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MN2020 - Minnesota Since 2002: Declining Public Investment, Faltering Economic Performance
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Minnesota Since 2002: Declining Public Investment, Faltering Economic Performance

June 01, 2010 By Jeff Van Wychen, Fellow and Director of Tax Policy & Analysis
Part One in a Two-Part Series

From 2002 to 2007, Minnesota state and local government revenue declined more than in just about any other state, according to a January 2010 Minnesota 2020 report "On Our Way to Average: Ranking Minnesota's Economic Performance."  This article updates some of the data from that report based on revised 2007 revenue and spending data from the U.S. Census Bureau that was not available at the time the report was published.

"On Our Way to Average" compared Minnesota to the 50 states in terms of state and local government taxes, own-source revenue, general revenue, total revenue, general expenditures, and total expenditures each year from 2002 to 2007.  For each of the six categories, Minnesota's ranking among the 50 states and comparison to the national average was examined per $1,000 of personal income (the preferred measure) and per capita.

The graphs below compare Minnesota to the U.S. total in terms of the change in each of the six categories of revenues and expenditures from 2002 to 2007 on both a per $1,000 of personal income and per capita basis.  Both graphs are based on the revised 2007 data; these graphs update graphs on page 23 of "On Our Way to Average."

These graphs provide a stark illustration of the decline in public revenues and spending in Minnesota relative to the rest of the nation.  For example, from 2002 to 2007 total U.S. state and local government general expenditures declined by $80 per capita in constant 2007 dollars; the decline in Minnesota over the same period was $870 dollars per capita--over 10 times greater than the national average.


Nothing in the revised Census data alters the fundamental conclusions of "On Our Way to Average" regarding the decline in public revenue and spending in Minnesota relative to other states.  From 2002 to 2007, Minnesota own-source revenue (which includes taxes and all other state and local government revenue except federal aid) declined more than in any other state in the nation.  This is true for both own-source revenue per capita and own-source revenue per $1,000 of personal income.

Minnesota's rank among the 50 states in terms of the decline in the other five categories of revenue and spending either stayed the same or rose further based on the revised data.  For example, Minnesota's rank in terms of the decline from 2002 to 2007 in general revenue per capita rose from 4th, based on the original Census data, to 3rd based on the revised data (i.e., only two other states had a greater decline than Minnesota).  Minnesota is the only state in the nation that ranks among the top 10 states in terms of the decline across all six categories of revenue and spending on both a per capita and per $1,000 of personal income basis.

The following graph shows Minnesota state and local government revenue and spending per $1,000 of personal income relative to the U.S. average.  This graph updates a graph on page 1 of the January report.

On the four broadest categories of state and local government revenue and spending (general and total revenue and generaland total expenditures), Minnesota is below the national average based on the revised 2007 Census data.


"On Our Way to Average" also examined Minnesota's performance relative to other states based on 13 indicators of economic vitality and quality of life during the period from 2002 to the most current year available.  Since release of the report in January, the U.S. Bureau of Labor Statistics (BLS) has revised employment data for each of the years examined in the report.  Based on the revised BLS data, Minnesota's rank in terms of the rate of employment growth since 2002 has improved from 40th to 38th.

In addition, since January the U.S. Bureau of Economic Analysis (BEA) has released revised personal income data.  Based on the revised information, Minnesota's rank in the percentage growth in per capita personal income from 2002 to 2008 has fallen from 32nd to 34th.  In addition, BEA per capita personal income data for 2009--which was not available when "On Our Way to Average" was released in January--indicates that Minnesota's percentage growth in personal income from 2002 to 2009 ranks 37th.  In other words, only 13 states have done worse than Minnesota in terms of growth in personal income since 2002.

The graph below shows Minnesota's rank among the 50 states based on the change since 2002 in each of the 13 performance measures examined in "On Our Way to Average."  A rank of "1" denotes the state with the greatest improvement among the 50 states, while "50" denotes the greatest decline.  This graph, which incorporates the revised BLS and BEA data, updates the graph on page 43 of the report.

Minnesota still ranks high on many of the 13 indicators based on a snapshot of the most current year available.  However, in terms of the change in these indicators since 2002, Minnesota's performance is disappointing, at best. Minnesota ranks among the bottom 10 states in the nation on four of the 13 factors and among the bottom 20 on 10.  Minnesota breaks into the top 25 states on only one factor.  (Minnesota ranks 23rd in terms of improvement in the deficient bridge percentage since 2002.)


"On Our Way to Average" demonstrated that declining public investment in Minnesota has coincided with deteriorating performance relative to other states.  Governor Pawlenty has been quick to take credit for the decline in taxes and the shrinkage in government but has refused to accept responsibility for Minnesota's faltering economic performance that has occurred during his watch.  Tomorrow's article will examine the Governor's critique of "On Our Way to Average."
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