There's a familiar national horror story about public pensions: bankrupt promises, cities like Detroit and states like Illinois drowning in unfunded liabilities, teachers and troopers who'll retire to find the money gone. It's a real story in some places. It is mostly not Minnesota's story — and the gap between the scary headline and the Minnesota numbers is worth understanding, because it's one of the clearest examples in this whole series of the state doing something right.
I went to the primary source for this — the official July 1, 2025 actuarial valuations that the state's actuary files with the Legislative Commission on Pensions and Retirement. Here's what they actually say.
The numbers are good, and they got better again
Minnesota's public retirement money sits mostly in three systems: MSRS (state employees), PERA (local government and county workers), and TRA (teachers). Their funded ratios as of July 1, 2025:
- MSRS General — 95.0% funded. The state-employee fund is nearly fully funded, on the smoothed actuarial basis, and on market value it's about 98%.
- PERA General — 87.6% funded, up from 86.7% the year before.
- TRA (teachers) — 81.6% funded, up from 79.9%.
- PERA Police & Fire — 88.6% funded.
Every one of those four big plans improved from 2024 to 2025. And the trend is not a one-year blip. The MSRS state-employee fund's own history table tells the story: it was 81.6% funded in 2016, climbed to 88.8% by 2018, crossed 99.9% in 2022, and sits at 95% now. That's a decade of a fund getting steadily healthier, not a time bomb ticking down.
For scale: a "funded ratio" of 90% means the plan already holds 90 cents of every dollar it will owe, decades out, with contributions and investment returns expected to cover the rest. Pension experts generally consider a plan at or above 80% to be in sound shape. Minnesota's biggest plans are well past that, and the flagship is knocking on 100%.
The state is confident enough to be increasing benefits
Here's the detail that really tells you how healthy these funds are, and you'll almost never hear it in a pension scare story. Minnesota isn't cutting retirees' benefits to stay afloat — it's raising them. The 2025 valuation records that the MSRS post-retirement cost-of-living increase was raised from 1.50% to 1.75%, effective January 2026, and the benefit multiplier for state workers was increased from 1.70% to 1.90% for future service. You do not restore and sweeten benefits in a system you're worried is going broke. You do it in a system that has recovered enough to share the gains with the people who earned them.
The assumptions are conservative on purpose — the honest critic's point, answered
The most serious criticism of any pension system is that its math is too optimistic — that it assumes investment returns it won't hit, which makes the funded ratio look better than it is. It's a fair challenge, and Minnesota largely answers it.
The plans assume a 7.0% long-run investment return. That's down from 8.5% a decade ago — the state deliberately lowered its own assumption, which raises reported liabilities and makes the funded ratios look worse, not better. A state cooking its books moves the assumption the other way. And the actuary goes further: in the MSRS report it flags that even an 8.0% assumption "does not comply with Actuarial Standards of Practice" — the actuary is on record calling the old, higher number too rosy. The plans also publish a second, deliberately conservative "low-risk" discount rate as a stress test. This is a system being honest with itself.
Did the 7.0% assumption hold up? In the year ended June 30, 2025, the State Board of Investment returned +10.9% on market value — well above the 7.0% target, producing an actuarial gain. One good year doesn't make a trend, and there will be down years that push the ratios back down; that's normal. But the assumption isn't a fantasy, and the state isn't leaning on a rosy number to hide a hole.
The one real pressure point — and I won't wave it off
Honesty cuts both ways, so here's the genuine soft spot. PERA's Police & Fire plan — the fund for cops and firefighters — is the one big plan running a contribution deficiency. The money statutorily flowing in falls about 1.48% of payroll short of what the actuary says the plan needs (32.51% coming in against 33.99% required). The plan is still 88.6% funded and in no immediate danger, but a persistent contribution gap is exactly the kind of small, ignorable problem that becomes a big one if it's left alone for twenty years. It should be closed now, while it's cheap to close.
And a fuller-honesty note: the teachers' fund at 81.6% is the lowest-funded of the big three, and TRA carries the largest unfunded liability in raw dollars — about $6.8 billion (down from $7.1 billion the year before). It's improving and it's above the 80% soundness line, but it's the one to keep watching alongside Police & Fire.
Why did Minnesota end up in good shape while other states didn't?
Because Minnesota did the hard, unglamorous thing at the right time. In 2018, after years of stalemate, the Legislature passed a bipartisan pension-stabilization law — signed by Gov. Dayton — that lowered the assumed investment return, adjusted cost-of-living increases, and raised contributions across the systems to close the funding gap on a real schedule. It was not a crowd-pleaser; it asked workers, employers, and taxpayers all to give a little. But it's the reason Minnesota's plans spent the last decade climbing toward full funding instead of sliding toward Illinois. Minnesota fixed the roof while the sun was shining. That's the whole lesson.
What we can do
Close the Police & Fire deficiency now. A 1.48%-of-payroll contribution gap is small and fixable today. Left for a generation, it's how a healthy plan quietly turns into a troubled one. Fix it while it's cheap.
Keep the assumptions conservative and resist the pressure to juice them. The single most dangerous thing any state can do to a pension fund is raise the assumed return to make the numbers look prettier and cut contributions. Minnesota has done the opposite, and it worked. Keep doing it — even in a booming market, especially in a booming market.
Protect what's funded, and be honest about the down years. These are among the best-funded state pensions in the country, but a bad market stretch will push the ratios back down and that's not a crisis, it's the cycle. The discipline is to keep making the full required contribution in the lean years, not just the fat ones.
Defend the pension promise as a promise. A retired teacher, trooper, or county clerk made decisions over a whole career relying on this. Minnesota has kept that promise better than most states, and the next Attorney General should be a plain, reliable defender of it — against anyone, in any party, who'd raid the fund or break the deal.
The national pension story is a warning. Minnesota's is close to a model: fix it early, keep the math honest, and you get to spend the next decade raising benefits instead of cutting them. That's not luck. It's what governing responsibly looks like when someone actually does it.
First the facts. Then the fix.
Sources
All funded ratios, liabilities, contribution rates, assumption figures, and the benefit-increase and investment-return data are from the official July 1, 2025 actuarial funding valuations prepared by Gabriel, Roeder, Smith & Co. (GRS) for the Minnesota Legislative Commission on Pensions and Retirement (LCPR), at lcpr.mn.gov: the MSRS General State Employees Retirement Fund valuation (funded ratio 95.0% AVA / 98.4% MVA; the 2016–2025 funded-ratio history table showing 81.6% in 2016, 88.8% in 2018, 99.9% in 2022, 95.0% in 2025; the July 1, 2025 plan-provision changes raising the post-retirement increase from 1.50% to 1.75% effective January 1, 2026 and the benefit multiplier from 1.70% to 1.90% for service after July 1, 2025; the 7.0% pre-retirement interest assumption, reduced from 8.5% over the prior decade per the report's assumption history; the actuary's statement that an 8.00% assumption "does not comply with Actuarial Standards of Practice"; and the FY2025 State Board of Investment return of +10.9% on market value / +10.1% on actuarial value); the PERA General Employees Retirement Plan valuation (87.6% funded, up from 86.7%); the Teachers Retirement Association (TRA) valuation (81.6% funded, up from 79.9%, with an unfunded liability of about $6.8 billion, down from about $7.1 billion); and the PERA Police & Fire Plan valuation (88.6% funded, with a statutory contribution deficiency of 1.48% of payroll — 32.51% statutory against 33.99% required). The State Board of Investment (SBI) manages the assets; the funded-ratio soundness benchmark (roughly 80%+) is the common pension-industry convention.
The 2018 pension-stabilization law is described from its well-documented public history — a bipartisan bill signed by Gov. Mark Dayton in 2018 that lowered assumed returns, adjusted cost-of-living increases, and raised contributions across MSRS, PERA, and TRA; its exact per-plan COLA and contribution parameters and chapter/session citation were not re-verified against the enrolled bill this pass and are stated in general terms rather than as specific figures. An official consolidated statewide funded ratio across all plans was not pulled; the per-plan figures above are the verified numbers. Corrections: campaign@madgettformn.com.