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Minnesota Public Employment Shrinks, Especially Locally

November 02, 2009 By Jeff Van Wychen, Fellow and Director of Tax Policy & Analysis

Minnesota 2020 recently demonstrated that public employment per capita in Minnesota has dropped below the national average.  A more detailed analysis of the data reveals that most of this decline in public employment occurred among Minnesota local governments, not state government.

Every five years, the U.S. Census Bureau compiles public employment information for state governments, counties, cities, school districts, and other local governments as part of the Census of Governments.  This analysis will compare public employment (excluding federal employees) as measured by the number of full-time equivalent (FTE) employees from the most recent Census of Government for 2007 to the previous 2002 Census of Governments.

The vast majority of public FTEs in Minnesota work for local governments.  This is not surprising, given that local governments are providing the lion's share of public services in the state.  In 2007, nearly all (96.4 percent) local government FTEs are employed by counties, cities, and school districts.  The graph below shows the distribution of public employees in Minnesota in 2007 by level of government.


The total number of public FTEs in Minnesota has dropped slightly from 281,287 in 2002 to 280,783 in 2007, a decline of 0.2 percent.  All of this decline occurred among Minnesota local governments; total local FTEs declined from 205,562 in 2002 to 202,517 in 2007, a drop of 1.5 percent.  Meanwhile, the number of state government FTEs increased from 75,725 to 78,266, a growth of 3.4 percent.

A portion of the growth in state FTEs and the decline in local FTEs was the result of the partial state takeover of court administration costs.  This takeover reduced the number of county employees and increased the number of state employees.  The balance of this analysis will adjust for this partial state takeover by subtracting the number of transferred FTEs* from the 2007 state government FTE total and adding them to the 2007 county and local government FTE total.**

After adjusting for the partial state takeover of court administration costs, the rate of growth in state FTEs from 2002 to 2007 was 1.9 percent, while the decline in the number of local government FTEs was 0.9 percent.  Even after adjusting for the court takeover, local government employment fell from 2002 to 2007, while state government employment increased.

The change in public employment should be measured relative to growth in the state population, which increased by 4.6 percent from 2002 to 2007.  FTEs per 1,000 Minnesota residents declined from 55.9 in 2002 to 53.3 in 2007 -- a drop of 4.6 percent.  The graph below shows the decline in the number of public FTEs per 1,000 population among counties, cities, school districts, all local governments (which includes townships and special taxing districts, not listed separately), state government, and combined state and local government.


From 2002 to 2007, Minnesota cities experienced a 7.5 percent decline in public employment per 1,000 population, the largest decline of any level of government.  The decline among school districts and counties was 6.2 percent and 3.4 percent respectively.  After factoring in townships and special taxing districts, the total decline in local government employment per 1,000 population was 5.3 percent.  The rate of decline in state government employment was 2.6 percent -- one-half the rate of decline among local governments.

The public employment information from the Census of Governments is sufficient to dispel two right wing fallacies.  The first fallacy is that government in Minnesota has continued to grow, even during the era of "no new taxes."  In fact, total public employment and public employment per capita declined during the period from 2002 to 2007.  The decline in public employment is consistent with the decline in total real per capita public revenue also observed during this period.

The second fallacy is that state government has shrunk more than local government in recent years.  The perception of local government expansion was recently fostered by Governor Pawlenty, who said, "They [local elected officials] need to get their head out of the clouds and stop increasing spending.  This is the real world! Perhaps they didn't understand that everyone else was living within their means, maybe now they will."

In fact, local governments have cut employment (and payroll) more than state government during the Pawlenty era.  In addition, the real per capita revenue of local governments has declined more than that of state government during this period.  Regarding the reality of state versus local finances in Minnesota, it is Pawlenty's policy views that are stuck in the "clouds."

The fact that public employment and total revenue has declined is firmly established.  The debate over whether this shrinkage in government has been beneficial or detrimental to Minnesota's economy continues, although a Minnesota 2020 report notes that the decline in public investment in Minnesota has corresponded with a decline in Minnesota's economic performance relative to other states.

Despite the preponderance of evidence, we will no doubt hear more right wing harangues about unsustainable government growth.  The facts regarding the decline in public employment and public revenue rebut this fallacious bluster.

 


*Based on information from the State Court system, 1,137 FTEs were transferred from counties to state government in FY 2003, 2004, and 2005 as a result of the partial state takeover of court administration costs.

**The shift of responsibility for incarcerating short-term felony offenders from state government to counties probably contributed to an increase in county FTEs and a decline in state FTEs in a way that partially offset some of the FTE transfer resulting from the partial state takeover of court administration costs.  However, because no data on the increase in county FTEs resulting from the short-term felony offender shift is available, it will be ignored in this analysis.




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