Michigan's Real Financial State

Governor-Elect Rick Snyder is getting a state budget with a surplus, according to outgoing Gov. Jennifer Granholm.

But James Hohman of the Mackinac Center for Public Policy says that although Granholm’s claim of a budget surplus may be technically accurate, it is in no way indicative of the financial picture of the state under her watch.

Granholm told the Michigan Information and Research Service (MIRS) recently: “For the first time in three administrations that not only are we handing the next administration a balanced budget, but a surplus. So he won't have to issue executive orders as he comes in, cutting in the middle of the year."

But Hohman says there is another side to the story that is not being told.

Hohman, a fiscal policy analyst, looked at two budgetary numbers under Granholm’s watch that he said were indicative of a state’s financial health. The first is “unrestricted net assets” which is the state’s assets, including cash, property and investments not set aside for specific activities.The other indicator is the “cash reserves” in the state’s general fund and school aid fund. Among other uses, these last two are used to pay for corrections, state universities, school districts, and to supplement Medicaid spending, Hohman said.

The state had $343 million of “unrestricted net assets” in 2002 which plummeted to a $7.3 billion deficit in 2009, according to the state’s Comprehensive Annual Financial Report.

According to the Citizens Research Council, the state’s reserves in cash in the general fund and school aid fund went from a $455 million surplus to a $432 million deficit under Granholm.

“So, what exactly is she bragging about?” Hohman asked in an email.

”The governor’s management of the state’s finances has been atrocious,” Hohman said. “We have faced huge spending pressures and she has not made structural reforms to deal with them.”