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'Price of government' in Minnesota expected to drop

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Personal income is expected to rise faster than public budgets in coming years, meaning a smaller percentage of Minnesotans’ income will go to government.

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State figures show that 15.4 percent of the average person’s income today goes to state and local governments, a figure expected to drop to 14.6 percent in four years. The only other time since the figures began to be compiled in 1991 that the percentage was nearly that low was 2009, when 14.7 percent of income went to government during an economic downturn.

The federal government cost is not figured into the numbers.

The figure, known as the price of government, is politically important as budgets are debated, and shows Minnesotans how much government costs them.

The price of government is designed “to provide a plain speak metric” that the public may use, Ryan Baumtrog of Minnesota Management and Budget told a state legislative commission Wednesday. “It is a state and local government transparency tool.”

Baumtrog’s figures also show that the state collects far more money than local governments, but local governments and schools outspend the state.

Sixty-one percent of tax and other revenue that flows to state and local governments comes to the state, with 31 percent to cities, counties, townships and other local governments. Schools collect 8 percent of revenues.

However, the state and local governments spend about equal amounts of the money (36 percent to 37 percent) and schools spend 27 percent of all revenues.

Government revenues rose as much as 8.1 percent a year in the past decade, although they fell 1.9 percent during the 2009 recession. They are predicted to rise 2.2 percent to 4 percent annually in the next four years.

Minnesotans’ incomes, meanwhile, often rose 3 percent to 6.7 percent a year over the past decade, although they fell 5.2 percent in 2010. Projections in the next four years show incomes rising a minimum of 3.4 percent a year, but they are projected to rise 5 percent in 2016.

While the percentage that government takes out of Minnesotans’ income is due to fall, Rep. Greg Davids, R-Preston, said the actual dollar amount will rise.

“The price of government has gone way, way up,” said Davids, who sees that trend continuing.

Baumtrog’s report shows total Minnesota personal income at $252 billion this year, soaring to $301 billion in 2017. State and local spending, meanwhile, are expected to go from $39 billion to $44 billion during that time.

The report does not predict the impact of federal budget woes, including cuts to funds it sends states.

Some of the projections are educated guesses.

For instance, a Revenue Department estimate of how much new laws will lower property taxes is disputed by legislative Republicans. Those Republicans say the department projected that local governments will lower property taxes in response to added state aid; Republicans doubt taxes will fall much, if at all.

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Don Davis
Don Davis has been the Forum Communications Minnesota Capitol Bureau chief since 2001, covering state government and politics for two dozen newspapers in the state. Don also blogs at Capital Chatter on Areavoices.
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