Report: 'Less investment, less return'

Minnesota has slipped behind other states in employment and personal income in recent years as it spent less on education and other government programs, according to a report released Wednesday by a St. Paul think tank.

While the report stops short of blaming declining public spending solely for lower economic performance, it argues that the slippage refutes the claims of tax watchdogs that cutting taxes and spending would improve Minnesota's competitiveness.

"The economic experiment undertaken by the advocates of 'less government' and 'no new taxes' has been a failure," said Minnesota 2020 in its report, "Minnesota's Slip Toward Mediocrity: Less Investment, Less Return."

But one tax critic, David Strom of the Free Market Institute, disputed the suggestion that a relative decline in taxes and spending contributed to diminished economic performance compared with other states.

"I think if we had kept taxes going up, we could easily have lost ... jobs due to companies leaving the state," Strom said.

Although Minnesota 2020 describes itself as nonpartisan, it was founded by former DFL legislative leader Matt Entenza. The report focuses much of its attention on developments since 2002, when Republican Tim Pawlenty was elected governor. He pledged to follow a tax restraint policy promoted by Strom.

"Minnesota 2020 ... has no credibility," said Pawlenty spokesman Brian McClung, who denounced "the ongoing whining of liberal think-tanks."

It tracks a relative decline in government spending per $1,000 of personal income from 1995 to 2006. It says Minnesota dropped from 10th to 29th during that period, with the sharpest decline occurring since 2002. Minnesota dropped from sixth in state and local taxes per $1,000 of income in 2002 to 18th in 2004, where it remained in 2005 and 2006, the report said.

Minnesota had the 14th-lowest unemployment rate in the nation in 2002 and 2003, but the 32nd lowest in 2007. The state ranked 27th in 2002 in the rate of employment growth, but dropped to 44th in 2007.

In another measure, pupil-teacher ratios in public schools, Minnesota ranked 33rd in 2002 and 40th in 2007.

The report can be viewed at www.startribune.com/a4452.