We Always Seem to Run a Deficit

By Peter Hamma, Graduate Research Fellow, December 1, 2011 at 8:30 am

Minnesota conservatives like to bash government spending growth. In reality, Minnesota per capita, inflation adjusted spending is down. Minnesota's Price of Government—state and local own-source revenue as a percent of personal income—has had the nation's second largest decline since 1992.

We have a revenue problem in this state. As a result, it's getting harder and harder for Minnesota to fund the critical services needed to move the state forward.

In the last decade, Minnesota’s revenue has dropped off a cliff. From Fiscal Year 2000-2007, annual per capita state general fund revenue averaged $3,530 in constant 2011 dollars, with significant decreases starting in FY 2008. From FY 2010-2015, it’s projected that figure will have dropped to $2,962. That's a 16% decline in real per capita state general fund revenue.

At the same time that real per capita state revenue has taken a nose dive, demographic and economic trends have resulted in increased demands on the state budget, as the number of elderly and financially distressed households has skyrocketed. Dealing with these trends with a constant flow of revenue would have been difficult enough, much less with a 16 percent decline.

Every year we are taking in less money, and the cuts are starting to take their toll on quality of life and Minnesota's future prosperity.

Instead of looking for ways to cut taxes and services even more, we must reverse this 15-year slide with progressive revenue streams. At the very least we should be keeping up with inflation so that we can continue to thrive as a state.

Posted in Fiscal Policy | Related Topics: State Budget  Budget Deficit  Income Tax