Michigan placed 38th in the country in the annual Truth in Accounting’s Financial State of the States report. | Wikipedia

Michigan placed 38th in the country in the annual Truth in Accounting’s Financial State of the States report, which was released in Sep­tember. Michigan received a “D” grade for its accounting prac­tices. 

The report says Michigan’s $5 billion in debt has not been addressed and would result in a $17,000 burden for each tax­payer in the state. 

Truth in Accounting is a non­profit, non­par­tisan orga­ni­zation that has released this report for the past 10 years, high­lighting many states’ ille­git­imate book­keeping prac­tices. The report says 40 states did not have enough money to cover its expen­di­tures in fiscal year 2018, which is required by law in 49 states. The report claims that states will often hide or under­report expen­di­tures in order to appear as if they are law-abiding.

Bill Bergman, director of research for Truth in Accounting, said Michigan has made improve­ments over the past 10 years and has risen con­sis­tently since its 2012, 44th-place ranking. 

“Once you’ve dug a hole, the first thing you have to do is stop digging. And Michigan has, for the large part, stopped digging the hole,” Bergman said.

The states received a grade-ranking based on the state’s tax­payer burden or tax­payer surplus. A “D” ranking indi­cates a per-tax­payer burden of between $5,000 and $20,000. 

Bergman said that although the group’s grading system is arbi­trary, it pre­dicts the states’ actual accounting standings better than the credit rating system — which, like a per­sonal credit rating, esti­mates the state’s debt and its ability to pay the debt back. And Michigan’s credit rating has stayed con­sistent over the past ten years. 

“Michigan state gov­ernment has done a good job of ‘walking the walk’ and keeping expenses lower than overall revenue,” Bergman said. “Illinois has not done that in five of the past seven years, so Michigan has a lot to be thankful for. 

Hillsdale College Pro­fessor of Eco­nomics and Political Economy Gary Wolfram said he was con­cerned that Michigan’s 38th-place ranking is mis­leading because it fails to take into account the steps Michigan has already taken to address their unfunded lia­bility problem. 

Bergman, however, said the grades are not based on yearly change or improve­ments. 

“They take every­thing, including past con­di­tions, into account.” 

The total state budget deficit for all 50 states in fiscal year 2018 was $1.5 trillion, which decreased by $62.6 billion from fiscal year 2017, according to the report. Two of the largest cat­e­gories of this debt are unfunded pension pay­ments, at $824 billion, and other post-employment ben­efits (OPEB) at $664.6 billion. 

Hillsdale City Manager David Mackie said the issue is more of a statewide problem than a city problem. Hillsdale, for example, has roughly 80 – 85% of its lia­bil­ities, city retirement plans, paid for, though it might change a point or two based on the health of the stock market. Other small cities and com­mu­nities are the same, according to Mackie. 

“They’ll have to pay off the debt some day,” Mackie said.