CHICAGO — A new accounting rule is requiring Michigan to come clean about its hidden pension debt, but the state continues to exclude billions of retirement debt from its financial reports. This information is released today in a report titled, The Financial State of Michigan, by Truth in Accounting (TIA), a Chicago-based think tank that analyzes government financials.
Because this pension rule was not required in previous years, state officials used outdated accounting methods to calculate the state’s debt. As a result, Michigan's reported pension debt increased from $742.2 million in 2014 to $6.2 billion in 2015.
“We’ve been encouraging state officials to report all of the state’s pension debt for years and we’re glad to see some progress finally being made,” said Sheila Weinberg, Founder and CEO of TIA.
Michigan is a strange case. Because of a technicality, the state is not directly responsible for funding the Michigan Public School Employees’ Retirement System, which currently has an unfunded liability of $25 billion. Instead, the local school districts are responsible for paying this debt. However, we have included it in our analysis because a vast majority of the public schools’ funding comes from the state.
If the state were to include this liability on its balance sheet, its pension debt would jump to $31.3 billion. In addition, state officials are hiding $17.9 billion of retiree health care benefits.
“While this year is an improvement, State Budget Director John S. Roberts and Governor Rick Snyder need to be even more transparent by reporting all pension and retiree health care debt,” said Weinberg. “Taxpayers deserve the truth.”
TIA researchers recalculated Michigan's overall financial position and discovered the state needs $55.5 billion to completely pay its bills. When this debt is divided amongst Michigan taxpayers, each taxpayer owes $18,200 – the state’s taxpayer burden.
Data is derived from the state of Michigan's September 30, 2015 audited Comprehensive Annual Financial Report and retirement plans' actuarial reports.
Founded in 2002, Truth in Accounting is dedicated to educating and empowering citizens with understandable, reliable, and transparent government financial information. Sheila Weinberg is a Certified Public Accountant with more than 30 years of experience in the field.
Contact: Katherine Oxenreiter
312.589.5104
press@truthinaccounting.org
koxenreiter@truthinaccounting.org
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