July 11, 2017

#24 | Ranking the States by Fiscal Condition: Minnesota

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Summary

On the basis of its fiscal solvency in five separate categories, Minnesota ranks 24th among the US states for its fiscal health. Minnesota’s short-run position is better than the average among states. Minnesota has between 2.04 and 2.73 times the cash needed to cover short-term obligations. Revenues exceed expenses by 5 percent, and net position improved by $365 per capita in FY 2015. On a long-run basis, Minnesota has a net asset ratio of 0.05, indicating that there are assets remaining after debts have been met. Long-term liabilities are 35 percent of total assets. Total primary government debt is $9.11 billion, or 3.3 percent of state personal income. Unfunded pension liabilities, on a guaranteed-to-be paid basis, are $100.11 billion, or 36 percent of state personal income.

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Key Terms

  • Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. (Minnesota ranks 24th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Minnesota ranks 15th.)
  • Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (Minnesota ranks 22nd.)
  • Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? (Minnesota ranks 40th.)
  • Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities and OPEB liabilities compared to the state personal income? (Minnesota ranks 33rd.)

For a complete explanation of the methodology used to calculate Minnesota's fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings

To read all our work on Minnesota, go to mercatus.org/states/minnesota.