(The Center Square) – The Michigan state government had $39.21 billion in debt, according to a new report.
The report, which was released by Reason Foundation, ranked Michigan’s debt 16th highest nationally at the end of the 2023 fiscal year. That is the most recent year that information is available.
California topped the report with nearly $500 billion in debt, as previously reported by The Center Square, while South Dakota came in 50th with $2.46 billion.
Per capita, Michigan’s debt ranked better than most states nationally, coming in at the 34th-highest. That is about $3,891 in debt for each citizen of the state, or significantly lower than the national average of approximately $8,000 per person.
The report also dug into debt in county governments, municipalities, and school districts throughout Michigan. In an exclusive interview with The Center Square about Michigan’s findings, the report’s authors dug into its results.
“Local governments are responsible for about 60% of all state and local debt nationwide, but their liabilities are often buried in individual financial reports that are hard for the public to access,” said Mariana Trujillo, one of the report’s authors. “The findings highlight the importance of governments disclosing their financial information transparently and accessibly.”
In total, all of Michigan’s public entities examined in the study owe $141 billion. That makes the state the 23rd-highest per capita, working out to $13,984 per citizen. While significant, that is lower than the national average of $18,376.
The report also found that state and local long-term debt in Michigan is made up of bonded debt (39%), unfunded pension liabilities (47%), and unfunded retiree healthcare obligations (9%). Long-term debt means it is due in more than one year.
The report looked at records for 588 school districts throughout Michigan. It found that those districts make up a significant portion of that debt, especially the pension debt.
“Of the $113.1 billion in long-term debt (non-current) liabilities, the largest share—$59.6 billion—is held by school districts,” said Jordan Campbell, the other author on the report. “Among school districts, 59% of all long-term debt is pension-related, showing how retirement costs dominate local balance sheets.”
This massive liability for Michigan school districts is especially worrying considering the declining state of its schools, something The Center Square has previously reported on.
“This trend is particularly concerning given declining public school enrollment . . . meaning fewer students and teachers are supporting growing legacy costs,” Campbell said.
This is not the first red flag thrown on the state’s growing pension obligations. Recently, The Center Square reported that Michigan received a “C” financial ranking.
While an improvement from previous years, Michigan’s financial condition could be on a continued downward spiral as federal funding is cut.
On top of that, unfunded pensions can have a real impact on many Michiganders, with pensioners seeing reduced retirement benefits or even an increase in required contributions from workers and taxpayers.
Trujillo explained this is why it is important for citizens and lawmakers to understand how deeply in debt their state and local municipalities are.
“Local debt directly affects residents through property taxes, sales taxes, and service levels, influencing how much communities pay and what they receive in return,” Trujillo said. “By showing the financial condition of so many state and local governments in the nation—and mapping where debt actually sits —the study helps taxpayers understand the financial pressures shaping local budgets and serves as a tool to hold their governments accountable for long-term obligations.”
