Minnesota has long been a pioneer in the field of social services, having invented, nearly a century ago, the concept of workers' compensation. Since then, Minnesota has been the birthplace of the first managed care program, as well as the first state-subsidized children's health insurance system. In recent years, the state's welfare reform experiments have been among the most successful in the nation, helping people move not only off the rolls but into work and out of poverty at rates no other state can top.

The state's vaunted reputation, though, is suddenly on the line. Minnesota, like practically every other state, has had to cut way back in the area of human services. Last year, the state faced a $4.2 billion shortfall--on a per-capita basis, one of the worst in the nation--and, with no appetite for tax increases, serious cuts were inevitable. This year, a much smaller shortfall has nevertheless led to legislative proposals that include slicing the size of the staff at the state Department of Human Services in half. "That was the best of a bunch of bad choices," says Linda Berglin, chair of the Minnesota Senate subcommittee on the health and human services budget.

But the state's squeeze on child care, health programs and welfare did not stem solely from the need to weather a bad budget year or two. The types of cuts that Governor Tim Pawlenty and the legislature in St. Paul are making represent not just dollar savings but a new policy course as well.

Major cuts in assisting the needy are hardly unique to Minnesota, of course. Throw a dart at a map of the United States and you're likely to hit a state that has made adjustments that are, if anything, even more severe. Every state has reduced Medicaid payment rates to providers, with most states toughening up eligibility requirements as well. In Oregon, where voters in February rejected a temporary income tax increase meant to preserve existing services, 45,000 fewer people are now enrolled in a state-run health insurance program. In Texas, the state has knocked about 17,000 people off of its Medicaid rolls and 130,000 kids from its children's health insurance program. The Lone Star State also has slashed spending on programs offering temporary assistance, such as its medically needy program.

While you might expect belt-tightening in a place such as Texas, if they're cutting in Minnesota, you know times have changed. During previous recessions, Minnesota raised taxes in order to fund increases in social services--even though Republican governors presided over the state at the time. Those days are over, however. A new generation of political leaders in Minnesota believes that the state can no longer afford to be as generous as it once was. As a result, afterschool programs are shutting down, class sizes are getting bigger, domestic abuse prevention projects are receiving fewer dollars and libraries are closing. It's now harder for people to get into the state's social service programs and to stay in them.

The billion-dollar reduction in the state's social service budget is emblematic of an overall shift in the state's political culture to a more conservative course. "There are some things we would have done regardless of the budget situation," says Kevin Goodno, commissioner of the Minnesota Department of Human Services. "We as a state have to come to grips with what level of services are we willing to pay for. The message from the last election is that people don't want to pay higher taxes."

SUCCESSFUL EXPERIMENTS

Minnesota remains, even after the budget tightening, one of the most generous states in terms of providing human services. Some of the program cuts sound severe--until you realize that many of the reductions were in programs that other states don't even offer. "When we have tight budget problems, I think it's fair that we look at protecting our most vulnerable people," such as children, the disabled and the "frail elderly," Goodno says. That certainly makes sense, but what critics of Pawlenty's administration charge is that he proposed short-sighted cuts to programs that helped people to overcome their vulnerabilities.

It's traditionally been the case, says Jim Mulder, executive director of the Minnesota Association of Counties, that "if you're at the margin and you needed a little bit of help, you could get that help. Now that's gone, and that's what's tragic."

Some of the biggest shifts of this kind have come in the area of welfare. During the late 1990s, most states responded to federal welfare law changes by imposing stiff penalties and time limits on recipients. Connecticut, for example, takes away 100 percent of a family's cash assistance if members are caught breaking welfare rules three times. That state, along with others such as Florida, also cut employable recipients off of welfare in less time than the new federal five-year limit. The story in Minnesota was different. Minnesota was willing to spend more money on welfare if it meant getting people into work and out of poverty.

In 1986, Republican legislators proposed cutting welfare spending by a third, which led to a budget stalemate. The problem, as is so often the case, was punted to a commission that, much to everyone's surprise, actually came to agreement over new work requirements, coupled with increased health insurance, child care and a set of anti- poverty provisions.

In time, the commission's ideas provided the basis for a new statewide welfare system called the Minnesota Family Investment Program. At root, the idea was to offer recipients help to keep them working. Minnesota was hardly unique among states in offering such forms of assistance as help with child care payments and job and housing searches. But Minnesota's benefit package was more comprehensive than any other state's.

The results were better than anyone had hoped for. A 2000 survey by the state Department of Human Services found that 60 percent of both new applicants and long-term recipients were working and many quickly left the program entirely. Both old and new recipients were relying on public assistance for less than a fifth of their income, with new applicants doubling their income after entering the program. The system wasn't perfect, and the state's welfare rolls didn't drop as precipitously as in some other states, notably neighboring Wisconsin. Still, because of its success, the Minnesota Family Investment Program--MFIP--became a much-studied model.

Today, many of MFIP's most important elements remain intact, but the program is less generous than it was even a year ago, and it's harder for recipients to put the package together in a way that translates into greater self-sufficiency. Pawlenty reduced cash benefits for most families (and imposed a "family cap," meaning benefits won't increase with the birth of more children), introduced tougher application requirements and allowed counties to impose 100 percent sanctions on cash benefits to families that cheat. He imposed new requirements that every welfare recipient receive immediate job counseling, but his cuts have led to layoffs for counselors who gave intensive counseling to chronic cases. "I have seen clients turn to crime in desperate situations," says Sarah Glover, lead employment counselor with a program for MFIP recipients who have long struggled to find work, run by Lutheran Social Service under a contract with Hennepin County. Glover's program will be on the chopping block come the end of June.

Cuts in MFIP were coupled with reductions tied to other programs that the state's welfare recipients count on. Those living in Section 8 housing, for example, have had their cash assistance slashed by $50 a month, with cuts of up to $200 a month currently under debate. MFIP families in which a member receives Supplemental Security Income payments are also seeing their welfare checks reduced by $125 a month. Goodno argues that the reduced benefits simply make things more equitable, with welfare families on SSI still receiving a bigger overall package of cash and food benefits than plain-vanilla welfare recipients.

But advocates maintain that what the administration has done is to make a hard road that much steeper. Their biggest complaint is about reductions in child care assistance--the form of help, they argue, that does more than any other to make it possible for welfare recipients to land and stay in jobs. Child care expenditures have skyrocketed in Minnesota, as in most other states, as part of the overall shift in the focus of welfare programs away from simple cash assistance. States have been able to use federal dollars to maintain child care programs more generously than they expected during the current downturn, but the amount of help they're able to provide is nonetheless declining.

To Goodno, it made no sense, since there was never enough money to go around even under Minnesota's old system, that a family making 250 percent of the poverty level could receive child care assistance while a family at 150 percent of poverty stayed on a waiting list. Changing the eligibility requirements, he says, directs scarce dollars to where they are needed the most. Still, 250 percent of poverty is not a ton of money and, given the high cost of child care--it can run as high as tuition at a good private school--some people are slipping from the workforce and into welfare.

State officials say they haven't seen any correlation between working adults losing child care help and having to go on welfare. But Linda Koblick, a Hennepin County commissioner, says that is the trend she has been seeing since the state cuts began to take effect. Minnesota is one of about a dozen states where health and human service programs are administered by counties and, Koblick charges, Minnesota is making its counties do the dirty work of implementing the hardest cuts. The state, for instance, folded 17 different programs, including child care assistance, into a single block grant--for which overall funding was then slashed by 18 percent. Counties were left to make the specific decisions as to which programs to trim and by how much. "We were the ones who had to say 'no' to people who used to come here and get those allocations," Koblick says.

Minnesota not only passed cuts on to counties, but imposed new costs on them as well--requiring counties to pick up part of the cost of underwriting people in local nursing homes, for instance. On top of that, the state substantially reduced direct aid to localities. The state didn't expect counties to make up the difference in spending with their own property tax dollars, as has been the case in many states. Instead, the state imposed limits on county levy increases, effectively tying their hands. "The administration really used the budget deficit to promote an ideology of less government," says Susan Haigh, a Ramsey County [St. Paul] commissioner.

A NEW DAY

The people who promoted that ideology--the governor and House Republicans, primarily--do not deny that the changes they made were often fueled not by a need to make the numbers add up but by a desire to change policy. They think the tougher work requirements they imposed on the welfare program, for example, were a smart move regardless of the budgetary effect. Whether or not the policy changes were a good idea, Haigh is correct in suggesting there's a new ideological sheriff in town.

Minnesota's longstanding commitment to social services was based on a number of factors, not least of which was the understanding, which grew out of agricultural disasters such as the grasshopper plague of 1877 and the Great Depression, that the state had a role to play in picking up part of the burden when individuals suffered. Minnesota regularly produced nationally known liberal Democrats such as Hubert Humphrey, Walter Mondale and Paul Wellstone, but the postwar growth in state social programs was the product of bipartisan support and rose out of a political culture rooted in a Scandinavian sense of the shared "common good." Minnesota used to be famous for its Five Percent Club: businesses that donated 5 percent of their pretax profits to community programs. Minnesota has one of the highest percentages of native-born residents of any state and that has fostered a philosophy of long-term investment. People knew they would live in Minnesota for the rest of their lives--as would their children and grandchildren.

But the state, of course, is changing. The once-homogenous culture has attracted thousands of Hmong refugees and the largest population of Somalis outside of Africa. Perhaps more important, there are major demographic shifts within the white majority as well, notably a big shift in population to the outer suburbs of the Twin Cities. The suburbs have taken a dominant position within the legislature, which was reflected in the post-2000 redistricting. Thirty percent of the members of the legislature were newly elected in 2003, as was Governor Pawlenty himself. (Republicans control the House and governorship, while Democrats hold the Senate.) "We're a couple of generations away from the Great Depression now and psychologically that has caused a lot of public moods to change," says William Lass, author of a standard history of Minnesota. "You see this with Pawlenty and his supporters--these are not people who have experienced poverty first- hand."

Pawlenty was born in 1960--long after the Depression's end--and the suburban constituency of his old legislative district is safely removed from the major effects of his cuts. Pawlenty seized the political high ground early on, arguing that the state could not afford to raise taxes to erase its shortfall, especially since new governors in neighboring states, including Democrats such as Jim Doyle of Wisconsin, were pledging to hold the line. That set up a debate in St. Paul about how much was going to get cut, not whether there should be cuts at all. "People really did understand we're living in a different time," says Monty Martin, director of human services for Ramsey County.

The increasingly suburbanized legislature, which largely went along with Pawlenty's proposals, restored some of the governor's suggested reductions in the areas of education and care for the elderly and developmentally disabled. That meant bigger cuts in programs such as child care, but the move to "protect priorities" gave legislators cover against the charge of being hard-hearted and helped shield suburban voters from feeling the effects of the budget directly. "They set it up very cleverly," says Senator Berglin. "If you're not affected, that awareness has tended to fade away."

IN SLOW MOTION

In many states, the bad news on program retractions arrived all in one blow. In Washington State, for example, it was immediately clear when the budget passed last year that 90,000 children and adults were going to be cut from state health insurance rolls. But in Minnesota, there has been no global accounting. Rather than simply cutting people off, the state made it harder for people to enroll in programs or to stay in them. And not only did the state shift the "dirty work" of implementing the new budget onto its 87 counties, balkanizing the effects, but it has rolled out many of its changes slowly, so that some of last year's cuts have yet to go into effect even as further reductions are being considered. While county officials tried to figure out the impact, the general public seemed more concerned about the decreasing quality of snow plowing. The debate as to whether that was the result of state budget cuts continued well into the spring.

In what may be the surest sign of the state's evolving political culture, there's been no backlash to the retrenchment in social services, which looks increasingly like a sea change in policy rather than stopgap measures meant to get the state through a tough year. "We're really focusing our money on survival and short-term needs," says Ramsey County's Martin. "We have a tradition in Minnesota of looking longer term, and we're losing that."

State House Speaker Steve Sviggum says he's skeptical about claims that spending on some programs--building up afterschool programs, say, in order to cut down on crime--actually saves dollars in the long run. "For 30 years, we've heard that if you spent X dollars in a prevention program, you'll save six or seven times that in the out years," he says. "We never can quantify that. I think it's a fair question to ask when we're gonna see savings. Our budgets continue to go up." In fact, as state budget director Jim Schowalter points out, state spending on health and human services is still set to grow by double-digit amounts in the coming budget biennium, meaning more cuts will be the order of the day.

Sviggum says that Minnesota is "very, very high tax and very, very high spend compared to other states. We're always going to be." The state can still afford to be more generous than most other states, but Sviggum says it can no longer afford to be as generous as it once was. But in the meantime, Sviggum derived great satisfaction in attending a trio of recent news conferences held by companies relocating to the state or expanding--none of which, he says, would have "if we had increased our tax burden."

So far, none of those jobs have landed in Ed Stone's lap. Stone, a client of Sarah Glover's at Lutheran Social Service in Minneapolis, knows that most of his problems were of his own making, the result of flirtations with crime and drugs. He dropped out of high school back in 1966 to take a job that paid $3.50 an hour--$140 a week was more than he could spend, he says. All these years later, he recognizes that he would be lucky to land work that paid much more than minimum wage. He's training at LSS to be a janitorial supervisor and receives welfare and subsidized housing but, with six kids at home, he's desperate to find a job before Glover's program ends. "I'm interested in just the basics--my next piece of bread, my next chicken," he says. "At the bottom, man, we're scratching around like rats fighting over a piece of cheese."