Local government more frugal than state government


Last August, a Minnesota 2020 analysis showed that real per capita Minnesota county, city, and school district revenue had declined since 2002, while state government revenue has increased. This analysis has been updated based on recently released data.

Total real (i.e., inflation-adjusted) per capita state government revenue has declined by 10.8 percent from FY 2003 to projected FY 2010. (In the “Price of Government” report, fiscal year data is grouped with data from the preceding calendar year; thus, FY 2003 data for school districts and state government aligns with CY 2002 data for counties and cities.)  However, the state has recouped this revenue loss by cutting the dollars it shares with local governments. Excluding transfers to local governments, state government revenue has increased by 1.4 percent from FY 2003 to projected FY 2010.

Over the same period, real per capita county and city revenue and real per pupil school revenue have all fallen.  The decline in revenue for all three levels of local government was somewhat greater than the decline indicated last August.

Governor Pawlenty has stated, “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.”

The above data shows that it is the Governor who has his “head in the clouds.”  Local governments have been more frugal than state government during Pawlenty’s tenure as governor.  Local governments do not need lectures from the state policymakers regarding the need for frugality.  What they do need is responsible state leadership that addresses the state’s budget problem forthrightly rather than merely shifting the problem on to local governments.

Notes on the above analysis:

  • Revenue data used in this analysis is from the February forecast “Price of Government” report.  County and city data covers the period from calendar year (CY) 2002 to 2009.  State and school district data covers the period from fiscal year (FY) 2003 to 2010.
  • With one exception, estimates of federal recovery dollars are excluded from state and local revenues.  Federal recovery dollars are omitted because these are one-time dollars that do not represent a permanent increase in public revenues.  The primary effect of excluding federal recovery dollars is to reduce growth in state government revenue.
  • The only federal recovery dollars included in this analysis are $500 million in aid to school districts that is used to replace a one-time $500 million cut in state general education aid in FY 2010.
  • County and state revenues include an approximate adjustment to reflect the partial state takeover of court administration costs.  This adjustment has the effect of reducing the rate of growth in state government revenue and reducing the rate of decline in county revenues.
  • All amounts in the first three graphs are adjusted for inflation using the implicit price deflator of state and local government purchases, which is the appropriate measure of inflation for state and local governments.