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Still in a home, by the skin of her teeth

Gut Check America profiles a single mom in Minnesota who found herself buried in debt after raising three kids. It took an unexpected windfall to save her from foreclosure.'s Kari Huus reports.
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Barbara Kennebeck relaxes in her yard in this northern Minnesota town at the end of another workday, plucking a few weeds from a small plot of daisies and tiger lilies that she has little time to tend. The flowers look a bit weary, but they are survivors. The same can be said for Kennebeck, a single mom who found that even working two jobs sometimes isn’t enough to fend off financial disaster.

“I was thrilled to see my kids leave,” the 46-year-old Kennebeck says, remembering the years when her debt slowly grew to unmanageable levels. “I love my kids, but I was counting the dollars.”

Even in the best of times, this is not an easy place to live. The summers are scorching, the air thick with humidity and mosquitoes. The long winters freeze plumbing and cause cars to seize up.  And it’s a long drive from just about anywhere to anywhere else.

The industries that long fueled the economy here — iron and steel — have been in decline since the late 1970s, resulting in the loss of thousands of high-paying jobs.

When’s Gut Check America put out a call to Minnesota residents to tell us how the current economic climate was affecting them and their communities, many responses came from this northeastern part of the state, known as the Iron Range. Their stories serve as a stark reminder that rising prices can quickly tip people out of the middle class and into poverty.

‘You just can't get caught up’
“It just keeps rolling up on you and you just can’t get caught up,” says Kennebeck, who fell behind on mortgage payments last winter and feared she would lose her house. “At some point, you have to decide (whether to pay) the heat, or gas to go to work, or the mortgage. It was that tight.”

It wasn’t any single catastrophe — just the relentless costs of being a single mom with teenagers — that that drove Kennebeck to the brink of disaster. In 1997, after parting ways with a longtime boyfriend, Kennebeck bought a house for herself and her three kids, Sheila, Andrew and Jesse, who were 15, 13 and 12. Taking advantage of a first-time home buyer’s loan, she was able to purchase a small single-story home in Cloquet for $60,000, with nothing down and a $500 monthly payment.

But increasing everyday expenses — the cost of food, school clothes, athletic uniforms, car insurance – slowly eroded her ability to keep up. Take-home pay from her job in Duluth as an employment counselor for the Minnesota Chippewa Tribe — just under $1,700 a month — frequently didn’t stretch far enough. She gradually ran up nearly $15,000 in credit card debt, with interest rates ranging as high as 21 percent.

Even after 2004, when the last of the kids graduated and moved out of the house, her situation did not improve as much as she had expected. Kennebeck was still backsliding under the pressure of interest payments, late fees and unexpected costs. Simple things like flat tires would knock her back. And the kids still needed a hand from time to time.

“It felt like every step forward there would be two steps backward,” she recalls. “I’d pay the minimum amount (on my credit card), it would be a late payment and then they would tack on another 35 bucks. It just kept growing and growing and growing. It was just terrible.”

A second job, but no relief
In 2005, she took a second job working overnight shifts caring for people disabled by brain injuries, working one week on and one off. Her take-home pay increased to about $2,560 a month.

Kennebeck would pore over a spread sheet on her computer each month, divvying up her pay to cover the mortgage, credit card minimums and other essentials. That would leave about $600 for heating, gas for her car, food. Surprises were not in the budget.

In 2007, when the furnace and her car broke down at the same time, she took out a second mortgage on her home — racking up another $23,000 in debt. That put her debt on the house — originally purchased for $60,000 — at more than $70,000. 

Meantime, as gas prices climbed, the cost of Kennebeck’s daily commute to Duluth — 44 miles roundtrip — more than doubled from its 2004 level. Between the winters of 2006 and 2007, the cost of heating her house doubled, she says. She fell several months behind on house payments and started careering toward foreclosure.

It took an extraordinary windfall to save Kennebeck from financial ruin. In May she received a check for $190,000 — the settlement of a class-action product liability lawsuit that had been in the works for nearly a decade. Kennebeck was among tens of thousands of Americans who were awarded damages after suffering heart and lung problems associated with the weight-loss drug Fen-phen.

The money allowed Kennebeck to quit her overnight job and pay off her credit cards and her second mortgage. She is beginning some badly needed repairs on her house — doors and windows need replacing, the bathroom needs work and she needs a new clothes dryer, for starters. Working her day job, she now hopes that she can cover her house payment and begin saving for retirement. To set a bit more aside, she now runs errands in Cloquet on a new orange scooter.

But Kennebeck also suffers from a permanent damage to one of her heart valves, causing a heart murmur, and she worries about medical costs down the road.

‘A ... very mixed blessing’
“(The money) is not going to go a long way for that, that’s for sure. I guess I’ll just have to be working as long as I can until, you know, whenever it gets worse,” she says. “It’s a mixed — very mixed — blessing.”

Kennebeck works all day with people who are homeless or too poor to get by without assistance. But she also sees middle-class people working more and spending less with no relief in sight. She said one of her neighbors has taken on a third job, and a colleague is spending $750 a month — about half his total income — on health insurance for his family.

This summer, Kennebeck shared her home with a friend who lost her house last spring after a year-long struggle to keep up mortgage payments. The woman, who asked not to be named, had been working two jobs — even three for a time — but finally gave up after her water was cut off. She moved in with Kennebeck in May and stayed until early August, when she was able to move into a modest rental house.

Kennebeck grosses around $40,000 a year working for the tribe — more than the median in Cloquet, which is around $35,000, according to city administrator Brian Fritsinger. Cloquet trails areas such as the Minneapolis-St. Paul area, where the median income is nearly $70,000, but it is slightly better off than many Iron Range communities. The town of about 11,200 people has a paper mill, a ceiling tile manufacturer and the Black Bear Casino — the town’s largest employer — on the Fond du Lac reservation.

“There are jobs here,” says Fritsinger. “There’s employment to be had, but wages are not necessarily at the level that provide everything you really need for a family.”

State and local officials are celebrating the prospect of major new investments in the region’s mining sector in years — driven by rising world demand for minerals and new technologies for refining them — a trend expected to bolster the Iron Range economy. Among them is a planned $300 million investment by U.S. Steel to expand the Keewatin Taconite operation, about 75 miles northwest of Duluth. Republican Gov. Tim Pawlenty has predicted an “Iron Range Renaissance.”

Image: Barbara Kennebeck rides her scooter to save on gas costs
Barbara Kennebeck recently purchased a scooter to reduce the amount she spends on gas while doing errands around her hometown of Cloquet, Minn.David Friedman

But the revival, if it is coming, has yet to hit Main Street.

Along Cloquet Avenue, colorful murals dress up some of the old brick-built businesses that line the street: Buskala’s Jewelry, Erickson Hardware, the Lumberjack Lounge, T&J Gun and Pawn, Rudy Law Firm and Ed’s Bakery. The busiest establishment appears to be the Mexico Linda restaurant.

The town has two claims to fame: as birthplace of actress Jessica Lange, who is said to keep a house here, and as home to the world’s only gas station designed by architect Frank Lloyd Wright. The town just finished celebrating the station's 50th anniversary.

But downtown Cloquet has the hollowed-out feeling of many communities in middle America, in part because new development, including a Wal-Mart, has been centered on a highway on the northwest edge of town. Downtown store owners say the economic slump has made it tough to keep the doors open.

“When the economy is good, we do good,” says Joanne Buskala, whose jewelry store here has been in the family since 1881. “When the economy is bad, we do repairs.”

Gas before diamonds
On a weekday afternoon, the store is devoid of customers, and Buskala and her daughter, Joelyn, have decided to use the free time rearranging displays. Sales are way down, though Buskala won’t say by how much.

“When you’re paying $4 a gallon for gas, you don’t buy diamonds,” is all she’ll say.

Looking ahead to elections, she’s eager to throw the Republicans out of the White House. That would be in line with a long Democratic tradition in the state — called the Democratic Farmer Labor party in Minnesota — particularly in the Iron Range, where there is a strong labor union tradition.

Minnesota hasn’t sided with a Republican in a presidential election since 1972, when Richard Nixon took the White House by landslide. It returned to its Democratic ways four years later when native son Walter Mondale was on the winning ticket with Jimmy Carter. Minnesota has gone for Democrats by a smaller margin since then, narrowly choosing Al Gore in 2000 and John Kerry in 2004. One wildcard in Minnesota is an independent streak that propelled Reform Party candidate and former pro wrestler Jesse Ventura into the governor's office in 1998 on a libertarian-leaning platform.

Republicans hope the convention will push what is shaping up to be a close race in the state between Sens. John McCain and Barack Obama back in their favor.

Back in her quiet store, Buskala isn't swayed by the Republican courtship of her state. But the former Hillary Clinton supporter also is wary of Democratic candidate Barack Obama, whom she feels lacks experience.

“I’ve been here since the 1970s, and the best economy this store has ever seen was in the 1990s,” she says. “I’d take the Clintons back in a heartbeat.”

Disgusted with his options
At Erickson’s Hardware — a dusty, workingman’s store just a few doors down, second-generation owner Roger Erickson has also felt the decline. He had to lay off his two part-time employees a couple of years ago. His is the only remaining independent hardware store in Cloquet, where there used to be five. At the moment, he’s seeing a slight uptick in business this year — but only, he believes, because gas is so expensive that people are reluctant to drive to Duluth.

As for the candidates, he won’t say who he’s leaning toward — only that he is disgusted.

“Maybe I won’t vote for anyone,” he says.

Kennebeck, who has usually voted for Democrats, says she is undecided with just more than two months remaining until the election.

She says the economy will be key in determining who gets her vote, adding that it will be the candidate who demonstrates that he “gets it.”

“The questions I will be asking myself when I make that decision is ‘Do they (the candidates) know what it is like to not have medical insurance for the family? Do they know what it is like to have to choose what bills to pay?”