needs are higher than their incomes. These families must make difficult choices just to keep a roof over their head and food in their fridge. MinnesotaCare and Medical Assistance help by keeping health insurance premiums for high-quality coverage at more affordable levels than these families would face on MNsure.

The Indicator also shows that families earning too much to qualify for MinnesotaCare or Medical Assistance still have very little wiggle room in their monthly budgets. The Advanced Premium Tax Credits created by the Affordable Care Act lower the monthly price of health coverage so that these families don’t experience increases in the insurance market that may otherwise bust their budget.

Source: Children’s Defense Fund-Minnesota, Economic Stability Indicator. Data is based on an updated, unpublished version of the Indicator. For more details on the price of basic necessities, see their methodology and the handout prepared for the presentation. This presentation of the data excludes potential Section 8 Housing Assistance and Child Care Assistance due to very long waiting lists for both forms of assistance.

These numbers leave little room for interpretation. Even with incomes at more than twice the official poverty line, families have only a very small financial cushion after paying their subsidized health care premiums. The Health Care Financing Task Force should focus its efforts on ways to ensure that all Minnesota families can afford health care premiums as well as their other basic needs.

-Ben Horowitz

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New report shows Minnesota is half way towards budget reserve goal

Progress accumulates in steps. And Minnesota is taking critical steps to ensure we’re better prepared for the next economic downturn.

The state should have $2.0 billion in its budget reserve to be able to meet the needs of Minnesotans in tough economic times. That’s according to Minnesota Management and Budget’s (MMB) most recent Budget Reserve Report, an annual projection of how much the state needs in savings to adequately prepare for the next downturn in the business cycle.

Similar to the way a family might have a savings account for emergency expenses or to weather a job loss, Minnesota keeps a budget reserve so that when a recession hits, the state can continue to serve Minnesotans’ needs. Because the need for public services often increases during a recession, a reserve is especially important to avoid drastic cuts to health care and other services that Minnesotans turn to when times are tough.

By evaluating the state’s current revenue system, MMB regularly produces a budget reserve recommendation designed to prepare the state to absorb the shock of most future economic downturns.

Building and maintaining a healthy level of reserves are also indications of sound fiscal management that can help the state earn a stronger bond rating. Similar to having a good credit score, a strong bond rating allows Minnesota to borrow funds to build roads, bridges and other infrastructure at a lower cost.

For FY 2016-17, MMB recommends a target of 4.8 percent of general tax revenues, or $2.0 billion. Currently, the state has $994 million in the reserve, or under half of the recommended target.

We’re making progress with sound policy decisions. In the 2014 Legislative Session, policymakers took a step toward strengthening the state’s long-term fiscal health by requiring that up to one-third of any projected surplus in the yearly November Economic Forecast automatically go to the state’s budget reserve until it reaches the MMB target.

Last session, policymakers left $865 million unallocated from the state’s projected surplus. Combined with good news of higher than expected revenues in the July and October economic updates, this indicates that Minnesota will likely have another strong surplus in the upcoming November Forecast. That’ll bring us closer to ensuring that Minnesota has enough resources to weather the next bout of tough economic times.

-Clark Biegler

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Minnesota starts budget year with good news

Minnesota is starting the current budget year stronger than expected, according to Minnesota Management & Budget (MMB).

MMB’s October Revenue and Economic Update finds that state revenues have come in above expectations. The state’s 2016 fiscal year began on July 1, and revenues from July to September came in $136 million, or 3.2 percent, higher than projected in the February Forecast. About 20 percent of these better than expected revenues are likely due to timing of income tax payments rather than an improved economy, so we shouldn’t expect revenues to consistently exceed projections by this wide margin.

The national economy continues to improve, but the Update highlights concerns. The good news is that unemployment continues to decline, and low gas prices are giving people extra spending money. However, wage growth has remained low, several factors have had a negative effect on U.S. manufacturing this summer, and U.S. job growth has unexpectedly declined in the past two months. National economic growth for 2015 is expected to be 2.5 percent, which is lower than projected in February. But looking ahead to 2016 and 2017, the economy is expected to pick up, growing annually by 2.9 and 3.0 percent, respectively.

The economic forecasters are fairly confident in their projections, and assign a 65 percent probability to their baseline economic forecast. They give a 20 percent chance for a more pessimistic scenario in which global markets decline; and a 15 percent chance that the economy will be stronger than the baseline prediction, due to better than anticipated productivity, household formation and foreign growth early next year.

The 2015 Legislative Session ended in June with $865 million of the state’s projected $1.9 billion FY 2016-17 surplus unspent. The next update on that available balance, taking into account both revenues and expenditures, will come out in the state’s November economic forecast. The current trend of higher than expected revenues indicates that the available balance will likely grow. However, predictions of slower economic growth could dampen the projected balance.

Up to one-third of any positive balance for FY 2016-17 measured in the November Forecast will go into the state’s budget reserve, further building up the state’s “rainy day fund” so that the state will be better prepared to meet the needs of Minnesotans during the next economic downturn.

Due to the late start to the 2016 Legislative Session, policymakers will also have the numbers from the February 2016 Forecast when they convene. At this point, it looks like policymakers will have a surplus to work with, and 2016 will present another opportunity to invest in the strong workforce and ladders into the middle class that are essential for more Minnesotans to participate in the economic recovery.

-Clark Biegler

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Economic recovery is not reaching all Minnesotans

Despite a rise in productivity in the U.S. economy, we aren’t seeing much growth in wages. In fact, many Minnesota workers don’t earn enough to support a family. We sort through the data in our latest report, For Many, Hard Work is Not Enough: The State of Working Minnesota 2015.

Even six years into the economic recovery, too many Minnesotans are struggling to support themselves and their families. Minnesota workers are earning about the same as they did 15 years ago, after adjusting for inflation. That’s despite economic growth that could have fueled wage gains, since national productivity has increased by 21.6 percent since 2000.SWM wage percentiles-01

Over a longer time span, the benefits of economic growth have gone largely to those with the highest incomes. High-wage workers saw their earnings grow by 21.3 percent since 1979, in inflation-adjusted terms, while low-wage workers’ wages only grew by 5.4 percent. This has contributed to worsening wage inequality in Minnesota.

Stagnant wages have not kept up with the cost of living, and many Minnesota workers are not earning enough to support a family. A typical Minnesota family of three needs to earn $16.34 an hour to meet their basic needs, but there aren’t enough good jobs that pay these wages. More than half of Minnesota workers without a college degree made less than this wage.

As we were reminded last week, people of color in Minnesota have not had access to the same opportunities as white Minnesotans. These Minnesotans are more likely to be unemployed or underemployed, and earn less. With Minnesota’s tightening labor market and a labor shortage on the horizon, we need to tap into the skills and abilities of this important and growing part of our workforce.

More workers will benefit from the economic growth they help create if we have public policies that strengthen job quality, ensure Minnesotans can get the education and training they need and can get good jobs, and help low-wage workers make ends meet and move into the middle class.

We can take specific steps, including:

Stagnant wages and growing income inequality threaten our state’s economic success. Making hard work pay off and broadly sharing the benefits of economic growth are critical to ensuring a strong future for all of us.

-Clark Biegler

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Let’s make sure successful tax credits reach all struggling workers

Only one group of American workers is pushed deeper into poverty by the federal tax code: 7 million childless workers, including noncustodial parents, with low-wage jobs. Fortunately, strengthening an existing policy would improve this situation. The federal Earned Income Tax Credit (EITC) is enormously successful at lifting millions of working families out of poverty, but it doesn’t do much for childless workers. It’s important to note that many of these workers are only “childless” when calculating their EITC. They may be partially responsible for children but can’t consider them dependents for the EITC. It’s time for policymakers to improve the EITC so that they reach these struggling workers.

The EITC for childless workers has three problems. First, workers become ineligible even while still earning very low wages. Second, the size of the credit for childless workers is too small, and not enough to keep these workers above the poverty line. Third, the credit is unavailable to childless workers under age 25.

For example, a personal care assistant working about 30 hours per week at Minnesota’s minimum wage will earn about $14,500, barely above the federal poverty line. They would owe about $1,500 in federal payroll and income taxes, but would only get a $23 tax credit through the EITC. If that worker is under 25, they would get nothing at all.

Both President Barack Obama and Representative Paul Ryan, the Republican Chair of the House Committee on Ways and Means, have proposals to improve the EITC for childless workers. Their plans raise the income at which workers can qualify, increase the credit amount, and lower the age limit to 21. The aforementioned personal care assistant earning $14,500 in 2015 would see their EITC increase from $23 to $544.

Boosting the federal EITC would mean more workers can put food in their fridges and gas in their cars. In Minnesota, a single working-age adult needs to earn $11.71 to meet their basic needs for food, housing, transportation, health care and other necessary expenses. That’s higher than our $9.00 state minimum wage. A stronger EITC could go a long way towards filling the hole between a worker’s low wages and what they need to make ends meet.

American workers living paycheck to paycheck shouldn’t be made worse off by the federal tax code. Improving the EITC would fix this glaring flaw and expand the benefits of a bipartisan, proven solution to some of those who need it the most.

You can show your organization’s support for a stronger EITC by joining a sign-on letter to Minnesota’s U.S. Senators. Visit our website to learn more, and sign on by September 28.

-Ben Horowitz

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Act now so critical, pro-work tax provisions don’t expire

Join us in calling on Congress to preserve federal tax credits that boost family income, support children’s development and lift millions of Americans out of poverty.

More than 240,000 Minnesota workers would lose out if Congress allows key parts of the federal Child Tax Credit and Earned Income Tax Credit (EITC) to expire.

In coming months, Congress is likely to consider extending several business tax provisions. They should make working families a top priority in any tax legislation by making key provisions of the EITC and Child Tax Credit permanent. Congress should also expand the EITC for childless workers and noncustodial parents working at low wages, the only groups who are taxed deeper into poverty by the federal tax code.

Demonstrate your organization’s support for these credits by signing on to a letter to Minnesota’s U.S. Senators Amy Klobuchar and Al Franken by Monday, September 28.

-Ben Horowitz

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More from the Census: Minnesota’s high income persists, but so does our unequal distribution of opportunity

Today’s Census update tells us a familiar story: Minnesota incomes are strong compared to much of the rest of the nation, but that isn’t the case for communities of color. The news is particularly troubling for black Minnesotans, whose incomes are more than 20 percent lower than before the Great Recession hit. The data are a clear call to action for policymakers, who should do more to ensure that the benefits of the economic recovery reaches all Minnesotans.

Minnesota’s poverty rate in 2014 was 11.5 percent, essentially unchanged from last year. The higher poverty rate for children also stayed flat at 14.9 percent. To put that in perspective, $24,250 is the current poverty line for a family of four.

The median household income in Minnesota was about $61,500 in 2014, showing no significant change from 2013. Minnesota’s median income puts us in 11th place among the 50 states and Washington, DC.

The most astonishing piece of data is that black Minnesotans’ incomes have decreased by an inflation-adjusted $7,700 since 2007, a drop of more than 20 percent. That includes a $4,500 drop from 2013 to 2014 alone.

In addition, the poverty rate for black Minnesotans has increased by nearly five percentage points. The poverty rate remains significantly higher for people of color in Minnesota. This is even true for Asian Minnesotans, who as a group have a relatively high median household income.

MN chart

As we discussed yesterday, policy choices can lift families out of poverty. And they are particularly important during a time of slow wage growth — especially when many current and recent policies have served as barriers for people of color.

Last year, state policymakers took a step toward all Minnesotans participating in the state’s economic success when they raised the minimum wage, a change that doesn’t show up in today’s data. Other data tell us that the states with minimum wage increases saw greater growth in pay for the lowest-wage workers, and people of color are one group that is highly likely to see a boost in income from a higher minimum wage.

There are other ways to make economic opportunity available to all Minnesota workers. More than a million Minnesota workers — and nearly half of black workers and 60 percent of Hispanic workers — do not have earned sick leave. Legislation could make Minnesota a place where working parents are not forced to choose between losing wages (or getting fired) when illness strikes their family.

The state should continue to invest in MinnesotaCare and Medical Assistance. These often represent a hard-working family’s only affordable option for health coverage, particularly in communities of color. Policymakers can also eliminate the barriers to driver’s licenses, helping Minnesotans get safely to work regardless of their immigration status.

Policies like these will more firmly plant the ladder to the middle class in every corner of Minnesota. They can take us to a future where Census updates will tell a different story — one where poverty is declining and incomes are rising for all Minnesotans.

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