Minnesota

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.

Download Printable State Report Card

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 presented here are taken from the 2021 Volcker Alliance report, Truth and Integrity in State Budgeting: Preparing for the Storm, which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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