Michigan ranked 30th nationally in Truth in Accounting’s 2026 “Financial State of the States” report.
The state received a “C” grade because it does not have enough money to cover its bills, according to the report. Michigan had a $2,000 taxpayer burden, the measure used to determine the state’s ranking.
Although Michigan’s finances remained in the negative, this year’s report showed improvement in the state’s financial standing from last year – when it ranked 32nd nationally.
Sheila A. Weinberg, founder and CEO of Truth in Accounting, discussed the findings with The Center Square in an exclusive interview.
“Michigan’s financial condition improved largely due to double-digit investment returns on pension fund assets. As a result, the state’s pension obligations are now 80% funded,” Weinberg said. “However, given these historically strong investment returns, the pension systems should ideally be overfunded to provide a financial cushion when markets inevitably experience downturns.”
In total, Michigan had $42.1 billion available to pay $48.8 billion worth of bills. That means Michigan has $6.7 billion in unfunded obligations.
“Despite a balanced budget requirement, Michigan has accumulated $6.7 billion in bills in excess of the assets available to pay bills,” Weinberg said. “This results in a taxpayer burden (per taxpayer share) of $2,000.”
That figure is down significantly from $4,100 per taxpayer in 2025, a decline Weinberg also attributed to continued “historically high” federal funding.
“Federal grants accounted for 40% of the state’s revenue,” Weinberg said. “Although the COVID-19 public health emergency ended several years ago, federal funding remains at levels comparable to those provided during the pandemic, raising questions about the sustainability of the state’s reliance on these funds over the long term.”
This leaves Michigan particularly vulnerable to federal funding cuts, which Weinberg warned could pose challenges in the coming years.
“Given the strong investment returns and historically high levels of federal funding, I believe states should be in a stronger financial position to weather unexpected economic and financial crises, which tend to occur periodically, often every seven to ten years,” she said. “Maintaining adequate reserves and reducing unfunded liabilities would help states withstand future downturns without placing additional financial burdens on taxpayers or cutting essential services.”
Because Michigan receives federal funding, it was required to conduct a spending audit that identified accounting and oversight issues. The report warns that these weaknesses could leave the state vulnerable to potential fraud.
“Missing documentation, late reporting, inadequate review, and weak procedures led to inaccurate financial reports, unsupported expenses, and difficulty confirming that federal funds were properly managed,” Weinberg explained.
Unfunded pensions make up a substantial portion of Michigan’s financial obligations. The report found that the state’s major retirement systems had a combined $24 billion in unfunded liabilities. If the shortfall is not addressed, retirees could face reduced benefits, or workers and taxpayers could be required to contribute more.
Compared with other states, Michigan’s financial condition was roughly in the middle of the pack. North Dakota ranked first in the report, with a surplus of $72,300 per taxpayer, while New Jersey ranked last at No. 50, with a deficit of $45,800 per taxpayer.
The report found that, at the end of 2025, 24 states did not have enough money to pay their bills.
Weinberg explained why every American should care about the report’s findings.
“Understanding whether states have sufficient resources to cover their bills helps citizens evaluate how responsibly their tax dollars are being managed and whether current fiscal policies are sustainable,” she said. “A state’s financial condition can affect the services residents rely on, the taxes they pay, and the financial burdens passed on to future generations.”
