K-12 Spending in Minnesota Again Below the U.S. Average
Minnesota is once again below the national average in terms of its K-12 public education investment. The U.S. Census Bureau’s most recent edition of “Public Education Finances” reveals this distressing trend.
Each year, the Census Bureau measures per pupil current spending for public elementary and secondary schools in all fifty states; fiscal year (FY) 2008 is the most current data available. The Bureau’s measure of per pupil current spending is particularly helpful because it is specifically designed to facilitate interstate comparisons.
In FY 2008, per pupil elementary and secondary school current spending in Minnesota was 1.2 percent below the national average. Figure 1 shows Minnesota’s per pupil current spending relative to the national average each year from FY 1995 to FY 2008.
Per pupil current spending in Minnesota was significantly above the national average in the mid-1990s before beginning a long-term decline. FY 2008 marked an ignominious milestone for the Gopher State: for the first time in history, Minnesota is at or below the national average in per pupil current spending for the fourth consecutive year.
The Census Bureau also examines per pupil expenditures per $1,000 of statewide personal income. Policy experts have argued that spending relative to personal income is a better way of making interstate comparisons of expenditure levels because it takes into account the higher wage levels that typically exist in high personal income states.
Minnesota’s public school spending per $1,000 of personal income has fallen from $47 in 1995 to $38 in 2008. Over the same period, nationwide public school spending per $1,000 of personal income has remained fairly constant, hovering between $41 and $44. As illustrated in figure 2, Minnesota has gone from ten percent above the national average in terms of public school current spending per $1,000 of personal income in 1995 to 10 percent below the national average in 2008.
Minnesota’s decline relative to the national average in public school current spending per $1,000 of personal income during the period from FY 1995 to FY 2004 is in part due to above average growth in Minnesota personal income. If personal income in a state grows more rapidly than the national average, then spending as a percent of personal income in that state will decline relative to the national average, all other things being equal.
However, from FY 2004 to FY 2008 growth in Minnesota personal income lagged five percent behind the national average. Thus, Minnesota’s decline relative to the national average in public school current spending per $1,000 of personal income since FY 2004 is due to a decline in Minnesota school spending, not to growth in Minnesota personal income. From FY 2004 to FY 2008, Minnesota public school real (i.e., inflation-adjusted)* current spending per pupil has fallen by 2.5 percent, compared to a 0.5 percent decline nationally.
From FY 2003, which is the year of the “state takeover” of general education funding and the last year prior to commencement of the “no new tax” era, to FY 2008, which is the last year for which Census Bureau data is available, per pupil public school current spending in Minnesota has fallen from $10,414 to $10,140 in constant FY 2008 dollars, a drop of nearly three percent. This is consistent with revenue data from the Minnesota Department of Education (MDE) and Minnesota Management & Budget (MMB), which each show a real per pupil decline of approximately 4 percent over the same period.
Separate reports from Minnesota 2020 published in August and September demonstrate that while school funding has declined since FY 2003, school property taxes have soared. Property tax increases since FY 2003 have not been sufficient to replace large cuts in real per pupil state support for K-12 education, thereby causing the school funding decline.
In a society in which economic growth is based on mastery of technology and new information, education is essential. However, despite growing school property taxes, Minnesota’s investment in education has dropped both in real terms and relative to the national average. The decline in school funding in Minnesota is directly attributable to declining state support during the era of “no new taxes.” If Minnesota is to have a productive workforce and a prosperous future, this trend must end.
*All inflation adjustments in this analysis are based on the implicit price deflator for state and local government purchases, which is the appropriate measure of inflation for state and local government purchases.