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Minnesota's School Investment Drops Below National Average

September 29, 2009 By Jeff Van Wychen, Fellow and Director of Tax Policy & Analysis

These findings are based on public elementary and secondary current spending per pupil as reported in annual "Public Education Finances" [PDF] reports prepared by the U.S. Census Bureau.  The most current report is for fiscal year (FY) 2007.  As defined by the Census Bureau, "current spending" comprises "current operation expenditure, payments made by the state government on behalf of school systems, and transfers made by school systems into their own retirement funds. This classification is used only in Census Bureau education reports in an effort to provide statistics for users who wish to make interstate comparisons."

In FY 1997, Minnesota's current spending was $9,078 per pupil in constant FY 2007 dollars.  Over the next six years, real per pupil education spending increased at an annual average rate of 1.3 percent, reaching $9,835 in FY 2003.  With the arrival of Governor Pawlenty and his "no new tax" regime, real per pupil spending declined at an annual average rate of 0.8 percent over the next four years, hitting $9,539 in FY 2007.  Since 2003, large school property tax increases have not been sufficient to offset real per pupil state aid cuts; thus, the total dollars available to fund school districts declined.


Current spending information from the U.S. Census Bureau is not available beyond FY 2007.  However, based on information gleaned from Minnesota sources, it is apparent that the decline in real per pupil school revenue that began in FY 2003 has continued through FY 2009.

Even after the decline since FY 2003, real per pupil current spending in Minnesota in 2007 is 5.1 percent greater than it was in 1997, which is an annual average growth of 0.5 percent.  However, the growth in school spending needs to be considered in the context of the growing number of special education students, an increasing concentration of non-English speaking students, costly testing requirements, and the push for class size reduction that began in the 1990s.

Over the last ten years, total U.S. real per pupil current spending increased by 13.5 percent (annual average rate of 1.3 percent), over double the growth rate in Minnesota.  Over this ten year span, Minnesota has gone from 6.6 percent above the national average in elementary and secondary school per pupil spending to 1.3 percent below.


A strong case can be made that education funding should be measured not on a per pupil basis, but per $1,000 of personal income.  Examining spending relative to personal income takes into account the higher labor costs that typically exist in high personal income states, such as Minnesota.  In addition, examining spending relative personal income measures the statewide investment in education relative to each state's ability to pay.

Minnesota elementary and secondary current spending per $1,000 of personal income has gone from 6.9 percent above the national average in FY 1997 to 9.6 percent below the national average in FY 2007.  A recent report by Minnesota 2020 Education Policy Fellow John Fitzgerald demonstrates that Minnesota's rank among the 50 states in public school current spending per $1,000 of personal income has fallen from 21st in 1997 to 42nd in 2007.

Regardless of whether we are examining education spending on a per pupil basis or in relation to personal income, Minnesota's investment in education has dropped below the national average.  Eventually this disinvestment will come back to haunt Minnesota; today's school children are tomorrow's workforce.

Art Rolnick, senior vice president and director of research at the Federal Reserve Bank of Minneapolis, recently observed in a Star Tribune commentary, "Back in the late 1950s and early 1960s, when Minnesota was an economic laggard, the state made a long-term commitment to upgrade its education system.  That kind of foresight helped forge a strong economy that has lasted for decades."

Without a strong commitment to education funding, Minnesota will eventually become "an economic laggard."  We should not be penny-wise and pound-foolish by trading the state's future prosperity for temporarily lower taxes.

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