Office of
Governor Mark Dayton
FOR IMMEDIATE RELEASE
July 25, 2018
Minnesota Earns AAA
Bond Ratings
Fitch Ratings, Standard
and Poor’s agree Minnesota is in prime fiscal health
With sound fiscal
management and a structurally-balanced budget outlook, national rating agencies
assign top bond ratings for the State of Minnesota
Fitch’s AAA rating
notes “Minnesota has shown significant financial resilience”
S&P’s AAA rating
“reflects our view of the state's improved financial position and recently
passed pension reform”
ST.
PAUL, MN – In separate announcements today, two national bond rating agencies –
Fitch Ratings and Standard
and Poor’s (S&P) – gave the State of Minnesota their highest “AAA”
bond ratings, affirming that Minnesota is in prime fiscal health. Today’s bond
rating announcements follow nearly eight years of sound fiscal management from
the Dayton Administration – including difficult budget cuts, the elimination of
budget shifts and gimmicks that undermined our fiscal health, the long-term
stabilization of the State’s revenues, structural budget balances into the
future, public employee pension reforms, and historic savings in Minnesota’s
Budget Reserves.
“Our
state government has made a complete financial turnaround in the past
seven-and-a-half years,” said Governor Mark Dayton. “The credit for Minnesota's
success belongs to the people of our state. I thank Minnesotans for their many
contributions to the strength of our economy and the stabilization of our
State’s budget. And I thank MMB Commissioner Myron Frans and his tremendous
staff for their steadfast commitment to improving Minnesota’s financial
management.”
“Minnesota’s
financial health is better than ever, and these AAA ratings are proof of the
progress we have made,” said Commissioner Myron Frans. “One of the key reasons
for our AAA ratings by S&P and Fitch is because of the Pension Reform Bill
that unanimously passed by the Minnesota Legislature this year. This bill not
only benefits 511,000 Minnesotans, it immediately eliminated $3.4 billion of
the state’s unfunded pension liabilities, and put the plans on a path to fully
fund pensions within 30 years the moment Governor Dayton signed it. Management
of our state pensions had long been a concern for the rating agencies, so it
was a highlight of my time as Commissioner to tell them we had taken a
significant step to achieve pension reform with bipartisan support.”
Standard
and Poor’s upgraded its rating to AAA, with a stable outlook. In its
determination, S&P notes: “The stable outlook on Minnesota reflects our
view of the state's improved financial position and recently passed pension
reform. The state has shown a commitment to actively managing its long-term
liabilities to better align its statutory funding of the pension with
actuarially determined contributions and through benefit reductions.”
S&P
also called out the state’s sound financial management and leadership, saying:
“The state has historically had very strong budget management. Minnesota has
strong policies and procedures. It was able to manage through the political
impasse between the governor and the legislature over tax reform adopted in the
fiscal 2018-2019 biennium… We have assigned a score of ‘1.5’ to the state's
overall financial management, on a scale where '1.0' is the strongest score and
'4.0' the weakest.”
To
read the full report from Standard and Poor’s, CLICK
HERE.
Fitch
Ratings upgraded Minnesota’s bond rating to AAA in 2016, after having
downgraded Minnesota’s rating to AA+ in 2011. This year, Fitch reaffirmed its
rating of AAA, with a stable outlook. In its determination, Fitch notes: “Minnesota
has shown significant financial resilience through downturns and a strong
commitment to bolstering its financial position as conditions improve.
Minnesota's economy is well-balanced, with positive wealth indicators and
innate demographic strengths. [The state is] exceptionally well positioned to
manage throughout the economic cycle while maintaining a high level of
financial flexibility.”
A
third national bond rating agency, Moody’s Investors Service, reaffirmed today
its Aa1 rating for Minnesota. In its determination, Moody’s notes: “Minnesota's
Aa1 general obligation rating reflects the state's diverse and growing economy,
supporting healthy revenue growth in recent years. The rating also reflects
improved financial management practices that have resulted in replenishment of
budget reserves and a structurally balanced budget… The state's manageable debt
and pension burden, along with recently enacted pension reform, affords the
state additional financial flexibility.”
About
Minnesota’s Economic and Fiscal Turnarounds
In
January 2011, Minnesota was still facing the economic consequences of the Great
Recession, and the state budget was a mess. Over 202,000 Minnesotans were out
of work, the State of Minnesota was facing a $6.2 billion deficit and owed
school districts $1.9 billion, and there was nothing in the State’s Budget
Reserves. Since then, Minnesota’s economy and fiscal health has greatly
improved. The chart below lays out some key comparisons of Minnesota’s budget and
economy between January 2011 and now.
|
|
THEN
January
2011
|
NOW
July 2018
|
|
Better Economy |
Unemployment was at 6.9 percent
202,000 people were out of work
|
At 3.1 percent, unemployment in Minnesota is
at its lowest rate in 18 years (as of the latest jobs
report)
Unemployment has been at or below 4 percent
for 47 straight months
Minnesota employers have added over 302,600
new jobs since January 2011
With 2.96 million jobs, Minnesota now has
more jobs than ever before
|
|
Better
Budget
|
Minnesota faced a $6.2 billion budget deficit
Minnesota owed our school districts $1.9
billion
Minnesota had nothing in the budget reserve
account to protect the state’s finances from economic downturns
|
Nine out of the last ten budget forecasts
have projected budget surpluses in Minnesota
Minnesota currently has a projected $419
million budget surplus for the FY2020-21 biennium
Minnesota has nearly $2 billion in cash and
budget reserves to help protect the state’s finances from future economic
downturns and prevent harmful budget cuts to essential state services
|
