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Minnesota’s Long Term Fiscal Challenges

Minnesota’s Long Term Fiscal Challenges. Tom Stinson, State Economist Tom Gillaspy, State Demographer December 2007. Minnesota Is at an Inflection Point. Demographic changes, globalization and technological advances will alter Economic structure Infrastructure and social investment needs

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Minnesota’s Long Term Fiscal Challenges

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  1. Minnesota’s Long Term Fiscal Challenges Tom Stinson, State Economist Tom Gillaspy, State Demographer December 2007

  2. Minnesota Is at an Inflection Point • Demographic changes, globalization and technological advances will alter • Economic structure • Infrastructure and social investment needs • Entitlement and related spending • Government resources • Minnesota may need to prepare for change

  3. Budget Priorities Will Change: More 65+ Than School Age by 2020 Census counts & State Demographer projection

  4. Budget Priorities Will Change: More 65+ Than School Age by 2020 Census counts & State Demographer projection

  5. Budget Priorities Will Change: More 65+ Than School Age by 2020 Census counts & State Demographer projection

  6. Budget Priorities Will Change: More 65+ Than School Age by 2020 Census counts & State Demographer projection

  7. State Taxes Paid by a Married Couple Before and After Retirement

  8. Aging Is the Dominant Trend in Minnesota and the Nation • It is not normal for a society to age • Dramatic changes are coming over the next 4 years • Sharp increase in retirements will begin in 2008 • In 2011, the number of 65th birthdays will increase substantially

  9. From 2005 to 2015, fastest growth in Minnesota will be for ages 55 to 69 Source: Minnesota State Demographic Center Numbers are rounded

  10. The Number of Workers Turning Age 62 Will Jump 30 Percent in 2008 2005 ACS

  11. Minnesota’s Dependency Ratio Is at a Record Low Dependency Ratio= Number of children (0-14) plus number of elderly (65+) Divided by the population 15 to 64 time 100

  12. The Proportion of Seniors Will Increase Under 15 and 65+ per 100 age 15 to 64

  13. Aging of Society Will Impact Private and Public Spending • Health care spending will increase • Shift in government priorities to issues of aging and health • Older voters often more fiscally conservative • State tax base will be affected as baby boom reaches retirement age

  14. Health Care Will Grow as a Proportion of GDP Through 2025

  15. CBO Expects Medicaid Spending to Double by 2016, State Tax Revenues Will Not Keep Up

  16. Aging is not the only concern

  17. By 2020 Minnesota Will Add About ¾ Million People And 1/3 Million Households State Demographer projection revised 2007

  18. Childless Couples And 1-person Households Projected To Grow Minnesota State Demographic Center projections

  19. Upper Midwest Becoming More Diverse But Still Less Than The Nation Note: Population except white alone, not Hispanic, 2006 Census Bureau estimate

  20. Minnesota’s Foreign-Born Population Increasing Since 1970 Source: Census, 2006 ACS

  21. Projected change in Minnesota income by type (preliminary results) Minnesota State Demographic Center

  22. State Taxes Paid by a Married Couple Before and After Retirement

  23. An Increasing Proportion of Consumption Goes for Services

  24. Much of Minnesota’s Tax Base is More Volatile than GDP

  25. Minnesota Has Been Very Successful(Especially For a Cold Weather State at the End of the Road) Our economic growth rate has exceeded the national average Our population growth rate leads the frost belt We rank with the leaders on many social and economic indicators

  26. Minnesota’s Current Success Is Due to Decisions Made 50+ Years Ago Private sector and public sector decisions established the foundation for growth in Minnesota’s economy Wise investments were made Dealing with challenges accompanying the baby boom was a key to our success

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