(The Center Square) – Despite receiving federal COVID funds, Michigan’s financial condition worsened in 2022. A new report found every Michigander must pay $12,100 to bail the state out of debt.
Financial watchdog Truth in Accounting released its 14th annual Financial State of the States report, which provides a comprehensive analysis of the fiscal health of all 50 states based on the latest available data.
The report found Michigan ranked 38 out of 50 for finances because it has $47.4 billion but $88 billion worth of bills – a $40.7 billion deficit. Each Michigan must pay $12,100 to bail the state out of debt.
TIA gives any government with a taxpayer burden burden between $5,000 and $20,000 a “D” grade.
“We are happy to see state debt decreasing but states should not count on temporary federal funding and increased tax collections to fix their long-term problems,” TIA CEO Sheila Weinberg said in a statement. “Elected officials need to include the true costs of government in their budget calculations, including accruing retirement benefits so that they can make real progress towards a healthier financial future.”
According to the report, at the end of fiscal year 2022, 28 states did not have enough money to pay all of their bills. In total, debt among the states was $938.6 billion, which is down from $1.2 trillion at the end of fiscal year 2021.
While Michigan’s pension and retiree health care plans reported more than 26% positive returns in 2021, those returns dropped to negative three percent in 2022.
Many states’ finances improved due to federal funding for COVID relief and increased tax collections attributed to taxpayers’ pent-up tourism and purchasing demands. However, this wasn’t enough to offset Michigan’s unfunded pensions and other employee retirement obligations.
Overall, it appeared state debt decreased mostly because of tax revenue increases due to the lockdowns ending, and millions, if not billions, of dollars in federal COVID funds received by the states. Tourism and individual spending increased significantly so that most states collected more money from tax revenues, often improving a state’s ability to pay its bills.
Every state, except Vermont, has a balanced budget requirement. This means that to balance the budget – as the law requires in 49 states -states shouldn’t carry any debt.
When states do not have enough money to pay their bills, TIA takes the money needed to pay bills and divides it by the estimated number of state taxpayers. The resulting number is a Taxpayer Burden™. Conversely, a Taxpayer Surplus™ is the amount of money left over after all of a state’s bills are paid, divided by the estimated number of taxpayers in the state.
The majority of state debt comes from retirement plans, such as pension and retiree health care benefits. On average, the 50 states had only set aside 71 cents for every dollar of promised benefits to fund pensions and 11 cents for every dollar to fund retiree health care promises.