News Day – January 28: Tim the Ripper, MN Job Watch, Home price puzzle

Tim the Ripper As expected, Governor Tim Pawlenty’s budget announcement slashed spending for health, education and welfare while offering tax breaks to businesses and leaning heavily on income he hopes will come from the federal economic stimulus. MPR’s Bob Collins offers the best shorthand list of who will suffer under the budget cuts. People who need health care, for a start: reduced eligibility for Medical Assistance would knock off many current recipients, hospitals and long-term care reimbursement will drop; many mentally-ill adults will lose MinnesotaCare. Local control also suffers as T-Paw abandons traditional conservative commitments to local control, eliminating 87 county human services programs and replacing them with 15 regional bodies. The list goes on and so does the excellent MPR coverage, with a general analysis here and a description of cuts in local government aid to cities and counties here. An analysis of health and human services budgeting says that while the proposed budget increases expenditures by 10 percent, expenses are projected to increase by 22 percent, meaning that “cuts to services are inevitable.”

Under the governor’s plan 84,000 adults will lose their state-subsidized health coverage. These people are primarily enrolled in MinnesotaCare. The governor also cuts millions of dollars in payments to hospitals and long-term care providers and eliminates dental coverage for all but pregnant women and children.

Long-term care providers, hospitals, and nursing homes also take substantial hits under the proposed budget. (And a little shameless self-promotion: TC Daily Planet has a roundup of Minnesotans weighing on the budget.)

MN Job Watch Target is cutting 1500 jobs, and Best Buy is also planning cuts, reports the PiPress. Both are national chains headquartered in the Twin Cities. That means cutting deep here at home, as 1000 of Target’s cuts (600 layoffs and 400 vacant positions eliminated) fall in the Twin Cities, with 500 more jobs eliminated in closing an Arkansas distribution center. Best Buy has already gotten 500 workers at its Richfield HQ to agree to buyouts, but says that’s not enough, and an as-yet-unannounced number of layoffs will come on February 19.

“The steady stream of layoff notices leaves everyone else beginning to wonder if their firm isn’t the next to lay off more people and that causes consumers to pull back on their spending even more and save a little more in case that comes,” said Minnesota state economist Tom Stinson.

“This is all part of the vicious self-reinforcement cycle that causes recessions to spiral downward for a while.”

According to one laid-off employee quoted by MPR, most of Target’s cuts are coming in finance, property development and information technology departments, and they include workers who had been with Target for more than 20 years.

Price-point puzzle for homeowners Twin Cities home prices dropped 16 percent in November 2008, compared to 2007, according to a national study cited in the PiPress. But wait a minute — a number of Minneapolis homeowners report that their assessed valuations are showing no decline in home prices, with a few saying their assessed valuation has even risen, unrealistically in their opinions. What’s up? What’s down? Why? Only the assessor can say for sure.

Getting back to hard numbers, the best way to spin the TC home price drop, says the PiPress, is that home prices dropped only 2.1 percent from October, which is less than the 3.3 percent September to October decline. Overall, however, prices remain low. The Minneapolis Area Association of Realtors says that there were fewer “lender mediated” (read foreclosed or near foreclosure) homes on the market in the final quarter of 2008. The drop is small — there were still more than 8,000 homes on the list on January 1, and seems to be focused on the hardest-hit central city areas while more prosperous city neighborhoods and suburban areas show growth in foreclosed properties.

Adding injury to insult Despite recent subzero temps, which many of us associate not only with frostbite but also with crisp, clean air, the MPCA advises that the southern two-thirds of the state is under an air pollution health advisory through Thursday.

About that economic stimulus Congressional Republicans continue to push for tax cuts rather than spending. The president’s plan allocates a lot of money to tax cuts, but, notes the NYT, the plan would “shower the nation’s school districts, child care centers and university campuses with $150 billion in new federal spending, a vast two-year investment that would more than double the Department of Education’s current budget,” and “amount to the largest increase in federal aid since Washington began to spend significantly on education after World War II.” The federal aid comes as state and local government funding for education is decreasing, and includes $20 billion for school renovation and modernization as well as increasing spending on Pell Grants to $27 billion from about $19 billion this year.