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participants' responses to this interview.
Gillaspy, Minnesota State Demographer
Civic Caucus, 8301
Creekside Circle #920, Bloomington, MN 55437
January 28, 2011
Bob White, Ted Kolderie, Paul Gilje, Dan Loritz, Tim McDonald, Sallie
Kemper, Verne Johnson; by phone: Dave Broden, Wayne Popham.
Summary of meeting:
State demographer Tom Gillaspy shares insights on the state budget
situation based on his three decades of government work and his
perspective as an economic demographer. The state needs structural reform,
he argues, in order to adjust to structural deficits that persist under
the present framework. Even as we work our way out of the recession,
Minnesota will continue to lose its capacity to provide services at
present levels. He argues that Minnesota leaders should first develop a
common vision for the state’s future, a common understanding of our goals
which lawmakers and the governor could then use in assessing proposed
strategies for reform.
Welcome and introductions
Tom Gillaspy has served as the
Minnesota State Demographer since 1979. The post of State Demographer
resides within the Minnesota Department of Administration.
Prior to moving to Minnesota, Tom held the position of demographer at the
Andrus Gerontology Center, University of Southern California. He received
his Ph.D. in economics from the Pennsylvania State University,
specializing in economic demography. He also holds a Masters Degree in
Comments and discussion
The budget deficit requires structural changes
The Great Recession
has caused four years of foregone revenue growth that we will not make up
and the Baby Boom Generation has begun to turn 65. Retirements will soon
increase sharply, long-run economic and income growth will slow,
government revenue growth will slow even more, but pressures on spending,
especially for health care, will increase. The structural deficit in the
budget is driven in large part by changing demographics. Year over year
expenses are projected to outpace income to the state for at least the
next 25 years. These are long term problems that will only get worse
unless we change the way things are done.
We must both invest and meet our moral obligations
There is spending, in
general, Gillaspy said, and then there is investment. Investments are
expenditures that result in increased revenue capacity over the long term.
Physical infrastructure, education, research, and intellectual property
development would be included in this definition.
And we have moral
commitments to spend. Keeping people in long term care facilities is not
an investment since there is no financial return, but it is a moral
obligation that we accept. The distinction to keep in mind is that while
we may rightfully choose to spend to meet our moral obligations, it is our
investment outlays that will increase future economic output.
Elder care spending, both for investment and to meet moral obligations,
will be costly.
It is important to
understand that many aging people with productive capacity can remain
active and contribute. An investment of time in organizing senior tutors
for children in writing and arithmetic would have returns for the
students, the elders (by keeping them active), and the community. But much
spending we do for the care of the elderly will not result in future
economic output. We need to recognize that while some aging people will
continue to contribute significantly, others will be more dependent upon
state services and thus net consumers of state funds.
One of the most
rapidly growing components of the state budget is the combined expense of
long-term care, long-term care waivers, and care for the elderly. Through
the long-term care waiver program we have kept people out of nursing homes
by providing in-home care services, but that in-home care is still very
expensive. It is a major reason why all states have structural deficit
problems. Resources are not growing as fast as demands for service. And
if we cut back on investments to meet our moral obligations, then we
diminish our future capacity for economic output. “It is the equivalent of
eating your seed corn, “ one participant noted. The challenge is so great
that in 25 years growth in health care costs will eat up all available
growth in spending statewide.
To elected officials: There are options beyond cutting and taxing
During the campaign
the media focused debate on only two options, but really there are three:
revenues (not only by tax increases, but also with investment that
produces increased revenues)
public sector productivity.
This third option
received little attention, perhaps because it was confused with the simple
solution of “cutting expenditures.” In fact, most of future productivity
increases will occur by both doing things better (e.g., reducing
the criminal recidivism rate; increasing high school graduation rate;
increasing education quality) and doing better things (promoting
activities that improve health outcomes; keeping people healthy by helping
them be active and productive in the community). Increased productivity
will result whenever we take advantage of opportunities to improve
outcomes at a lower cost.
There is a rare 2-4 year window for structural change
that in his 32 years in government, he has not before seen such an
opportune environment for change as exists in St. Paul today. “I think we
have a 2-4 year window where major systemic change will be possible before
the culture will return to incrementalism,” he said. “This is the first
time I’ve seen this sort of confluence of events, from the economic crisis
(which could have been much worse) to the structural imbalance of services
to the shifting political sands.
We have done little to prepare for this day
“I remember visiting
with Senator Durenburger 30 years ago about this same problem of mounting
demand for state services, and writing a report on it to Governor Carlson
15 years ago. It is frustrating that we’ve done basically nothing to
prepare for this day.” We have known all along that “boomers” would
eventually start now to retire in great numbers, but we have failed to get
ready for the demands we knew were coming.
“Politics is focused
on the short term and these were always issues that were in the distant
future and could be safely put off. The long term has now become the short
term. We’ve been driving down the road at night at 60 miles an hour and
have seen a deer in the middle of the road, but instead of stepping on the
breaks we’ve continued on just hoping that it might not really be there,
or that it would move out of the way. “But now we have hit the
deer. This will not go away.”
He described a sense
of urgency in this discussion. “We’ve been talking about this for a long
time. We could have done gradual things if we had begun 20 years ago, but
we don’t have time for gradual measures now. In times of great social
stress and great social change such as during the Great Depression, the
number of disruptive events and disruptive innovations increases very
sharply. We are facing just such a period now.
Our years of
accomplishment have created for Minnesota what Gillaspy termed the
potential for the ‘tyranny of success.’ Minnesota has been, by all
measures, a very successful state. One of the signs that the tyranny of
success might be afflicting us is smugness. “I think we’ve been a little
bit smug, but now we need to realize that we need to bring about some
serious change. We are in the midst of a big storm, and we all need to
work together or the ship will be lost. We need to have a vision, a
common idea of what we want our state to be in the future, in order to
determine what we must change to get there. It will take leadership to
develop that vision.”
Distinguish among problems, goals, and strategy
“We share your concern
and frustration”, a participant said. The Caucus has been thinking about
the fact that the state has some clearly defined problems (e.g., the
achievement gap, long term care), and also some well-established goals.
The frustration comes from not getting to the real issue of “how?” How do
we solve the problem to reach the goal? “You’re absolutely right—the
forecasts you put out in the past decades were entirely accurate. Can you
talk at all about the process for developing alternatives?”
Gillaspy replied that
state leaders should soon develop a plan for Minnesota.
“The first step is a
serious, honest self-appraisal—an unvarnished view of our strengths,
weaknesses, opportunities and threats.
“Then we should bring
together a group of people, put them in a room, and have them come up with
a vision for what the state should be.”
expressed concern that inevitably conflicts of vision create paralysis. If
you start with the problems you may have a better chance of making
“You need to have a
vision first,” Gillaspy replied, “so that it informs both strategy and
tactics.” The vision is the determination of which “war” to fight; the
strategy determines which battles we should take on; the tactics tell us
how we are going to go about it.
“The experience of
GE—the only original Dow-Jones Index company still around—illustrates the
importance of having a vision. Every couple of decades GE starts with a
very firm vision of where they are going, and then after some decades that
vision begins to fade. As it fades, they begin losing their competitive
advantage. But they have always had the foresight to come back, refocus
on a new vision and successfully reinvent the company.”
A participant observed
that up until WWII Minnesota was very locally focused. Then very rapidly
in the 60’s and 70’s we became more nationally oriented, and later,
globally or internationally focused. “The companies that used to be
focused locally are not now—sometimes staff are told explicitly not to be.
The Business Partnership has members whose CEO’s are not even physically
located here so certainly they are not focused on the state. This triggers
the challenge: Why would you work here and be headquartered here if you’re
doing business globally? I would try to create a vision related to that
Develop a vision, now
Gillaspy told a story
about Minnesota developing its vision for medical device companies.
“In the years when I
first came here we were the global center for mainframe computers, then in
a matter of months it collapsed. Then iron mining, long a major industry
here, failed as we endured a major economic collapse.
“There was a man by
the name of Lee Berlin who came into Governor Perpich’s office mumbling
something about ‘medical alley.’ Lee had a whole new way of thinking about
things—said we had all these medical and technical products that were
related but not showing up due to the way the data was organized. We
statistical types couldn’t even see it. But these companies had developed
here because earlier we had made a major push in education.
“We discovered what
the British discovered in the age of their empire. It doesn’t matter
fundamentally how much gold you have, or how many debt notes you amass;
it’s the quality of your workforce and productivity that is core to your
Recommendation: six steps for developing a state vision
Gillaspy proposed six
major steps to develop an integrated, long-range strategic plan for the
Step 1 SWOT analysis:
Bring together a broadly representative group to develop a self-critical,
in-depth analysis of Minnesota’s strengths and weaknesses
along with the opportunities and threats facing the state
over the next 20 or more years.
Step 2 Vision statement:
Using this same group, develop a vision statement for Minnesota based on
the analysis and discussion of the SWOT analysis. Some examples might
include Minnesota as the Value State; the Quality State; the Low-Cost
State; the Productivity State; the State that Works.
Step 3 Apply vision to state government:
State government leaders, including the governor and key legislative
leaders, adapt the vision for Minnesota to a vision for state government
in Minnesota, to identify specific overarching strategic directions, and
to specify the process and timing by which each department within state
government identifies its vision, mission, strategic goals and tactics for
Step 4 Align state government initiatives with vision:
Direct each department to develop its own vision, mission, strategic
goals, tactics, and measures of progress.
Step 5 Measure progress toward vision:
evaluate progress toward achieving the overall vision and perceived
Step 6 Revisit vision and goals:
review the vision and strategic goals based on an audit. Incorporate the
views of new participants in state government as they are elected and
emerge as leaders.
The Civic Caucus is
now developing a distinction, within the concept of “redesign,” between
the notions of improvement and innovation. Gillaspy has described the
importance of agreeing on a common vision before attempting fundamental
reform. At the same time, there are elected officials meeting every day on
Capitol Hill struggling to resolve a budget crisis by tinkering around the
edges of an obsolete model of state financing. It is there we need to
direct a constructive message built around these ideas.
It will be helpful to
think about Gillaspy’s comments at next Friday’s internal discussion,
where the caucus’s 2011 work plan will be discussed.
The chair closed with
the comment: “I’ve never seen in 30 years the level of activity and
interest in this issue by leaders of so many different organizations as
there is now.” There is real opportunity for a collaborative effort.
Thanks to Tom Gillaspy
for taking the time to visit with the Caucus on this important topic.