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Crumbling Fiscal Foundation: A Decade of Decline in State Investment

April 15, 2013 By Jeff Van Wychen, Fellow and Director of Tax Policy & Analysis

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On this Tax Day, tea party activists will fan out across Minnesota to protest out of control government spending. In Minnesota that’s just not the case, adjusting for inflation, population growth, budgeting gimmicks and state takeovers, the State of Minnesota is spending 18 percent less that it was a decade ago.

The Great Recession combined with “no-new-tax” policies has resulted in a 20-year low in real per capita state general fund revenue. This has led to a $5.2 billion adjusted state general fund spending decline, Minnesota 2020’s new report reveals. In the 2010-11 biennium, adjusted per capita state revenue fell to an all time low, just under $3,100 per capita from $3,734 in the early to mid-2000s (constant FY 2012-13 dollars). Revenue is expected to stay flat.

 

 

Despite small government advocates’ claims, there’s no indication a decade-long decline in real state general fund spending has spurred Minnesota’s economic growth. In fact, personal income growth in the state has lagged slightly behind the national average.

In order to prevent biannual state budget crises, which disrupt economic development, education, and health care planning, policymakers must enact reasonable structural revenue increases and spending reforms. Modest revenue and budgeting proposals currently under debate in legislature offer us an opportunity to reverse a decade of disinvestment that’s decreased state spending $730 per capita in constant FY 2012-13 dollars.

Implementing Governor Dayton’s budget plan is an affordable step forward that would restore less than one-third of these cuts. Under the plan, state spending would still be $500 fewer per capita in 2016-17 (using constant 2012-13 dollars).

Here's the bottom line, relative to income, Minnesota is not a high tax state. It ranks 28th in revenue per $1000 of income at the state and local level and ranks 27th in spending per $1,000 of personal income.

 

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5 Comments:

  • ROB says:

    April 15, 2013 at 7:26 am

    Thanks for the memories T-paw. I hope you are enjoying your new job and paycheck as head PR man for the Wall Street banks. I said it before and say it again, that guy and his right-wing extremist policies nearly destroyed liberal MN.

  • Susan Legender Clarke says:

    April 15, 2013 at 7:51 am

    I for one am very grateful to my City for giving me trees along the streets; for coming out and filling up a sink-hole at the corner of our alley; for coming out (within a couple of hours) when I reported a branch hanging over the street; for creating bike lanes so my grandson is sage riding to work; for providing great police officers in our area; for adhereing to regulations about building; and so on.
    Government is great and it is NOT a business; it is a service.

  • ChristeenStone says:

    April 15, 2013 at 8:31 am

    I have spent a great deal of time at the Capitol the past 25 years And I am so happy to see the restoration made in the last few years.I remember my first visit There in 1940, it was awesome to me along with the Cathedral and Landmark center.It
    would be wonderful to see it fully restored fully. Money wisely invested. It is a building to view with pride.

  • Dennis Litfin says:

    April 15, 2013 at 10:04 am

    Here is a quote for the tea party activists on ‘their’ day…..

    “Tea Party :  People covered by Medicare who hate Socialized Medicine”

  • Dan L Conner says:

    April 30, 2014 at 8:55 am

    It was so surprising that Minnesota voters re-elected Pawlenty to 2 terms considering the deterioration he encouraged in the State.  He never cared about infrastructure, education, or the health of the people.  He only cared about lining the pockets of people who don’t need anymore money.