Two Trends: Demographics & Globalization
As the baby boom retires, spending pressures, particularly in health care, will increase. Meanwhile, Minnesota’s workforce (i.e. primary taxpayers) will shrink in comparison to the “dependent” population. At the same time, a mobile, global economy with the fastest growing markets on the other side of the world will make it vital that Minnesota be extremely competitive – in tax burdens and public services. This isn't a partisan issue. It can't be a partisan issue, if Minnesota is going to face the twin challenges of demographics and globalization.

Baby Boom: Driving past growth, future spending
Between 1970 and 2000, Minnesota’s overall population rose from 3.8 million to 4.9 million. But the workforce grew faster. In 1970, 1.56 million Minnesotans (41 percent) were working age. By

Baby boomers swelled the workforce, driving economic growth and tax revenues. As boomers retire, the workforce will shrink, growth will slow, taxes will sag.
2000, 2.69 million Minnesotans (55 percent) were working age. By 2010, there will be a projected 3 million people working in Minnesota. State spending came along for the ride, growing from $3.5 billion for all state funds in the 1970-71 biennium to a projected $57.5 billion in 2010-11. In other words, more people making and spending more money – and paying more taxes.

In contrast, Minnesota's workforce will grow just 6 percent between 2010 and 2020, and 3 percent the following decade. Boomers will still be around. But retirees tend to have less taxable income, buy fewer taxable goods and purchase more non-taxed services. Tax revenues simply won't grow as fast in the future as they have in the past. At the same time, Baby Boomers will increase demand for public services, primarily in health care, making it difficult to restrain budget increases. Annual health care expenses for someone over 65 are about three times those for someone under 65. With the number of retirees growing more than 50 percent by 2020, health care costs will explode, even if we get a handle on premium increases. Those who have carried personal income and state spending to current levels will themselves soon begin asking for help from a proportionately smaller workforce.