minnesota and the new normal tom stinson, university of minnesota tom gillaspy, state of minnesota...
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![Page 1: Minnesota and the New Normal Tom Stinson, University of Minnesota Tom Gillaspy, State of Minnesota July 2010](https://reader035.vdocuments.mx/reader035/viewer/2022062407/56649c985503460f9495433a/html5/thumbnails/1.jpg)
Minnesota and the New Normal
Tom Stinson, University of MinnesotaTom Gillaspy, State of MinnesotaJuly 2010
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Recent Economic and Demographic Events Have Changed the Outlook
for as Far as We Can See
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This Recession Was More Severe Than Those of 1990-91 and 2001
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The U.S. Economy Lost 8.4 Million Jobs in the Great Recession
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Total U.S. Wages Fell in 2009Quarterly Year-Over-Year
Percent Change
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Household Net Worth Fell by More Than $17 Trillion Dollars
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Minnesota Saw a 30 Percent Jump in Workers Turning Age 62 in 2008
0
10,000
20,000
30,000
40,000
50,000
60,000
7/05 to7/06
7/06 to7/07
7/07 to7/08
7/08 to7/09
7/09 to7/10
7/10 to7/11
7/11 to7/12
Year Turning Age 62
Wo
rke
d W
ith
in P
as
t 5
ye
ars
2005 ACS
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The Age Distribution Has Changed
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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
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Labor Force Growth Is About To Slow Sharply
1.52%
1.12%
0.75%
0.43%
0.10% 0.13%
0.27%
0.0%
0.2%
0.4%
0.6%
0.8%
1.0%
1.2%
1.4%
1.6%
1990-2000
2005-10 2010-15 2015-20 2020-25 2025-30 2030-35
Ave
An
nu
al C
han
ge
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World Labor Force Growth SlowingProjected Change In Working Age Population (15-64)
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
Minnesota UnitedStates
Europe China Japan Rest ofAsia
SouthAmerica
Africa
Continent
An
nu
al
% C
ha
ng
e
2000-10
2010-20
U.S. Census Bureau
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Minnesota Will Grow More Diverse; Remain Less Diverse Than The Nation
1416
19 20 22 23 25
2023
2629
3133
35
0
10
20
30
40
50
60
2005 2010 2015 2020 2025 2030 2035
Pe
rce
nt
Min
ori
ty
Minnesota Total
United States Total
Ramsey County
Twin Cities (7 cou)
State Demographer & Census Bureau projections
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Change In Minnesota K-12 Enrollment 2002-03 To 2009-10
Mn Dept of Education
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In 2006, Minnesota’s Foreign Born Workforce Was 240,000 or 8% Of The
Total Workforce
0 10,000 20,000 30,000 40,000 50,000 60,000 70,000 80,000 90,000
Less Than HighSchool
High School
Some College
Bach+
2006 ACS
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The Old Normal+ The Great Recession
+ Long Run Demographic Changes= The New Normal
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The “New Normal” Probably Means
• Higher interest rates
• Slower economic growth
• Increasing numbers of retirees
• Less consumption; more saving
• A more diverse population
• A shift in the balance between private and public sectors
• Creative destruction/disruptive innovation will change the way we deliver services
• More uncertainty about the future
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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
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Health Care Spending Jumps After 55U.S. Health Care Spending By Age, 2004
$1,855$1,074 $1,445
$2,165$2,747
$3,496
$6,694
$9,017$9,914
$3,571
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
Source: Agency for HealthCare Research and Quality, Medical Expenditure Panel Survey,data for per capita spending by age group in the Midwest. Excludes spending for long-term care institutions.
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FY 2012-13 Budget Gap Now $5.8 Billion
($ in millions) FY 2012-13
Resources $32,906
Spending 38,695
Difference ($5,789)
Inflation $1,181
Planning estimates assume:•Complete repayment of the K-12 aid deferral. Delaying repayment would save $1.163 billion•.No repayment of the K-12 Property tax recognition shift. Repayment would cost 564 million.•No continued GAMC spending. Restoring the GAMC to its former level would cost $928 million. Current agreement costs $214 million.
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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
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The Great Recession Has Been The Great Recession Has Been Blamed for Raising the Level of Social Blamed for Raising the Level of Social
AngstAngst
But What Is Really HappeningBut What Is Really Happening
Is That We Have Entered A Is That We Have Entered A
““NNeeww NNormal”ormal”
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Grieving For The “Old Normal”• Denial – “This is not happening.” “Just wait, things will
return to normal.”
• Anger -- “Who is to blame?” Rage and gridlock rule and anyone who symbolizes life, energy, progress, success, happiness, etc. is treated with resentment and mistrust.
• Bargaining – “I’ll change if this just goes away.” Somehow, we can get back to the old normal if we just return to good, ole fashioned (conservative/liberal) values.
• Depression (emotional, not economic) – “What’s the point in trying?” “We are all doomed anyway.” The certainty/finality of events is finally recognized.
• Acceptance – “It’s going to be okay.” Looking for opportunities begins.
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But Why Fear The New Normal?It Plays To Our Strengths!
Future economic growth will depend increasingly on increasing productivity and less on labor force size
Education has been the key to Minnesota’s productivity and prosperity
Future productivity increases will depend on decisions and the investments we make now
Public Sector Productivity Growth Will Be Essential
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Productivity Is Not Just Producing at a Lower Cost
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Increasing Productivity Also Means
Making things better
(improved quality)
Making better things
(innovation, new products)
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Education Is The Key To Productivity
Minnesota High School Graduation Ratio
2007-08 Mn Dept of Education 5 year graduation rate. Percent of 9th graders who graduate within 5 years
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High School Graduation Is No Longer Enough
• 70% of Minnesota job openings will require at least some college--63% nationally
• In 1973, 28% of job openings required some college
• Minnesota is the 3rd most education intensive job market in the nation
• Nationally, college degrees conferred will need to increase by 10% a year by 2018 to meet the demand for skilled workers and avoid slower economic growth
Georgetown Univ Center for Education and The Workforce
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The Fiscal Catch-22
If we don’t make the necessary public investments in human capital, research and infrastructure, then we won’t have the productivity gains needed to provide the resources to make those investments.
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“If something can't go on forever, it will stop.”
Herbert Stein, Chair President Nixon’sCouncil of Economic Advisors
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“I skate to where the puck will be, not to where it has been.”Wayne GretzkyHockey Great