The Fiscal Health of Michigan Local Governments 2023
This report provides an annual update on Michigan local government fiscal health. Using financial data reported to the State of Michigan in 2023, this analysis develops a set of indicators to look at cash, budgetary, long-term, and service solvency for counties, cities, villages, and townships in Michigan. This update finds that there were few significant changes in overall trends for the fiscal health of Michigan local governments compared to the past few years. Federal aid continues to bolster general fund balances and cash reserves, resulting in strong cash and budgetary solvency measures. However, local governments should beware of “fiscal cliffs” as one-time revenues from pandemic-era aid expire. Local governments continue to show variability in their ability to meet long-term financial and service obligations, due in part to restrictive revenue policy and high long-term liabilities from pensions and retiree healthcare benefits.
Key findings
- Most Michigan local governments continue to show healthy short-run financial conditions. There is a wide variation in local government general fund balance levels, but very few are lower than recommended. Of those, most of them are counties and cities which suggests the need for close monitoring.
- Pension funded ratios slipped in FY23, with many values in the low 70% range, slightly lower for cities. Funded ratios for OPEB plans are generally low but improving.
- There is a wide range in expenditures and governmental assets per capita, suggesting that governments vary in their capacity to deliver services. Amounts are generally rising, but it is unclear whether this reflects service expansion or inflation-driven costs.