the minnesota state colleges and universities system is an equal opportunity employer and educator....
TRANSCRIPT
The Minnesota State Colleges and Universities system is an Equal Opportunity employer and educator.
State of Minnesota
Economic Outlook:
Implications for the
System
Minnesota State Colleges and Universities
January 4, 2010
Slide 7
State of Minnesota forecast revenue: fiscal years 2010-2011
($ millions)End-of-Session
November Forecast $ Change % Change
Individual $14,927 $14,099 $(827) (5.5)
Sales 8,548 8,516 (32) (0.4)
Corporate 1,219 1,273 54 4.4
Motor Vehicle 92 99 7 7.7
Other 6,356 5,999 (357) (5.6)
Total $31,142 $29,986 ($1,156) (3.7)
Source: November Economic Forecast, Minnesota Management and Budget, November 2009.
Slide 9
Problems Remain for 2012-13 Biennium
$ millions FY2012 FY2013 FY2012-13
Revenues $16,023 $17,195 $33,218
Expenditures 19,960 18,964 38,644
Difference $(3,657) $(1,769) $(5,426)
Assumes:GAMC discontinued. Restoration adds $928 million.K-12 Aid shift restored. Delay saves $1.167 billion.No repayment of K-12 property tax recognition shift. Repayment would cost $562 million.No discretionary inflation. Inflation at CPI (2.1 percent in 2012 and 1.9 percent in 2013) would increase spending by $1.179 billion.
Source: November Economic Forecast, Minnesota Management and Budget, November 2009.
Slide 10
Economic/Demographic Environment Has Changed
Short run economic cycle has merged with long run demographic cycle.
We have entered the Age of Entitlement—economic growth in the next 25 years will be about half what it was in the past 25.
State revenue growth will slow while spending pressures will accelerate.
This is a national/global issue.
Source: “But…What About Tomorrow?”, presentation to LCPFP Balanced Budget Subcommittee, October 2009.
Slide 11
Minnesota Faces a Fiscal Trap
The issue is a long run, structural one— short run solutions will not solve the problem.
Trend growth alone will not be sufficient. Fundamental changes are necessary.
Revenue growth will slow. Efforts to increase it will be met with resistance.
Spending pressures will increase driven largely by issues of aging and health.
State spending will shift its focus from education, infrastructure and higher education to care and support of the aging.
Source: “But…What About Tomorrow?”, presentation to LCPFP Balanced Budget Subcommittee, October 2009.
Slide 12
2007-09 Recession Permanently Reduced the Base for Future Revenues
Source: “But…What About Tomorrow?”, presentation to LCPFP Balanced Budget Subcommittee, October 2009.
Slide 13
Next 25 Years--State Revenue Growth Rate Projected To Slow
6.8%
3.9%
5.5%
3.4%2.8%
1.2%
0%
1%
2%
3%
4%
5%
6%
7%
8%
2001 2033
5 Y
ea
r C
om
pu
nd
Gro
wth
Ra
te
TotalPer CapitaReal Per Capita
Budget Trends Commission, 2009
Slide 14
From 2010 to 2020, Minnesota will see large increases age 50s and 60s
20,15036,190
47,3305,050
-30,680-9,980
47,95061,920
-2,680-63,650
-42,31054,240
102,960112,540
91,37041,400
8,44016,500
0-45-9
10-1415-1920-2425-2930-3435-3940-4445-4950-5455-5960-6465-6970-7475-7980-84
85+
Source: Minnesota State Demographic Center, rev 2007Numbers are rounded
Slide 15
Budget pressures will change --more 65+ than school age by 2020
0
200,000
400,000
600,000
800,000
1,000,000
1,200,000
1,400,000
1950 1960 1970 1980 1990 2000 2010 2020 2030
18-24
65+
5-17
Census counts & State Demographer projection, revised 2007
Slide 16
If state health care costs continue their current trend, state spending on other services can’t grow
3.9%
8.5%
0.2%0%
1%
2%
3%
4%
5%
6%
7%
8%
9%
Revenue Health Care Education & AllOther
An
nu
al
Av
e G
row
th 2
00
8-2
03
3
General Fund Spending Outlook, presentation to the Budget Trends Commission, August 2008, Dybdal, Reitan and Broat
Slide 17
How do we get out of this fiscal trap?
Revenue growth will depend increasingly on per capita economic growth.
Future economic growth will depend increasingly on increasing productivity and less on labor force size.
This plays to Minnesota’s historic strength.
Source: “But…What About Tomorrow?”, presentation to LCPFP Balanced Budget Subcommittee, October 2009.
Slide 19
Higher education share of state’s budget
Fiscal year 2011 estimate includes unallotment. Higher education includes the Minnesota State Colleges and Universities, the University of Minnesota, and the Minnesota Office of Higher Education.
Slide 20
State appropriation per FYE studentDuring past decade, appropriation per FYE student has decreased $765 (16 percent); adjusted for inflation decrease is $1,759 (36.5 percent)
Fiscal year 2011 estimate includes unallotment.
Slide 21
Minnesota state colleges and universities share of state budget
The System’s share of the state budget is 3.9 percent.
State budget deficit for fiscal years 2012-2013: $5.426 billion to $8.095 billion (if other budget pressures such as GAMC, inflation, etc., are recognized).
The System’s share of the budget deficit:
Solved with spending cuts only: $211.6 million to $315.7 million.
Solved with combination of spending cuts and tax increases: $105.8 million to $157.8 million.
Slide 22
Minnesota state colleges and universities strategy
Revenue growth
Tuition increase greatest potential
Enrollment growth
Enrollment growth will pressure overall revenue outlook
Productivity