8 posts from March 2014

Minnesota’s population projections: Older but hipper?

Minnesota is getting more urban and older.

Those are just two conclusions from population projections recently released by the Minnesota State Demographic Center. The highest population growth rates between 2015 and 2025 are expected generally in counties along the St. Cloud-Twin Cities-Rochester corridor, while counties in the northeastern and southwestern parts of the state are expected to have relatively lower population growth rates (see map, left).

Given their large size, metropolitan counties in this same corridor also will see the largest numerical gains (see map, right). Population in the state’s top five most-populated counties is expected to rise by 175,000 between 2015 and 2025, accounting for over 50 percent of all population gains in the state.

MN population maps 1-2 -- 3-28-14

Statewide, another big demographic trend is the projected aging of the population. Between 2015 and 2025, the number of residents 65 years of age and over is expected to rise as a share of total population, while the share of working-age population ages 20 to 64 is expected to fall across all counties in Minnesota. By 2025, over 30 percent of the population in the northeastern counties of the state will be age 65 or over.

MN population map 3 -- 3-28-14

A budget breather: FY2013 more favorable to state budgets

State lawmakers have the difficult task—aided by forecasts—of setting budgets based on expected tax revenues and expenditures for the coming year. Changing economic conditions mean they come close but often miss the mark, sometimes substantially.

In fiscal year 2013 most Ninth District states missed on the favorable side, with higher revenues and lower expenditures relative to the approved budget (see Chart 1).

State budgets CH1 -- 3-25-14

Much of the higher revenue came from rising individual and corporate income tax collections. For instance, Minnesota and Montana saw general fund revenues exceed the budget by $500 million and $244 million, respectively. In both states, better than 90 percent of the variance came from higher corporate and individual income tax receipts. In the case of North Dakota, income tax collections were up 13 percent ($169 million) over the 2011-13 biennium.

On the expenditure side, public spending was also lower than budgeted in district states. A large part of the savings came from lower expenditures on health and human services. In Minnesota, for example, spending by the state’s Department of Human Services was $201 million lower than budgeted; more than two-thirds of that savings came from the Medical Assistance program. South Dakota’s actual expenditures fell $33 million short of budgeted figures, almost a third of which came from lower-than-planned spending by the Department of Social Services.

Savings in North Dakota, by contrast, came from the Department of Transportation, where expenditures were about $160 million (60 percent) lower than budgeted. The only district state that did not see expenditures come in lower than budgeted was Montana. General fund expenditures there exceeded the original budget by $160 million, most of which came from higher spending on education.

Many of the district’s larger cities have also experienced better-than-expected finances in fiscal 2013 (see Chart 2). Billings, Mont., and Sioux Falls, S.D., have both posted higher revenues and lower expenditures than budgeted. Though FY2013 results are not yet out for Minneapolis, the largest city in the district expects actual revenues to exceed budgeted amounts by $17 million based on year-to-date Q3 data.

Going forward, growing local economies are leading to higher revenue projections. Approved budgets for FY2014 show higher general fund revenues for St. Paul, Sioux Falls and especially Minneapolis, which expects budget revenue to increase by $95 million, or 26 percent.

In all of this analysis, it is important to keep in mind that budget versus actual comparisons are based on the cash method of accounting, which may not indicate the true strength of state finances if, for instance, large amounts of debt have been issued or major capital projects started during the fiscal year.

Even taking this method into account, state finances have clearly improved in 2013. One measure is net position, which is the difference between a state’s assets and liabilities, including capital assets and long-term obligations. Changes in net position indicate whether the financial position of the state is improving or deteriorating, and in FY2013, all district states posted positive increases in their net positions, particularly North Dakota and Minnesota (see Chart 3).

State budgets CH2&3 -- 3-25-14

Then and now: Labor markets in Ninth District counties

Unemployment rates in the majority of District counties were higher in 2013 compared with 2007, the year before the Great Recession (see map). Unemployment rates in several counties in the eastern and western parts of the district were more than one percentage point higher in 2013 compared with 2007. Meanwhile, most counties in western North Dakota benefiting from the energy boom posted decreases in unemployment rates.

County unemployment map -- 3-24-14

Overall performance can also be seen in Charts 1-6, which compare 2013 unemployment rates with rates in 2007. Dots above the 45-degree line indicate the unemployment rate in 2013 was higher than prior to the recession in 2007. Dots below the 45-degree line indicate that the unemployment rate in 2013 was lower than the rate in 2007. In each figure the respective state’s counties are highlighted in red.

North Dakota has the largest share of counties with lower unemployment rates in 2013 than in 2007. Meanwhile, unemployment rates in Upper Peninsula of Michigan counties were all higher in 2013, and have been generally higher during this period than most other district counties.

County unemployment charts 1-6 -- 3-24-14 -- 3-24-14

Per capita income race: It’s North Dakota by a length

Personal income growth slowed last year for many states. And then there is North Dakota.

Nationwide, personal income increased by 2.6 percent last year, down from 4.2 percent in 2012, according to estimates from the U.S. Bureau of Economic Analysis. While every state saw total personal income rise at least 1.5 percent, North Dakota was doing laps around the rest of the field with 7.6 percent growth, almost double the next fastest rate (Utah, 4 percent). Among Ninth District states (highlighted in dark red in the chart), South Dakota saw the smallest increase, at 1.8 percent.

In fact, North Dakota has been among the leaders in income growth for more than a decade. From 2003 through 2013, personal income in the state has risen at a compound annual rate of 6.8 percent (not adjusted for inflation), according to BEA figures. That’s 50 percent faster than the next closest state (Louisiana, 4.45 percent). Other district states saw annual compound growth of between 2.3 percent (Michigan) and 3.9 percent (South Dakota). Over this period, North Dakota has climbed from 37th in per capita income in the country to third ($57,000), behind only the District of Columbia and Connecticut.

BEA personal income 2013 Ch1

Foreign students helping to meet demand for STEM graduates

Nationwide and in the district, there’s widespread concern that colleges and universities aren’t producing enough STEM (science, technology, engineering and mathematics) workers.

Whether or not the district faces a STEM crunch—an inadequate supply of STEM graduates to meet employer demand—students from other countries account for a significant and rising share of STEM degrees awarded by higher education institutions in the region.

In 2012, about 7 percent of bachelor’s degrees awarded by district institutions in STEM fields such as computer science and engineering went to international students, according to the National Center for Education Statistics (see chart). There was marked variation among states, with North Dakota posting a foreign-awards rate almost five times higher than South Dakota's. The U.S. average was 5 percent.

The share of STEM bachelor’s degrees earned by international students has increased since the Great Recession, outpacing overall growth in foreign four-year degrees. The proportion of STEM master’s degrees and doctorates earned by foreign students is much higher—about 40 percent districtwide—but has declined slightly over the past decade.

International college enrollment has risen in the district since the mid-2000s, slowed only briefly by the recession. Many foreign students, including those from countries such as China and Korea that score high in math and science on international tests, opt to pursue STEM majors. U.S. students are less likely to declare majors in STEM fields—hence, efforts by educators, employers and others to increase the number of homegrown STEM graduates.

For much more on STEM education and international students, watch for the upcoming April issue of the fedgazette.

Foreign STEM degrees -- 3-12-14

March madness: ACA enrollments racing to sign-up goal

The March 31st deadline to sign-up for private health insurance plans as part of the Affordable Care Act is fast approaching, and enrollments in some states are sprinting toward their projected goals while others are lagging, according to data released last week by the U.S. Department of Health and Human Services.

As of March 1, enrollments in Michigan and Wisconsin are at 90 percent of enrollments projected by HHS before the new law’s launch (see chart). In contrast, fewer than 7,000 people have enrolled in South Dakota, or just 36 percent of its 19,000 projection. Minnesota is the only district state that constructed its own health plan exchange (all others are using the federal healthcare.gov exchange). Enrollment in private plans to date through the MNsure exchange was just 48 percent of the goal of 67,000.

States and the federal government are also keeping a close eye on the number and proportion of young people signing up. For health insurance markets to work efficiently, the number of younger (and healthier, actuarially speaking) enrollees has to balance out the number of older, less healthy enrollees. It was originally estimated that 18 to 34 year olds would make up 35 to 40 percent of all enrollees. So far, it’s just 25 percent, and has remained fairly consistent in monthly reports. Among district states, only about one in five Wisconsin enrollees are in this young age bracket, while South Dakota has one of the highest rates, at 29 percent.

ACA March update -- 3-17-14

Stop being so negative: Rising prices help underwater mortgages

Last year is generally regarded as a strong year for housing, with improved activity in starts for new single-family units, higher sales of existing homes and rising prices. Those rising prices are good not only for sellers, but for existing homeowners with a mortgage, because rising prices mean more equity.

Last year saw a dramatic drop in the percentage of mortgages with negative and near-negative equity, according to CoreLogic, a property information, analytics and services company. Negative equity is when the balance of the mortgage is more than the value of the home; near-negative equity has a loan-to-value ratio of between 95 percent and 100 percent. Nevada, for example, saw a 41 percent decline in negative and near-negative equity in 2013. The bad news for Nevada is that its final rate of 33.5 percent was still the highest in the country (see chart).

Ninth District states fare comparatively well on mortgage equity measures. North Dakota not only has the lowest rate of mortgages with negative and near-negative equity, it has held the top spot for two consecutive years. Montana holds the fourth-best ranking, and both states saw small improvements in 2013. Minnesota ranks 21st in the country and saw the percentage of underwater and nearly underwater mortgages drop from 21.5 percent to 13.2 percent. Wisconsin’s 2013 rate is still comparatively high and saw only modest improvement over 2012. While Michigan continues to have one of the highest rates in the country, it saw the fourth-best improvement of any state in 2013. No data were available on South Dakota.

Negative equity -- 3-13-14

Census says: Bakken growth floating a lot of boats

It’s official: Williston and Dickinson, N.D., registered two of the nation’s highest rates of growth in both population and aggregate income for population centers with at least 10,000 people.

That’s according to new American Community Survey (ACS) five-year estimates, released in December by the U.S. Census Bureau. The latest estimates, which are derived from surveys conducted over a five-year period spanning 2008 to 2012, confirm that population and income growth in the Bakken region of North Dakota and Montana is rapid and widespread.

Williston’s rates were, by far, the highest of all 955 of the metropolitan and micropolitan areas tracked by the Census Bureau, with a 6 percent increase in total population and a 20 percent increase in aggregate income from the 2007-2011 to the 2008-2012 estimates.

And these growth rates, while topping the list, likely understate growth in more recent years as Bakken activity accelerates, and do not include changes after 2012. For instance, in a separate data release, the Census Bureau estimated Williston’s population changed by 25.3 percent from April 1, 2010, to July 1, 2012.

The ACS five-year estimates, while not as timely as other data sources, report a wealth of demographic and economic information at the Census tract level. These tracts generally have a population size between 1,200 and 8,000 people. The 13-county Bakken region has 36 Census tracts, all of which are considered non-metropolitan because they do not overlap with a Census designated major metropolitan area. An analysis of median family incomes reveals that Williston and Dickinson have registered large gains, but so too have the more rural regions of the Bakken (see Figure 1).

In 2006-2010, only three Bakken tracts had a median income of 120 percent or more of the statewide (non-metro) median. However, just two years later, 10 additional Bakken tracts surpassed this 120 percent threshold to be classified as upper-income. Over this period, all but one of the Bakken Census tracts improved their median income position (in other words, shifted right in their distribution in Figure 1 into higher income ratios).

 Bakken income Fig 1 -- 3-6-14

 The distribution of growing income can also be seen geographically, as more Census tracts shift into the darker blue upper-income category (see map).

But not all Census tracts improved their income position. In fact, one Census tract, on the northwestern edge of the Fort Berthold Indian Reservation, remained low-income, or less than 50 percent of the statewide non-metropolitan median (see red-shaded tract). The median family income reported in this tract was the only one in the Bakken region whose five-year average dropped from 2007-2011 to 2008-2012, and it has fallen in each of the last three ACS five-year averages. However, for the Fort Berthold reservation as a whole, incomes have been rising at rates similar to the rest of the region.

Bakken income Fig 2 -- 3-6-14

Broadly speaking, ACS data also imply that incomes are keeping up with rising rents. As noted above, Williston was at the top of the national list for population and income growth, with Dickinson not far off the pace. However, neither city was in the top 10 nationally for growth in median rent (despite robust rent increases of 9 percent and 8 percent, respectively, in Williston and Dickinson). As a result, ACS estimates imply that the percentage of renter households considered highly burdened (housing costs greater than 30 percent of income) in the Bakken actually declined from an average of 34 percent of renters in 2006-2010 to an average of 31 percent in 2008-2012. Over that same period, the proportion of highly burdened renters increased from 45 percent to 46 percent in the non-Bakken portion of Montana and decreased from 42 percent to 40 percent in the non-Bakken portion of North Dakota.

However, other evidence points to rising housing burdens in the Bakken. Median rent for all renter-occupied housing units averaged $534 in Williston during the five-year period 2008-2012, according to ACS estimates. But much higher rents were recently reported for at least one segment of the Williston rental market.

According to a recent Apartment Guide blog post, Williston had the highest average entry-level rent in the nation, at $2,394. Entry-level rents for each city were estimated by averaging the rents of the least expensive rental units of each apartment community listed on apartmentguide.com. While the Apartment Guide numbers are not representative of the entire rental market, they are more current than those reported in the ACS. To the extent that Apartment Guide’s estimates reasonably reflect current price pressures in the broader rental market, future ACS rental figures will likely show significant increases in rents and rental burdens in Williston and the Bakken.