New data for FY 2011 from the U.S. Census Bureau show that Minnesota is about average in government revenues.
We rank 27th among the 50 states in total revenues as a share of personal income. This comprehensive measure of state and local government revenues includes a broad range of revenue sources, including taxes, federal funds and public university revenues. Measuring revenues as a share of personal income allows us to compare states in a way that takes into account the size of the state’s economy.
The state’s federal funding for public services is below the national average, and Minnesota ranks 38th for federal funding received as a share of personal income. The fact that Minnesota gets less funding from the federal government is partially a reflection of the state’s economic success, as federal funding formulas frequently send more dollars to states with higher levels of poverty. This also means that Minnesota needs to raise more funds itself to provide public services like health care and education.
Minnesota is above average for a measure called “own source general revenue” as a share of personal income, a measure that includes state taxes, fees, tuition, etc., but takes out certain state revenues that can only be used in very limited ways. Since no federal revenue is included, we would expect Minnesota to be above average on this measure. This measure is similar to Minnesota’s Price of Government, which measures state and local revenues as a percent of personal income. The Price of Government is significantly lower than it was in the 1990s, as state and local government has become a smaller share of Minnesota’s economy.
State rankings may be popular because they simplify a complex number of decisions on how to fund roads, health care, libraries and schools into a single number. By themselves they cannot tell us whether we are making the right decisions for our state’s future.