Business activity continues to improve in Ninth District

Business activity in the Ninth District is above average and has improved over the past three months, based on a recent poll of 105 business contacts from around the district (see methodology). Improvements were seen across many industry sectors.

 Fifty-five percent of responding Ninth District firms reported that current business activity is above average or well above average, while only 6 percent reported that activity is below average. More than half of respondents said that business conditions have improved over the previous three months, while only 14 percent reported slightly worsening conditions, and none reported that conditions have worsened greatly. Respondents in real estate, construction, professional services and financial services were the most positive about current business activity, while manufacturers were much more mixed in their reports.

When those surveyed were asked about retail sales in their community, 40 percent of the responding firms noted that retail spending has been increasing over the past three months. Only 12 percent reported that retail sales have decreased.

Construction also appears to be growing, as almost two-thirds of responding firms said that construction activity in their communities was above average or better, and only 8 percent reported below-average activity. More than three-quarters of respondents also indicated that conditions in the construction sector had improved over the past year, and respondents in the construction industry were even more upbeat.

Recent changes in the value of the dollar had no impact on sales or costs, according to 71 percent of respondents. The remainder was split evenly between those reporting a positive and negative influence on sales, though manufacturers as a whole reported more negative effects, and they expect this drag on sales to continue.

Methodology: On May 11, 2015, the Minneapolis Fed emailed a web-based survey to about 600 Beige Book contacts from around the Ninth District. By May 12, 105 contacts had filled out the survey. The respondents come from a variety of industries (see table).

Ad hoc -- 5-21-15

Repeat after me: Ninth District hospitals (again) ranked among the country’s best

The rising cost of health care, the implementation of the Affordable Care Act and other factors are putting increased attention on the quality of care. Recent analyses (see here and here) suggest that providers in the Ninth District are generally ahead of their national peers. Now a recent study by iVantage Health Analytics is piling on.

The firm’s Hospital Strength Index scored hospitals along nine measures, including cost, inpatient and outpatient shares, patient outcomes and perspectives, and financial strength. It looked at more than 4,300 U.S. hospitals, including 1,300 critical access hospitals, making it one of the largest and most comprehensive assessments of hospital performance in the country.

It found that hospitals in Ninth District states tend to be rated higher—in some cases, much higher—than their peers nationwide (see chart). In Wisconsin, for example, 40 percent of hospitals were given the top, Tier-1 rating, and 75 percent were in the top two tiers—better than all but three states. Every district state had a higher percentage of hospitals in the top three tiers compared with the national average.

Ninth District states are also home to almost 20 percent of critical access hospitals nationwide, which are small rural hospitals that receive special, cost-based reimbursements different from other hospitals. In a related ranking by iVantage, district states were home to 34 of the top 100 critical access hospitals.

For more analysis of health care issues in the Ninth District, watch for a forthcoming fedgazette article on ACA implementation in Ninth District states.

Hospital ratings iVantage -- 5-5-15

More recharging personal batteries at national parks

Even in the digital age—or maybe because of it—the great outdoors continues to be a tourism draw, as evidenced by growing visits to the country’s national parks, according to data from the National Park Service (NPS). And those visits are translating to the Ninth District economy.

Attendance has been trending upward at many parks, especially since the recession. Last year, attendance grew 6 percent among the 13 national parks in the Ninth District with annual attendance of at least 100,000, and is up almost 20 percent since 2008 (see Chart 1). In 2014, attendance at these district parks hit 9 million for the first time.

Among these large national parks in the district, two of them—Mount Rushmore in South Dakota and Glacier National in Montana—are responsible for half of all visitors. (The list does not include Yellowstone, portions of which are in Montana, but which lies mostly in Wyoming.) The biggest jump in attendance last year occurred at the Apostle Island National Park. Located in Lake Superior off the northern tip of Wisconsin, it saw attendance double to almost 300,000 in 2014 thanks to an impressive formation of ice caves on the island, coupled with a uniquely long viewing period.

Those visitors are spending money and creating jobs, according to a separate NPS database. Visitor spending hit nearly $1.2 billion last year, supporting more than 20,000 jobs (see Chart 2) in district states.

National parks

Ninth District hospitals ranked among best in the nation

When people are sick, they want the best health care. And despite what reputations might precede hospitals (or not), a recent and voluminous data release by the Centers for Medicare and Medicaid Services found that many of the top-rated hospitals—at least according to patients—are not on the coasts, but in the heart of the country and specifically in the Ninth District, according to a summary analysis of the rankings by Kaiser Health News.

South Dakota and Maine tied for the top spot in nationwide hospital rankings, with a 4.1 average rating for all hospitals. Wisconsin and Minnesota ranked in the top five states, while Montana also beat the national average of 3.3 stars. Only North Dakota, at 3.2, was below the national average among district states.

The ratings use a one-to-five star system based on 11 facets of patient experience, including communication with patients, how well patients believed their pain was addressed and whether they would recommend the hospital to others, according to Kaiser. Hospitals collected the reviews through random surveys of all adult patients after their care. Every rated hospital had at least 100 patient reviews, and most had 300 or more.

A breakdown of star ratings shows that six of 17 rated hospitals in South Dakota earned five stars; Wisconsin had more than 100 rated hospitals, and none received fewer than three stars. North Dakota, meanwhile, had no hospitals rated either one or five stars.

Hospital ratings -- 4-24-15

Is there a doctor in the house (who accepts my insurance)?

When you are sick, you sort of assume that you will be able to see a doctor. But according to a recent survey by the National Center for Health Statistics, not all doctors are accepting new patients. That’s especially the case if you are on Medicaid, the federal health program that serves the poor. The good news for the sick and injured is that doctors in the Ninth District are more willing and able to see new patients than doctors elsewhere.

The survey looked at access for new patients with three types of insurance coverage: private, Medicare and Medicaid (the survey did not ask about the uninsured). Overall, about 95 percent of office-based physicians across the country accepted some new patients.

But apparently not all patients are created equal, because access differed by type of insurance. Patients with both private insurance and Medicare had about an 85 percent chance of being able to find a doctor taking these types of new patients. But only 69 percent of doctors said they were accepting new patients on Medicaid, which typically reimburses doctors at a lower rate than other health insurance coverage.

But new-patient rates among doctors in the Ninth District were universally higher (see chart). Doctors in Minnesota accepted new patients at a rate of about 94 percent, regardless of insurance type. The Dakotas and Montana went completely against the trend; doctors in each of those states were more open to accepting new Medicaid patients than those with either private or Medicare insurance.

New patients -- 4-20-15

Minnesota foundations: Give ’til it hurts so good

Like the saying goes, it matters where you grow up. So it is with nonprofits in Minnesota, which benefit from generous giving from foundation and corporate grantmakers.

Corporate and foundation contributions make up a small portion of charitable giving (25 to 30 percent) and an even smaller portion of total nonprofit revenue. Still, corporate and foundation giving plays an important financial role for many nonprofits, and this giving often comes in big chunks critical for new or expanded services.

In that vein, Minnesota nonprofits are blessed with a large institutional giving sector, whose charitable contributions are considerably larger than those in neighboring district states, even on a per capita basis.

For example, in 2012 (the most recent year with comparable state data), Minnesota foundations gave roughly twice as much to charitable causes as the four other Ninth District states combined, according to the Foundation Center (see Chart 1). One of the reasons for this big gap has to do with foundation assets. For example, Wisconsin has almost 40 percent more in-state foundations than Minnesota, but only half the total assets ($8 billion vs. $16 billion), according to the Foundation Center.

Minnesota also has a number of very large corporations, with affiliated foundations, headquartered in the state. In 2013, the top 25 corporate foundations in Minnesota—which include the likes of Target, General Mills and Cargill—gifted $146 million to in-state organizations (see Chart 2), along with more than $500 million to non-Minnesota organizations, according to the Minnesota Council on Foundations.

For more discussion of charitable giving and other trends affecting nonprofits, look for the upcoming April issue of the fedgazette.

Foundations Ch1-2 -- 4-9-15

The waiting game: Wait times at VA health centers vary across Ninth District states

Going to the doctor is not always fun. But waiting for the doctor can be worse. Much attention has been paid to wait times for military veterans seeking care at Department of Veterans Affairs (VA) medical centers across the country, and data from the VA show that wait times vary significantly among VA health care systems in Ninth District states.

For example, the percentage of pending appointments that are scheduled more than 30 days after the preferred date runs as low as 1 percent (Fargo, N.D.) to 10 percent (Milwaukee, Wis.), according to VA data released this month for appointments through March 15, 2015. The likelihood of waiting also appears unrelated to volume; for example, the Minneapolis office, which had 73,000 pending appointments at 11 health centers across the state, has a lower average wait rate than Milwaukee, which has 58,000 appointments on the books at six facilities.

Field facilities within a specific VA district also vary considerably. For example, at Montana’s busiest VA facility (Fort Harrison), nearly 16 percent of appointments are scheduled more than 30 days past the preferred date, while the rate is 4.4 percent in Billings. But again, volume isn’t necessarily the culprit. The Iron Mountain district serves the Upper Peninsula of Michigan. Its busiest facility (in Iron Mountain) had a 30-day wait rate of 5.7 percent, while the Marquette facility—with one-quarter of the appointments—had a wait rate of 13.2 percent.

VA wait times -- 4-9-15

A bumper crop of storage

A bumper 2014 harvest combined with low prices has piled up crops at grain elevators and on farms in the district.

Last fall, growers in five district states (excluding Michigan’s Upper Peninsula) harvested about 4.4 billion bushels of corn, soybeans and wheat, according to government statistics. That was 3 percent more than the previous year and the largest harvest of those major district crops in the last five years. A decline in crop prices since 2013 induced many farmers to store their crops over the winter rather than ship them to market via rail or river barge.

The result was a cornucopia of stored crops; the U.S. Department of Agriculture estimated that December stocks of corn, soybeans and wheat increased 7 percent over 2013, pushing up crop storage (see Chart 1). Almost 3.5 billion bushels of crops—equal to about 80 percent of the 2014 harvest—was held at grain elevators, other commercial storage facilities or on the farm. (That amount included unprocessed crops left over from the 2013 harvest.)

Storage on farms -- 4-6-15 CH1-2

About 40 percent of crops were stored in Minnesota (see Chart 2), the top producer among district states of corn, the region’s biggest cash crop. And in every district state, a large share of crops was stored on farms in silos or bins. Over the past 15 years, farmers have invested substantially in on-farm storage to avoid paying for off-farm storage.

“Given the low prices, every square inch of on-farm storage was utilized this year,”’ said Bob Zelenka, executive director of the Minnesota Grain and Feed Association, which represents rural elevators and feed mills.

Regardless of crop prices, farmers are expected to ship large quantities of stored crops to market by the summer. This has raised concerns about renewed congestion on freight railroads, which transport the bulk of agricultural commodities in the district.

Railroad capacity in the district last year was strained by severe weather and rising freight volumes, including increased shipments of crude oil. For much more on railroad capacity in the district, see the upcoming April issue of the fedgazette.

Bakken showing impact of oil price drop

Employment data are picking up on the impact of lower oil prices on labor markets in the Bakken. The price for West Texas Intermediate dropped from $90 per barrel in the beginning of October to $50 in January, hovering around that price since then. During this time, the number of active drilling rigs in North Dakota and Montana decreased by more than 50 percent, dropping below 100 rigs at the end of March and leading to layoffs of oilfield workers.

These job losses seemed to impact overall employment, as levels decreased from 102,600 in December to 95,000 in January for the 12-county area that makes up the core area of the Bakken (see definition below). Seasonality affects employment data, as levels are higher during the summer months and lower in the winter (see Chart 1). However, during the previous two years, employment increased slightly from December to January.

As employment slowed, the unemployment rate for the region increased from 1.5 percent in December to 2.1 percent in January (see Chart 2). While the Bakken unemployment rate also increased from December to January during the previous two years, the rate increased faster during the most recent period. For the whole state of North Dakota, the unemployment rate increased to 2.9 percent in February, losing its status as the lowest unemployment rate in the nation to Nebraska, which posted a 2.7 percent rate.

Bakken update Ch1-2 -- 4-6-15

The number of online job postings in the Bakken area also decreased from December to January, but increased slightly from January to February (see Chart 3). The number of job openings still remains at a relatively high level in the region, despite layoffs in the oilfields. Companies from a variety of sectors continue to actively look for workers. But with the loosening in labor markets, employers in and around the Bakken have reported an increased number of applicants to choose from.

  Bakken update Ch3 -- 4-6-15

12-county Bakken area: North Dakota counties: Billings, Burke, Divide, Dunn, Golden Valley, McKenzie, Mountrail, Stark and Williams. Montana counties: Richland, Roosevelt and Sheridan

Government pension check: Hopefully in the mail

Will pension funds have enough money to pay off their plan’s retirees? Each pension fund has a portfolio of investments (assets) and a current value of future pension payouts (liabilities). The pension fund is considered well-funded if the assets exceed the liabilities. An easy gauge of pension health is the funded ratio, which is the assets divided by the liabilities (see table).

Most pension funds in the Ninth District are underfunded, with the Michigan Public School Pension having the lowest funded ratio at 60 percent, with unfunded liabilities of $26 billion. One way to remedy the underfunded problem is for government employers to kick in more money (via public tax dollars). The employer contribution necessary to eventually make a pension fund whole is called the annual required contribution (ARC) and is determined in part by related employee contributions and investment returns.

Employee contributions are typically a set percentage of salary or wages. Investment returns are gauged against return assumptions, which range from 7.2 percent to 8.4 percent for different plans (see table). Higher investment assumptions lead to lower employer contributions (and therefore lower ARC), at least initially. But failure to meet investment assumptions creates unfunded liabilities, which raises ARC over time; the higher the investment assumption, the greater the unfunded liabilities when returns are low.

The National Association of State Retirement Administrators (NASRA) recently released a report analyzing state public pension plans from 2001 through 2013, comparing actual government contributions to the annual required amounts. The results show a range of disparities across Ninth District states (see table). Some states have one unified system while others have separate plans for teachers or other public employees. Wisconsin’s annual contributions exceeded ARC by three percent over this 12-year period, while government contributions for the North Dakota Public Employees Retirement System were 42 percent below the ARC.

Underfunded plans are occurring despite the fact that actual government contributions have been rising steeply for many government employers. For example, school districts in the Michigan Public Schools plan have seen their actual contributions rise from about $600 million in 2001 to almost $1.4 billion in 2013, according to the NASRA report. Over this same period, the annual required amount has risen from about $600 million to almost $2 billion.

Research Analyst Dulguun Batbold contributed to this article.

State pensions -- 3-25-15