Minnesota’s public employment and payroll shrinking

Conservatives would have us believe Minnesota is a “big government” state.  New public employment data from the U.S. Census Bureau is the latest piece of information demonstrating the falsity of this claim.  Total state and local government employment in Minnesota is actually below the national average.

This conclusion is based on data from the most recent Census of Government report for fiscal year 2007.  The Census of Governments is a comprehensive assessment of the finances and employment of all state and local governments in the U.S.* The Census Bureau conducts the Census of Governments every five years.

As recently as 2002, public employment in Minnesota was modestly above the national average.  The graph below shows total state and local government employment (measured in terms of “full-time equivalents” or FTEs) per 1,000 residents in all fifty states based on the 2002 Census of Governments.  States are listed in descending order, with high public employment states on the left and low public employment states on the right.

Some states are clearly outliers in terms of the level of public employment.  For example, in conservative bastions like Alaska and Wyoming, the number of state and local FTEs per 1,000 residents is 79.0 and 83.5 respectively, dramatically above the national average of 54.6; the high public employment in these two states is likely due in large part to the fact that both states must maintain infrastructure over a large and sparsely populated geographic area.  However, in a large majority of states, including Minnesota, the number of state and local government FTEs range from 50 to 60 per 1,000 people.

In 2002, Minnesota had 56.1 state and local government FTEs for every 1,000 residents, 2.8 percent higher than the national average.  Minnesota ranked 26th among the fifty states in terms of the number of FTEs per capita (i.e., 25 states had more state and local government FTEs per 1,000 population and 24 states had fewer).  Thus, even in 2002 — prior to the so-called era of “no new taxes” – Minnesota’s public employment level was fairly typical relative to other states.

Over the next five years, Minnesota dipped modestly below the national average in terms of total state and local public employment.  The following graph shows total state and local government FTEs per 1,000 residents in all fifty states based on the 2007 Census of Governments.

Over the course of five years, Minnesota had dropped from 56.1 public FTEs per 1,000 population to 54.2, a decline of 3.4 percent.  By 2007, Minnesota’s ranked 31st among the fifty states in terms of the number of FTEs per 1,000 population.

Real (i.e., inflation-adjusted) per capita state and local government payroll also declined from 2002 to 2007.  From March 2002 to March 2007, per capita public payroll (i.e., total payroll divided by the statewide population) declined from $223 to $217 in constant 2007 dollars, a drop of 2.7 percent.  In addition, total public payroll per $1,000 of Minnesota personal income also declined over this period.  The graph below shows the change in real per capita state and local government payroll and payroll as a percent of personal income in Minnesota relative to the U.S. average.

Nationally, real per capita state and local government payroll grew by 1.6 percent from 2002 to 2007, while in Minnesota it fell by 2.7 percent.  State and local government payroll per $1,000 of personal income fell by 5.3 percent nationally, compared to 8.4 percent in Minnesota.

Although the decline in Minnesota public employment and payroll from 2002 to 2007 was not dramatic, it was significant.  The level of public employment and public payroll in Minnesota declined in an absolute sense and relative to other states during this period.  Taken in the context of other information, it is clear that Minnesota is not a “big government” state.  For example:

• Analysis from the Minnesota Department of Revenue demonstrates that total state and local taxes in Minnesota are “just about average” relative to the rest of the U.S.

• A subsequent analysis conducted by Minnesota 2020 based on Revenue Department techniques shows that Minnesota state and local own-source revenue and total revenue are also approximately average.

• Minnesota state and local government revenues and expenditures as a percent of personal income have also dropped below the U.S. average.

• Public elementary and secondary school current spending per pupil is modestly below the national average.

• The per capita expenditures of Minnesota cities are slightly to significantly below the national average, depending on how expenditures are measured.

• The real per capita/per pupil revenues of Minnesota counties, cities, and school districts have all declined significantly since CY 2002 / FY 2003.

Over the course of the last decade or so, public investment in Minnesota has diminished to an average — and in some instances, below average — level relative to the rest of the U.S.  The question then becomes, has this decline been beneficial or detrimental to Minnesota’s economy?

This question is difficult to answer definitively, but the trends are not encouraging for those who espouse continued shrinkage in public spending.  During the “no new taxes” era Minnesota’s unemployment rate and poverty rate have increased relative to the national average, while our median household income and rate of employment growth has fallen.  The prosperity promised by proponents of less government has not materialized; in fact, the deterioration in public investment has corresponded with a decline in Minnesota’s economic performance relative to the rest of the country.

The public employment data from the Census Bureau is only the most recent in a long string of information showing that Minnesota is fairly average in terms of the size of government relative to other states.  Despite this fact, the most persistent and factually challenged right wing voices in Minnesota can be counted on to keep beating the “big government” drum. Progressives should not be fooled.  Smart public investment, rather than continued disinvestment, is the key to a prosperous future for Minnesota.

*Employment and payroll data from the U.S. Census Bureau is based on March data.  Thus, the 2002 and 2007 Census of Government employment and payroll data is from March 2002 and March 2007 respectively.  State and local government employment and payroll table used in this analysis are from the Census Bureau’s “Build-a-Table” utility.  State population data for 2002 and 2007 is also from the Census Bureau.  Fiscal year personal income data was calculated from quarterly data provided by the U.S. Bureau of Economic Analysis.