State Budget Practice Report Cards and Budget Resource Guide

Michigan’s B average in budget maneuvers for 2016 through 2018 shows the progress the state has made over a number of years in reducing its reliance on one-time actions to cover fiscal imbalance during and immediately after the Great Recession. The state scored an A in 2018 after getting Bs the previous two years.

In 2018, Michigan did not defer expenditures, accelerate revenues, fund recurring expenditures with debt or use other mechanisms, such as asset sales, to bolster spending. However, it extended a debt maturity in 2016 through a bond refinancing and used $10 million of one-time money for ongoing costs in 2017. 

The lowest average grade Michigan received was a C in legacy costs. In 2017 and 2018, the state came close to making its actuarially determined contributions for pensions and other postemployment benefits, largely health care. This raised its annual grade to a B in both of those years from a D in 2016, when annual contributions for pensions fell short. Because of previous underfunding, Michigan still had a low pension funded ratio of 65.1 percent as of 2017, more than three percentage points below the US total. 

The state earned a B average in the budget forecast category. Its only shortcoming was the lack of multiyear expenditure forecasts in each of the three years studied.

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To emphasize the need for clear and comprehensible budgets to inform citizens, promote responsible policymaking, and improve fiscal stability, the Volcker Alliance in 2016 began a study of budgetary and financial reporting practices of all fifty states. The Volcker Alliance’s mission is to improve the effectiveness of the administration of government at all levels. Making state budgeting more transparent and accountable is an important part of that goal.

The report cards presented here are taken from the 2018 Volcker Alliance report, Truth and Integrity in State Budgeting: Preventing the Next Fiscal Crisis which proposes a set of best practices for policymakers. For those wishing to gain greater insight into state fiscal issues, the accompanying budget resource guide is derived from the Alliance publication State Budget Sources: An Annotated Guide to State Budgets, Financial Reports, and Fiscal Analyses (2016). 

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