Report: Michigan improves but taxpayers owe $4,100 each

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(The Center Square) – Michigan ranked 32nd nationally, according to Truth in Accounting’s 2025 “Financial State of the States” report.

The state received a “C” ranking after the report found that it does not have enough money to cover its bills. In fact, it found a $4,100 burden per Michigan taxpayer, which is how the state’s rankings are determined.

Even though the state was in the negative, this year’s report still showed improvement for Michigan’s financial situation. Sheila A. Weinberg, founder and CEO of Truth in Accounting, shared more about this with The Center Square in an exclusive interview.

“Even though Michigan's financial condition has improved compared to previous years, the state still faces a significant shortfall,” Weinberg said.

In total, Michigan had $44.2 billion available to pay $58.3 billion worth of bills. That means Michigan has $14.1 billion in unfunded obligations.

“This means the state does not have enough assets on hand to cover what it owes,” Weinberg added. “While the improvements are encouraging, the financial gap remains a concern.”

While the state saw improvements, many of the factors that contributed to that improvement were not long-term solutions. Instead, those improvements came from strong investment returns and temporary federal aid rather than from long-term structural changes.

“Better long-term planning, greater transparency, and a commitment to reducing unfunded liabilities would all contribute to a more sustainable fiscal outlook,” Weinberg said. “Avoiding short-term fixes and addressing the root causes of financial imbalance are essential steps forward.”

Cuts in federal funding could also have a substantial impact on the state.

Since COVID-19, Michigan, like other states, has consistently received large amounts of temporary federal aid. It is currently set to lose as much as $7.7 billion in federal funding, if allocations return to 2019 levels. That is 8% of the state’s expenses.

That makes it even more critical for the state to consider long-term solutions,” Weinberg said.

“Michigan can improve by making consistent and adequate contributions to its pension and retiree health care systems,” she explained. “The state should reduce its reliance on strong investment returns or temporary federal aid and focus instead on building long-term financial stability.”

Pensions make up a substantial portion of Michigan’s bills. The report found that the state’s major retirement systems for state and public school employees remained under 80% funded. If the pension’s funding is not addressed, pensioners could see reduced retirement benefits or an increase in required contributions from workers and taxpayers.

“This financial gap can have real consequences. It may lead to cuts in public services, increased taxes, or both. Unfunded obligations, especially in pensions and retiree health care, continue to grow if not addressed,” Weinberg explained. “Over time, this creates pressure on future budgets and could shift financial burdens onto the next generation.”

Weinberg said it is concerning that most people are not informed of the financial situation in their state.

“This is also about transparency,” she said. “People deserve to understand the true financial condition of their state and how it might impact their communities.”

Compared to other states, Michigan’s financial condition was about average. For example, North Dakota comes in first on the report with over $60,000 in surplus per taxpayer. On the flip side of that, New Jersey ranked 50th, with a deficit of $44,500 per taxpayer.

The report found that, at the end of 2024, 25 states across the country did not have enough money to pay its bills.

Judi Willard, communications and development manager for Truth in Accounting, told The Center Square that everyone, no matter their political persuasion, should care about the report’s findings.

“Year after year, our research reveals the alarming consequences of these flawed standards—billions in hidden liabilities, unfunded promises, and budgets that don’t add up,” Willard said. “A government that can’t accurately account for its money cannot be trusted to deliver on its promises, whether to progressive or conservative taxpayers. Accurate financial reporting isn’t a partisan issue; it’s the foundation of a functional, accountable government.”