Crumbling Fiscal Foundation: A Decade of Decline in State Investment

/ 15 April 2013 / eunice

Jeff Van Wychen, Minnesota 2020, April 15, 2013 – 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.

Read more: Download full report (pdf)

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http://www.mn2020.org/issues-that-matter/fiscal-policy/crumbling-fiscal-foundation-a-decade-of-decline-in-state-investment