+ Demographic

Changes and

the State

Budget

Presentation to the Legislative Commission on Planning

and Fiscal Policy

Susan Brower, State Demographer

March 4, 2013 This document is made available electronically by the Minnesota Legislative Reference Library as part of an ongoing digital archiving project. http://www.leg.state.mn.us/lrl/lrl.asp

+ Major demographic changes that will

impact the budget

The aging population will place new pressures on the state budget, especially in the areas of health and long-term care

The retirement of the baby boomers will reduce labor force growth and potentially economic growth.

Our growing diversity requires attention, especially when there will be fewer workers relative to each retiree

Our state’s economic competiveness is a function of the quality of workforce

Minnesota’s water resources will become an increasingly important asset for our state’s population growth and economic competitiveness

+ Number of additional older adults will

increase substantially in next 20 years

Sources: U.S. Census Bureau and Minnesota State Demographic Center

85 55

71 67 47

91

- - - - -

1950s 60s 70s 80s 90s 00s 10s 20s 30s 40s 2050s

Change in older adults, age 65+ (Thousands)

+ Number of additional older adults will

increase substantially in next 20 years

85 55 71 67

47

91

285

335

97 66 56

1950s 60s 70s 80s 90s 00s 10s 20s 30s 40s 2050s

Change in older adults, age 65+ (Thousands)

Sources: U.S. Census Bureau and Minnesota State Demographic Center

+ A portrait of Minnesota, by age, 2011

0 100,000 200,000 300,000 400,000 500,000

Under 5 5 to 9

10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79 80 to 84

85+

Total Population

Minnesota, 2011

Baby Boomers:

Age 47-65

Age 65

+ MN’s total 65+ population overlaid on

future biennia

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

2000

2005

2010

2015

2020

2025

2030

2035

2040

2045

2050

2055

Source: Minnesota State Demographic Center Projections, Revised Jan 2013

+ Increasingly our demographics will

change the demand for services

K-12

Education

42%

Health &

Human

Services

31%

Higher

Education

8%

All other

areas

19%

Medical Assistance Expenditures:

25% of GF spending (8.5 billion)

Medical Assistance Expenditures

for the Elderly and Disabled: 16%

of GF spending (5.5 billion)

MA expenditures include basic

care, long-term care waivers and

long-term institutional care

General Fund Expenditures

FY 2012-2013 Within Health & Human Services

Sources: Minnesota Management and Budget, February 2013. House Research, Long-

Term Care Services for the Elderly, November 2012

Conclusion from 2008:

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 & All OtherAn

nu

al A

ve

Gro

wth

2008

-2033

General Fund Spending Outlook, presentation to the Budget Trends Commission,

August 2008, Dybdal, Reitan and Broat

+

18-24

65+

5-17

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

1950

1960

1970

1980

1990

2000

2010

2020

2030

2040

2050

2060

For the first time in MN history:

More 65+ than school-age by 2020

+ Medical expenses rise considerably

after age 65

$1,769 $1,814

$3,230

$6,429

$10,274

89% 85%

76%

89% 96%

U.S., 2010

Average annual expense Percent with a medical expense

Source: Medical Expenditure Panel Survey, 2010

+

Source: Stone, 2000

Need for long-term care is substantial

after age 85

+ A large share of baby boomers don’t

know how they will cover the cost of

their own long-term care

Source: Transform 2010 Survey, Minnesota Department of Human Services

Plans to pay for long-term care

Minnesota Baby Boomers, 2010

+ As share of older adults grow, working-

age shrinks and under 18 group is

unchanged

24%

63%

13%

2010

Under age 18

Age 18-64

Age 65+

24%

59%

17%

2020

Under age 18

Age 18-64

Age 65+

24%

55%

21%

2030

Under age 18

Age 18-64

Age 65+

MN population by age group share, 2010-2030

Source: MN State Demographic Center projections

+ MN’s labor force growth is projected to

slow

1.4% 1.4%

0.8%

0.4% 0.3% 0.3%

0.2%

0.4% 0.5%

1980 1990 2000 2010 2015 2020 2025 2030 2035

Average Annual Labor Force Growth,

1980-2035

Source: MN State Demographic Center projections

+ Recap: Budget implications of aging

Age brings rising health care costs & long term care needs

Anticipated enrollment and spending pressures in public

programs serving older adults, specifically 3 areas of Medical

Assistance (MA):

Basic Care (as a supplement to Medicare)

Elderly Waiver

Nursing Facilities

Potential reduction in income tax collections

Slower labor force growth could mean slower growth in GDP

+ MN: Largest growth among Asian, Black

and Hispanic groups by 2030

Source: Minnesota State Demographic Center

60,300

223,300 264,900 258,200

84,300 63,800

358,900

419,500

491,700

128,000

American

Indian

Asian Black Hispanic Two or More

Races

20102030

+ Poor outcomes

after 6 years of

high school for

many students

of color

22%

7%

21%

15%

5%

17%

12%

14%

4%

8%

6%

Percent of students who dropped

out after 6 years of high school, by

subgroup Minnesota, 2011

Two fastest growing

demographic groups in MN

Source: MN Department of Education

+ Wide disparities in educational

attainment exist among MN-born

19%

58%

37%

23%

50%

32%

0%

10%

20%

30%

40%

50%

60%

70%

American

Indian

Asian (other) Asian (SE

Asian)

Black White non-

Hispanic

Hispanic

MN-born young adults (age 25-39) with an AA

degree or higher by race/ethnicity

Source: Tabulated by MN State Demographic Center from the

Integrated Public Use Microdata Series

+ A portrait of Minnesota, by age

and race, 2011

0 100,000 200,000 300,000 400,000 500,000

Under 5 5 to 9

10 to 14 15 to 19 20 to 24 25 to 29 30 to 34 35 to 39 40 to 44 45 to 49 50 to 54 55 to 59 60 to 64 65 to 69 70 to 74 75 to 79 80 to 84

85+

White (non-Hispanic) and Of Color Population

White (non-

Hispanic)

Of Color

Source: 2011 Population Estimates, U.S. Census Bureau.

Working-age

population, 2011 Working-age

population, 2021 Working-age

population, 2031

+ Recap: Implications of changing

workforce and diverse populations

Fewer school-age children relative to older adults will mean

pressures to shift resources from younger to older, but

these children will soon become our workforce

Fewer workers relative to older adults puts a premium on

highly educated and skilled workers — to fuel continued

economic growth and to pay for needed public services

Poor educational outcomes for our fastest-growing

populations of color jeopardize our economic

competitiveness and quality of life for all ages

+ Water resources and demographic,

economic growth

Water resources are essential for just about every

economic activity.

The fastest growing areas of the U.S. are also those

areas where ground water storage has declined most

markedly

Minnesota has an opportunity to gain relative to

other areas in the U.S. through the stewardship of its

water resources

+ Major demographic changes that will

impact the budget

The aging population will place new pressures on the state budget, especially in the areas of health and long-term care

The retirement of the baby boomers will reduce labor force growth and potentially economic growth.

Our growing diversity requires attention, especially when there will be fewer workers relative to each retiree

Our state’s economic competiveness is a function of the quality of workforce

Minnesota’s water resources will become an increasingly important asset for our state’s population growth and economic competitiveness

+

Susan Brower susan.brower@state.mn.us