Minneapolis Faces $93.9 Million Shortfall, Earning a “C” Grade

Minneapolis’ financial condition showed some improvement in fiscal year 2023, but the city still faced a $93.9 million shortfall. This equates to a Taxpayer Burden™ of $600, earning Minneapolis a “C” grade and classifying it as a “Sinkhole City” in Truth in Accounting’s latest report.

Despite a reduction in federal COVID-19 relief funds, the city’s financial outlook improved due to a decrease in pension debt. The Public Employees Retirement Association of Minnesota reported an unrealized gain of nearly 9%, easing long-term liabilities. Additionally, an increase in the pension discount rate lowered estimated future benefit payments. However, these improvements underscore the need for careful management of pension funds, particularly in light of market fluctuations and the uncertainty of future obligations.
Employee wages and benefit costs accounted for 63.5% of Minneapolis’ General Fund expenditures in 2023, driven by rising wages, inflation, and overtime expenses. The city’s commitment to financial transparency is notable, particularly its inclusion of consolidated figures for both its primary government and component units, enhancing clarity and accountability.
Key findings from the report include:

• Minneapolis had $1.2 billion available to pay $1.3 billion in bills.
• The city’s financial shortfall amounted to $93.9 million, leaving each taxpayer with a $600 burden.
• Pension debt reduction and discount rate adjustments improved the financial outlook despite reduced federal funding.

While Minneapolis has taken steps toward financial improvement, careful budgeting and pension fund management will be essential to maintaining long-term fiscal stability.

For those interested in a deeper dive into Minneapolis’ finances—and how it compares to other major U.S. cities—you can read the full Financial State of the Cities 2025 report here.