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Rich State / Poor State: An Educated Minnesota Pays Big Dividends

by Invenium Viam on June 4, 2015

Breakdown-of-tax-cut

(click to enlarge)

“In a democracy, the people get the government they deserve.” Alexis de Tocqueville

 

Over in Wisconsin, Governor Walker is driving something on the order of $450 million in cuts to public education, which will result in massive lay-offs of teachers and increased class sizes for those who remain. That follows $1.85 billion in cuts to education that Walker signed into law four years ago, in 2011. And it also follows $541 million in tax cuts that Walker signed into law in March, 2014, which was supposed to generate a $1 billion surplus … oh, say … right about now, June 2015, only that didn’t happen.

 

It’s just another example of magical thinking by a Republican governor who believes with all his heart that tax cuts generate growth. And this guy thinks he has the chops to be president? Think Progress had this to say about it:

 

This week, Wisconsin kicked off a series of hearings on Governor Scott Walker’s proposed budget, which would slash about $300 million from the University of Wisconsin system over two years, funnel hundreds of millions to build a pro-basketball stadium, and cut deeply from funds for health care, food stamps and public media.

And it’s not just higher education feeling the pain.

Public primary schools across Wisconsin will lose about $127 million in education aid next year, largely by scrapping a special $150 per-student fund that Wisconsin school districts received over the past two years.

The struggling Milwaukee public schools are set to lose more than $12 million.

The deep cuts are part of the Governor’s attempt to fill a more than $1.6 billion budget hole. Though lawmakers on both sides in the aisle in the state have pleaded with the Governor to consider ending some of the state’s massive tax breaks for corporations and the wealthy, he has largely refused to do so. [Emphasis mine]

 

Here in Minnesota, with the state looking at a balanced budget and a $1.85 billion surplus thanks to Governor Dayton’s tax increase of 2% on the wealthiest Minnesotans — which now looks like the Wisdom of Solomon by comparison with Walker — House Republicans have also looked to public education to trim the cost of government, offering a paltrey 0.5% increase in education spending to the tune of about $153 million, which school districts across the state said inevitably would result in teacher lay-offs and larger class sizes. Of course, the GOP wanted nothing at all to do with Universal pre-K. Governor Dayton was forced to capitulate that point or risk a shut-down.

 

The irony is that Republicans love to argue that government needs to be more efficient. And they constantly point to the business model as an example, always happily ignoring the fact that business and government are two entirely different human endeavors, with entirely different goals and objectives, methods of operation, etc. On those rare occasions when something of a rough parallel can be drawn, however, Republican legislators seldom heed their own advice.

 

Take for example the ROI Minnesota now enjoys as a direct result of our long-term investments in an educated workforce over the past decades. Business routinely invests significant capital in educating workers: from the initial orientation, to training seminars in new methods and procedures, to conferences and symposiums, to performance reviews, to paying for continuing education, and even in some cases for degree coursework. Business knows that the better educated their workforce is, the more productive, efficient, effective, creative and competitive it will be. The same thing is true of an educated state population. A state with a high percentage of educated people creates more wealth, moves more goods, generates more business activity, underwrites more business expansions, and supports more new business start-ups, than states without an educated population. So investing in educating the population is a good long-term investment that stimulates economic development and growth and that genuinely supports a strong business climate.

 

The following tables illustrate the point dramatically. On September 18 of last year, 24/7 Wall St., a financial news and opinion website, published an analysis of the ten most educated states and the ten least educated states, based on the percentage of the working population with college degrees, as well as the ten richest states and the ten poorest states, based on median incomes. All data was sourced from the US Census Bureau’s statistics for 2013. For bona fides24/7 Wall St. is rated by Gawker as one of the “25 Most Valuable Blogs in America.” ContentMatters rates it one of the “Ten Best Financial Blogs.” I took the data published there and organized it into table format for purposes of comparison. The relationships between an educated workforce and the wealth or poverty of a state are conclusive.

 

 

It should be immediately clear that, broadly speaking, states with the highest percentages of college-educated workers also have the lowest overall poverty rates. Those states also broadly correlate to the richest states based on median annual income. It should also be clear that, broadly speaking, states with the lowest percentage of college-educated workers also have the highest poverty rates. Those states also broadly correlate to the poorest states based on median incomes.

 

Of the ten most educated states (including Minnesota), seven are included among the richest states, based on median income. The richest states also have the lowest unemployment rates. Of the ten least educated states, eight are included among the poorest states based on median income. Broadly speaking, those states also have the highest unemployment rates.

 

Clearly, an educated population brings enormous benefits to a state’s economy, as well as to its business community, and it appears that an educated population also serves to buffer the economic impact of recession for the less educated workers in a state. For example, Minnesota was one of several rich states with an unemployment rate that ran about 2 percent lower on average than the national rate. It would be interesting to know how that lower jobless rate has translated to reduced costs of government and an improved business climate since September, 2008 when the Great Recession began. Inarguably, it has translated into far less pain for the residents of Minnesota, for our statewide business community, and for state government, than would otherwise have been the case.

 

Since business is one of the direct benefactors of an educated workforce, you’d think GOP legislators would be more than happy to invest in education from pre-K through college, particularly in a year of abundant surplus, if for no other reason than it supports the state’s business community. But no, it seems that would be too far-sighted. They’d rather follow the lead of guys like Governor Walker and Governor Brownback and drive the state in the ground with misinformed and misguided ideas about how state economies work.

 

Most-Educated-States

Table 1 – Most Educated States (click to enlarge)

 

 

 

 

 

 

 

 

Least-Educated-States

Table 2 – Least Educated States (click to enlarge)

 

 

 

 

 

 

 

 

 

Richest-States

Table 3 – Richest States (click to enlarge)

 

 

 

 

 

 

 

 

Poorest-States

Table 4 – Poorest States (click to enlarge)

 

 

 

 

 

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