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Greater Minnesota depends on the public sector

Greater Minnesota is more reliant on the public sector than other areas of the state. This is true for a number of reasons:

Calculations of disparities in regional income, based on federal Bureau of Economic Analysis figures, show that in 2007 rural and non-metro individuals on average received almost 20% of their income from federal, state and local government sources, while Twin Cities-area residents received about 12% from these sources.

Minnesota rural municipalities received about 42% of their revenue from state and federal transfers, while the share averaged about 22% in metropolitan cities.  Reduction in aid to counties and school districts –  a function of unprecedented and chronic state budget shortfalls over the last decade – likely also had a disproportionate effect on non-metro Minnesota.

Statistics maintained by the Center on Budget and Policy Priorities, the Minnesota Budget Project, and Minnesota 2020 show that Minnesota holds the dubious distinction of leading the nation in government cutbacks, both in the scale of income and property tax cuts a decade ago, and in reducing public sector spending to balance the ensuing budget shortfalls.  Down from typical rankings of well above average or in the top ten in state-local expenditures per capita, Minnesota most recently ranked 32nd among the states in total state-local expenditures as a percentage of income.

Economies of scale are a crucial explanatory factor for higher public costs in rural areas.  It simply costs more per capita to maintain a highway and farm-to-market road system through a sparsely populated rural farm region than it does to provide transportation in a densely populated urban core.  The same is true for building and maintaining schools, libraries, human service systems, nursing homes and other essentials for a safe and civilized life.


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