FW Rank: 24

1992 Rank: 34

Population: 9.4 million

Moody's bond rating: A1

Standard & Poor's bond rating: AA

Governor: John Engler, Republican

Legislature: Republican majority in Senate; House split

-- Ranking pluses: Deficit wiped out; new consensus approach (first used for fiscal 1993) bringing heightened realism to revenue estimating process; rainy day fund still quite dry, but a high priority; excelling financial reporting with GFOA Certificate of Achievement; increased attention to efficiency of state programs through PERM (private, eliminate, retain or modify) program.

-- Ranking minuses: Faulty revenue estimates and underestimate of Medicaid expenses in fiscal 1992; very slim reserves; continued (though diminishing) reliance on one-time measures to achieve balance is fiscal 1992 and 1993 put pressure on next year's budget; new biennial approach to budgeting has extended outlook into future, but longer view would be even better.

-- Comments: Congratulations are due. Increased honesty in budgeting is helping state climb in FW's ranking. Budget was balanced in fiscal 1992 after two years of deficits, with the very slight $20.1 million surplus socked away in the rainy day fund (more to come in 1993). Hefty supplemental appropriations are history. One-time revenues and other short-term solutions to shortfalls have decreased from $1 billion in fiscal 1991 to $696.5 million in 1992 to $299.8 million in 1993. Budget office is getting an impressive new financial management system. School finance reform will raise the sales tax from 4% to 6% and cut property taxes to a level that parallels the national average. The plan, which requires citizen approval in June, guarantees payments of $4,800 per pupil, instead of the current range of $2,500 to $9,000. Unemployment dipped below the U.S. average in February. State employees' wages have been frozen for two years, with raises to come only if health benefit costs are contained.

Source: "The State of the States," Financial World Magazine, May 11, 1993 (Vol. 161, No. 10); New York, NY.