Supermajority Amendment Could Harm Minnesota's Financial Standing
St. Paul, Minnesota - February 21, 2012 - Requiring a supermajority to raise Minnesota taxes could threaten the state’s standing with credit rating agencies, which could mean higher borrowing costs to maintain our roads, bridges, schools, libraries and other important infrastructure, according to a Minnesota Budget Project report released today.
The paper warns that a supermajority requirement could raise credit rating agency concerns about Minnesota’s financial flexibility and creditworthiness.
According to the report, Supermajority Requirement Would Limit Financial Flexibility, Risking Minnesota’s Credit Rating, credit rating agencies base their ratings partly on states’ flexibility to respond quickly to changing budget conditions. In contrast, supermajority requirements set rigid limits on states’ ability to make budget decisions.
Some states with supermajority requirements have already suffered a hit to their credit standings, according to the report. Rating agencies cited limited financial flexibility and reliance on one-time measures as contributing factors to their decisions to downgrade Arizona and Nevada. Moody’s Investor Service, one of the agencies downgrading the states, specifically cited their supermajority requirements as concerns.
“Rating agencies are already concerned about Minnesota’s financial management,” said Minnesota Budget Project Director Nan Madden. “A supermajority amendment could contribute to those worries – resulting in more downgrades in the future – and higher borrowing costs.”
The Minnesota Budget Project, an initiative of the Minnesota Council of Nonprofits, provides independent research, analysis and advocacy on budget and tax issues, emphasizing their impact on low- and moderate-income Minnesotans.