State Budget Practice Report Cards and Budget Resource Guide
Until 2019, Minnesota did not fund state worker pensions in line with actuarial recommendations—a failure that kept it to a C average in legacy costs from fiscal 2015 through 2019. But that grade masks several improvements the state made in the last two years of the period.
In 2019, annual pension funding was aligned with the actuarially determined contribution for the first time. In addition, a 2018 agreement with retired teachers and local government employees to reduce certain benefits helped cut Minnesota’s unfunded pension liability by $3.4 billion. While the state’s pension funding ratio was 63 percent in 2017, it rose to 82 percent in 2018 and stayed at that level in 2019, 11 percentage points above the total for all states. The state has only a modest liability for other postemployment benefits (OPEB), primarily health care, and can safely fund them on a pay-as-you-go basis.
Despite shortchanging annual pension contributions before 2019, Minnesota did not defer current costs into the future in each of the years studied. By consistently avoiding a variety of one-time measures that other states routinely use to achieve balance, the state earned a top A average in budget maneuvers.
Minnesota also averaged an A in reserve funds, with solid policies concerning disbursements and replenishments for its budget reserve and cash flow accounts. Like nineteen other states, Minnesota links historical revenue volatility and reserve fund policies. It had $2.5 billion in rainy day savings in 2019, an amount equivalent to 10.7 percent of general fund expenditures.
To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.
The report cards found here contain grades of the state's budgetary practices during the fiscal years of 2015 through 2019. Each state received marks in five critical categories, based on their adherence to best practices in several key budgeting indicators. The five categories covered methods used to achieve budgetary balance as well as how budgets and other financial information are disclosed to the public.
States received grades of A to D-minus (there are no “failed states”) for their procedures in estimating revenues and expenditures; their use of one-time actions to balance budgets; how they oversee and use rainy day funds and other fiscal reserves; the adequacy of their funding of public worker retirement and other postemployment benefits; and the quality of transparency of budget and related financial information. The grades are based on research conducted by public finance and budgeting professors and students at eight US schools of public administration or policy. The universities’ research efforts were augmented by Volcker Alliance staff, data consultants at Municipal Market Analytics, and special project consultants Katherine Barrett and Richard Greene.
State Budget Sources
State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses is a resource published by the Volcker Alliance designed to help public officials, policy advocates, journalists, academics, and concerned citizens fully understand the critical fiscal decisions that governors and legislators must make. The guide includes the links below to budgets for this state as well as legislative analyses of budget bills and treasurers’ or comptrollers’ monthly state cash-flow statements; capital spending plans; reports on public-worker pension funding and returns; and reports by local and national fiscal research organizations, bond rating firms, and associations of state fiscal and finance officials.