Neel Kashkari and other Fed employees now prohibited from advocating for constitutional amendments

A recent change to the Federal Reserve's code of conduct now prohibits the kind of advocacy Minneapolis Fed President Neel Kashkari has done in recent years to support a proposed constitutional amendment aimed at reducing educational disparities in Minnesota.

According to new language added to the Fed's policy: "An employee may not use, or create the appearance of using, their position or bank resources to influence a partisan or non-partisan election or ballot initiative, such as a referendum or constitutional amendment."

A Fed spokesman said the Board of Governors in Washington, D.C., approved the new clause and required all Fed regional banks to adopt it. Bloomberg first reported on the development.

A Minneapolis Fed spokeswoman confirmed the bank updated its policy with the change on Dec. 1.

She did not provide further comment from the bank or Kashkari. But the Minneapolis Fed has pulled down some pages related to the constitutional amendment from its website.

In 2020, Kashkari and former Minnesota Supreme Court Justice Alan Page launched an initiative to amend the education clause in the state's Constitution. The new wording would have made it a "paramount duty" of the state to provide a "quality public education" and a fundamental right for all children.

The idea for the proposed amendment grew out of conversations between the two leaders following a Minneapolis Fed report that showed Minnesota has some of the largest educational gaps by race and socioeconomic status in the U.S.

They pitched the idea as a way to get through political gridlock and to finally close the state's large achievement gap, which they noted had shown little improvement despite a number of efforts throughout the years. They traveled around the state, holding community conversations to build support for the proposal.

The Minneapolis Fed also produced related research, such as a report showing other states that adopted similar constitutional amendments did not see a significant increase in court cases, which was one of the often-cited concerns about the proposal dubbed the "Page Amendment."

While the proposed amendment had bipartisan support, it also drew strong bipartisan resistance and failed to gain traction at the State Capitol. In particular, it ran into steep opposition from the teachers union, which raised a number of concerns, including whether it could allow for the creation of vouchers for private schools.

At the same time, critics — including now-retired U.S. Sen. Pat Toomey and the Minnesota-based Center of the American Experiment — were among those who questioned whether it was appropriate for Kashkari to use his role as a Fed official to promote such an amendment.

In an April letter sent to Kashkari and other Fed officials, Toomey, who was then a Republican senator from Pennsylvania, argued Kashkari's involvement went beyond the Fed's mandate, was at odds with the bank's prohibition on political activities and undermined the Fed's independence and credibility.

Kashkari and other Minneapolis Fed officials defended their efforts as part of the bank's mission to achieve maximum employment, noting education is a factor in being able to fully participate in the workforce. They also said the initiative built on the Minneapolis Fed's research and work in promoting early childhood education, particularly for low-income children.

The Federal Reserve is an independent government agency, and Fed officials often steer away from commenting on political matters. While the Fed's Board of Governors are government employees, those who work for the regional banks are not.

"The Federal Reserve gets to do what it does," Page said. "They have their rules. I'm not interested in having [Kashkari] violate them, as I'm sure he's not."

In any case, he said it's a moot point now because they're not actively working on the Page Amendment this year after running into roadblocks in the state Legislature the last few years.

"There's nothing going on," Page said.

In what he admits is a long shot, state Rep. Ron Kresha, R-Little Falls, introduced the Page Amendment in the Minnesota House last month. But there's no companion bill in the Senate as there was last year.

Kresha said it's unlikely to have a hearing this year after failing to get one last year. It only had an informational hearing in 2021.

"Nobody wants to hear the bill except for me," he said.

He wasn't aware of the change to the Fed's code of conduct but said he had not had any recent conversations with Kashkari about the bill.

"All I have used the Federal Reserve for was their research," Kresha said. "They had put a lot of information together for getting to full employment and what things to look for, so that research was helpful."

The Minneapolis Fed said it will continue to conduct research into educational disparities and their impact on the economy as it has done for decades.