Sunday, May 1, 2011

Minnesota's Parks and Trails

Minnesota has a vast system of parks and trails that include 73 parks and 1137.9 miles of trails. These parks and trails are highly popular among Minnesota residents, with overall attendance rising from 8.3 million in 2008 to 9.5 million in 2010.

The Parks System has an interesting funding system; the three main sources of expenditures at the state level are the Natural Resources Fund (at $89.3 million), the Parks and Trails Fund (at $36.6 million), and the general fund (at $21.1 million). The parks collect user fees, which go into the Natural Resources Fund, and some of those funds are then returned to the parks system. The Parks and Trails Fund is generated by the Legacy Amendment, which placed a .375% sales tax on goods in Minnesota. General Fund revenue comes mainly from general income and sales taxes.

Due to the fact that only a small portion of the budget for Parks and Trails comes from business-like user fees and charges, what results is a large subsidy for Parks and Trails. This means that the expenditures on Parks and Trails cause a large distortion to the market. Specifically, total quantity demanded is increased greatly.

This distortion is justified in that parks represent a market failure insofar as their use increases public health through recreation and exercise. Additionally, parks and trails represent a natural monopoly that could not exist without public subsidy, as the costs associated with a park cannot typically be justified business-wise. Additionally, Minnesota has been historically known as a generous state when it comes to expenditures related to quality of life issues, such as parks and trails, and though they may be somewhat of a luxury, Minnesotans are typically willing to pay the costs through taxation.

The current model of funding creates a major disconnect between those who pay for the parks and those who use them. Whereas the bulk of the funding comes from regressive sources, such as lottery tickets and sales taxes, the users of state parks disproportionately are those with higher incomes. This is the one area of Parks and Trails expenditures that should be changed: instead of the system receiving expenditures from the Natural Resources Fund and the Parks and Trails Fund, the weight of the expenditures should come from the General Fund, as to reduce the level of regressivitity currently present in the way Parks and Trails are funded.

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