Fed bank president defiant in face of criticism of his lobbying on state education

The president of the Federal Reserve Bank of Minneapolis, Neel Kashkari, has put the full weight of the institution behind an initiative to enshrine quality public education as a fundamental right in the Minnesota constitution.

The effort has included phone calls to lobby Minnesota lawmakers, a special website dedicated to pushing the proposal and frequent use of Fed research resources that often bolster his arguments. 

Kashkari and retired Minnesota Supreme Court Justice Alan Page have been championing the constitutional amendment they say is a bipartisan effort to address the state’s educational achievement gaps based on race, ethnicity and socioeconomic status, which by some measures are the worst in the nation.

“Minnesota — for all of the talk about equity — has made zero progress, literally zero,” Kashkari said in a Reformer interview. “It’s a politics problem. Politics seems to be getting in the way of real reforms.”

But some question whether it’s appropriate for a regional Fed chief to be lobbying lawmakers at the State Capitol and using the Fed’s considerable resources to support passage of a controversial amendment to the constitution.

“I’ve never heard of the Fed becoming involved in a constitutional amendment, ever,” said Myron Orfield, a former state lawmaker and a constitutional law professor at the University of Minnesota, who served as an advisor on inequality to Kashkari before a falling out. Orfield is opposed to the constitutional amendment. 

In a recent Wall Street Journal commentary, Charles Plosser, former president of the Federal Reserve Bank of Philadelphia, was quoted saying it was “pretty unusual” for any Fed official to advocate a specific piece of legislation. Fed officials generally avoid making political proposals not directly related to the Fed’s mandate. 

“It is one thing to say you think education is important and needs improvement, which I probably said many times, but it’s another to essentially lobby for a specific proposal or bill,” Plosser said. “Also it is one thing to react to the proposals of others in general terms but quite another to proactively argue for a specific solution. A real danger is that such actions can indirectly insert the Fed into the political process, undermining its case for independence.”

Gerald O’Driscoll, former vice president at the Dallas Fed, told the Journal in an email “It certainly goes beyond what Fed presidents do traditionally. I could see a Fed president hosting a conference on education at his bank.”

Asked about the former Fed officials’ criticism, Kashkari said, “They’re entitled to their opinions.” He said when people can’t argue with him on the substance of an issue, “They reach for arguments like this.”

Former Treasury official who ran for governor of California

The Federal Reserve serves as the nation’s central bank, with 12 Reserve Banks. They regulate banks and pursue twin goals of full employment and stable prices. It’s overseen by the Board of Governors, a federal agency, and reports to Congress.

Kashkari is a former U.S. Treasury official who helped oversee the bailout of big banks after the 2008 financial crash. He later ran for governor of California with an education platform with some of the themes he’s pursued here.  He helped create the Fed’s conference series on racism and the economy, and believes a quality public education is a fundamental right.

Orfield, who is an expert on the legal structures of economic inequality and has done work for presidents Barack Obama and Joe Biden, said the amendment discards language guaranteeing equal funding, protecting labor unions and mandating integrated schools. Orfield alleges it’s a backdoor attempt to privatize the educational system. 

“It’s a huge amendment,” he said, while also calling it “sinister.” 

Page and Kashkari have attracted thousands of people statewide to “community conversations” about the proposal since 2020. The amendment has been promoted by Fed employees in legislative hearings and is often the topic of Minneapolis Fed newsletters. 

One day after the Wall Street Journal piece was published, the Minneapolis Fed’s email newsletter pointed to “new research” showing education such constitutional amendments raise the minimum standards for education results and increase education-related bills enacted without an increase in court challenges.

Kashkari said opposition to his activism is nothing new: When he first started more than five years ago, he did a lot of work on too-big-to-fail banks, and the banks “hated it” and accused him of pursuing political ambitions.  

“They can’t debate you on the merit of an issue. They try to distract with these other considerations. And that’s what this is about. There are a lot of people who don’t care about the education disparities in Minnesota, and they come up with nonsensical arguments to distract from the disparities.”

Asked whether he’s aware of other Fed presidents with similar causes, Kashkari sidestepped and said when he arrived in Minnesota, he heard lots of praise for the Minneapolis Fed’s two decades of work on early childhood education.

One of the Fed’s goals is maximum employment, and education is the most important determinant of that, he said. Some presidents get involved in literacy or rural economic development, he said, but he thinks the biggest economic challenge in Minnesota is education disparities.

It’s an obvious place to focus the Fed’s energy, he said, as long as it’s done in a nonpartisan manner.

Asked if he has similar initiatives in other states he oversees, he said nothing “quite this formal,” although he’s gotten a lot of inquiries in Montana about the Fed’s previous work on early childhood education.

Fed points to success of Louisiana’s education reform

Supporters of the constitutional amendment often point to a 2019 Minneapolis Fed report on the achievement gap, which cited states such as Louisiana and Oklahoma for making progress in closing gaps.

The report cited as “bold steps” Louisiana’s 2003 passage of a constitutional amendment that allowed the state to take over failing schools and put many under charter management. It also pointed to the Harlem Promise Academy charter schools founded in 2004, as well as Boston College’s City Connects schools. 

Kashkari points to Florida as an example of a state that has made more progress than Minnesota on education disparities after amending its constitution multiple times, leading to sweeping “accountability measures” and “choices for parents.”

Kashkari said he’s not suggesting Minnesota should mimic Florida, but he said the amendment would “send a powerful message to elected officials” and force change.  

Orfield said he suspects another motive, that Kashkari is returning to central issues in his bid for California governor, during which he advocated tossing out much of the state’s education code and allowing most schools to operate under the same rules as charters.

Asked if he’s considering running for office again, Kashkari said, “I’m not running. I have no interest in running.” 

Orfield noted that 22 legal scholars and experts signed a letter to lawmakers saying the amendment eliminates all language requiring minimum levels of funding for public schools and removes language protecting students’ civil rights, while inserting language that could measure students’ rights through the lens of standardized testing.

“No expert thinks this is anything but an effort to make the system more private,” Orfield said. 

Kashkari said the proposed amendment says the word “public” three times in two sentences. He said both Page and Attorney General Keith Ellison deny the measure would lead to more private education. The amendment, Kashkari said, is supported by “the two most senior African American lawyers in Minnesota,” meaning Ellison and Page, though Page is retired. 

“We’re trying to strengthen public education, so that’s nonsense,” Kashkari said of accusations that he is seeking to privatize the schools. “And the people who are telling you that are lying. One of the things we’ve learned in the last couple of years is if you don’t like the truth, just to invent your own truth and keep repeating it. Some people are gonna believe you.”

Rep. Ron Kresha, R-Little Falls, said the proposed amendment, which has faced resistance from the influential teachers union Education Minnesota, has yet to get a serious hearing in the House the past two sessions due to opposition from the House Democratic-Farmer-Labor majority. He accused the union of standing in the way of a “quality education.”

Is it lobbying?

Even though Kashkari has met with lawmakers to advocate for the constitutional amendment, he doesn’t consider his work lobbying.

Neither Kashkari nor the bank are registered as lobbyists.

“To me lobbying is hiring a lobbyist,” he told the Reformer. “We don’t have lobbyists on staff.”

The Minnesota Campaign Finance and Public Disclosure Board, which regulates lobbying, defines the activity as “trying to influence governmental action by communicating with or urging others to communicate with public officials.”  

Kashkari said he’s merely putting out good policy ideas backed by objective analysis. He likens it to Minneapolis and St. Paul asking the Fed to do an economic analysis of their decision to raise the minimum wage. Or, an economic impact analysis of the devastating 1997 Red River flood.

Kresha said he doesn’t consider Kashkari’s work to be lobbying, noting lawmakers have also worked with Art Rolnick, former senior vice president and director of research for the Federal Reserve, who promoted early learning scholarships. 

Kresha added: “I know a lot of people have asked that question: Why is the president of the Federal Reserve involved in this?”

Kresha said Kashkari is merely trying to solve a problem: “Their role is to improve the economy. What he intends to do in the future, that’s up to him. But in the present, he’s trying to solve an achievement gap.”