Michigan earns a ‘D’ grade for finances

If Michigan needed to pay all its bills, every taxpayer would have to pay $7,600.

That’s according to a new analysis from Chicago-based Truth In Accounting, a think tank that analyzes government financial reports. Truth in Accounting gives the Wolverine State a “D” grade in its 15th annual Financial State of the States report.

According to the report’s A-through-F grading scale, any government with a ”taxpayer burden” between $5,000 and $20,000 earns a D. The report uses the term "taxpayer burden” to include the amount required to pay off all a state’s debt.

In 2023, Michigan’s finances improved by $12.5 billion when reported revenues exceeded expenses, and liabilities for pension and retiree health care decreased due to changes in actuarial assumptions. Michigan had $46.9 billion available to pay $75.1 billion worth of bills, leaving a shortfall of $28.2 billion. If that amount is divided by every Michigan taxpayer, each would pay $7,600. Most of that debt stems from unfunded pensions and other post-retirement benefits to public workers.

The largest improvement in the state’s financial condition related to decreases in unfunded pension and retiree health liabilities for the Michigan Public Schools Employees’ Retirement System. Those decreases occurred thanks to changes in the economic, demographic and other assumptions used to estimate future benefit payments. That good news evaporated this year after a drastic cut by the Legislature in funding for pension liabilities.

Michigan ranked 35th out of 50. The state isn’t alone. TIA says 27 states don’t have enough money to pay their bills.

For most states, this report is based on the audited Annual Comprehensive Financial Reports for fiscal year 2023, showing the most recent information available.

State fiscal mismanagement harms taxpayers, as well as public employees such as teachers, firefighters, and police officers, who count on pension and health care benefits for their retirement.

“Most states’ financial conditions improved in fiscal year 2023,” Sheila Weinberg, founder and CEO of Truth in Accounting, said in a statement. “But the states should focus on bolstering their retirement systems so they can weather market downturns and other economic uncertainties in the future.”

The report features a broad range of state spending approaches, which yield a variety of results. Connecticut moved into last place because it needed more than $64.9 billion to pay its bills. If you were to divide that figure by the number of Connecticut taxpayers, the taxpayer burden is $44,300. Conversely, North Dakota had more than enough money to pay its bills, with a taxpayer surplus of $55,600.