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On the basis of its fiscal solvency in five separate categories, Michigan ranks 35th among the US states and Puerto Rico for its fiscal health. On a cash basis, Michigan has between 1.04 and 2.26 times the cash needed to cover short-term bills. Revenues exceed expenses by 1 percent, producing a surplus of $64 per capita. On a long-run basis, net assets are 1 percent of total assets, and total liabilities are 33 percent of total assets. Total debt is $7.41 billion. Unfunded pension liabilities are $123.31 billion, and other postemployment benefits (OPEB) add $20.60 billion in unfunded liabilities. These three liabilities are equal to 38 percent of total state personal income.

Key Terms

  • Cash solvency measures whether a state has enough cash to cover its short-term bills, which include accounts payable, vouchers, warrants, and short-term debt. (Michigan ranks 34th.)
  • Budget solvency measures whether a state can cover its fiscal year spending using current revenues. Did it run a shortfall during the year? (Michigan ranks 37th.)
  • Long-run solvency measures whether a state has a hedge against large long-term liabilities. Are enough assets available to cushion the state from potential shocks or long-term fiscal risks? (Michigan ranks 24th.)
  • Service-level solvency measures how high taxes, revenues, and spending are when compared to state personal income. Do states have enough “fiscal slack”? If spending commitments demand more revenues, are states in a good position to increase taxes without harming the economy? Is spending high or low relative to the tax base? (Michigan ranks 30th.)
  • Trust fund solvency measures how much debt a state has. How large are unfunded pension liabilities, OPEB liabilities, and state debt compared to the state personal income? (Michigan ranks 32nd.) 

For a complete explanation of the methodology used to calculate Michigan's fiscal health rankings, download the full paper and the dataset at mercatus.org/statefiscalrankings-2016-edition.