Michigan received a "D" grade for its financial status in a new report released Tuesday by Truth in Accounting, a non-profit that scrutinizes governments' fiscal responsibility and accountability.
Truth in Accounting's ratings are based on a formula that assesses taxpayer burden. The group divides the number of taxpayers in the state by the amount of money needed to pay all its bills, including pension debt. Each Michigan taxpayer would owe $16,600 to account for all of the state's debt, earning the state a D grade, according to TIA.
Sheila Weinberg, founder of Truth in Accounting, told Watchdog.org that Michigan is a “classic example” of a state that has burdened its taxpayers with unfunded pension and retiree health care debt.
Using numbers from the Office of Budget and Management, TIA's report shows that Michigan has $25.8 billion in pension debt and $16.3 billion in retiree health care debt. The state does not include these numbers in its balance sheet.
Michigan has been slowly decreasing its debt since 2013, which Weinberg said is a good start. Along with paying off debt, she said, it would be helpful for the state to prefund these liabilities instead of paying as they go. Weinberg also said the state should include these numbers in the balance sheet.
Kurt Weiss, the Michigan State Budget Office’s public information officer, championed Michigan’s financial state.
“The state budget that begins on October 1 continues the strong fiscal practice of paying down debt and maintaining the course to have the debt paid off by the year 2038,” Weiss told Watchdog.org. “Long-term liabilities have been reduced by more than $20 billion since 2011. The state’s Rainy Day Fund was depleted in 2011 with a balance of just $2 million, and with the latest enacted budget the balance soars to over $1 billion, showing rating agencies and taxpayers that our fiscal house is back in order.”
The Truth in Accounting report gave most states a poor financial rating. Ten states received an F, which is given to states that have $20,000 or more in per-taxpayer burden, and 18 states received a D, which is given to states that have a per-taxpayer burden between $5,000 and $20,000. Twelve states were awarded a C, which means their per-taxpayer burden was below $5,000 or at an even zero. Ten states received either an A or a B, which are given to states with a surplus.
Truth in Accounting assesses the status of a state’s finances differently from organizations such as credit ratings. Unlike credit ratings, which are focused on whether a state can pay off its bondholders, Truth in Accounting assesses the risk and burden on taxpayers.
