This issue paper was prepared and written by Gary S. Olson, Director of the Senate Fiscal Agency. Karen Hendrick prepared the graphs, performed the word processing, and coordinated the production of the report. The Senate Fiscal Agency wishes to acknowledge the assistance of the Michigan Department of Treasury in providing the data that are the basis of the report. This issue paper represents an update and expansion of the Senate Fiscal Agency issue paper entitled, "State and Local Government Debt in Michigan: An Overview and Background", released on September 1, 1995.
 

Introduction

Constitutional Limitation on Government Debt

Statutory Limitations on Government Debt

Type of State Debt in Michigan

Amount of State Debt Outstanding in Michigan

State Government Debt in Michigan Compared with Other States
 

Introduction

The 1970s and the 1980s marked a period of robust growth in the budgets of state governments across the country. Fueled by an expanding economy, higher tax rates, and a continuing demand for government services, state government budgets grew at rates well above inflation.⁽¹⁾ The 1990s have brought more restrained levels of budget growth due to a combination of economic factors and a more conservative philosophy across the country, resulting in many reductions in state government tax rates. Michigan has mirrored these national trends.

While the 1990s may have brought overall restraint in the growth in state government budgets, one area of state budgets has continued to grow rapidly. This area involves the amount of borrowing being undertaken by state governments and the debt associated with this borrowing.

This Senate Fiscal Agency Issue Paper examines the growth in state government debt in Michigan and provides a comparison of the level of governmental debt in Michigan with the level in other states. This issue paper also addresses the restrictions on governmental debt in Michigan and briefly discusses the major types of debt financing occurring within the State.

Constitutional Limitation on Government Debt

The Michigan State Constitution of 1963 provides the broad framework that limits the issuance of State and local government debt. The broad framework provided in the Constitution then is further enforced and clarified by a variety of State laws and local ordinances that govern the actual issuances of the broad range of State and local government debt in Michigan.

There are nine principal sections of the Michigan Constitution of 1963 that govern the issuance of debt. The following information provides a brief summary of these constitutional restrictions.

Article IX, Sec. 12. Evidence of State Indebtedness.

"Sec. 12. No evidence of state indebtedness shall be issued except for debts authorized pursuant to this constitution."

"Sec. 13. Public bodies corporate shall have power to borrow money and issue their securities evidencing debt, subject to this constitution and law."

Article IX, Sec. 14. State Borrowing, Short-Term.

"Sec. 14. To meet obligations incurred pursuant to appropriations for any fiscal year, the legislature may by law authorize the state to issue its full faith and credit notes in which case it shall pledge undedicated revenues to be received within the same fiscal year for the repayment thereof. Such indebtedness in any fiscal year shall not exceed 15 percent of the undedicated revenues received by the state during the preceding fiscal year and such debts shall be repaid at the time the revenues so pledged are received, but not later than the end of the same fiscal year."

Cashflow borrowing is often necessary because of differences in the timing of the collections of State revenues versus the disbursement of State appropriations. To the extent that these timing differences cause cashflow problems, Sec. 14 authorizes short-term borrowing. This cashflow borrowing is limited to 15% of General Fund/General Purpose revenues. This limit translates into a $1.3 billion limit in fiscal year (FY) 1997-98.

The State has often utilized this type of cashflow borrowing. During the prior fiscal year, FY 1996-97, the State borrowed $900 million for cashflow purposes. This borrowing was repaid by the end of the fiscal year. The requirement that short-term borrowing be repaid by the end of the fiscal year has the effect of ensuring that no borrowing occurs simply to avoid a State budget deficit. Absent such a limitation, the State could borrow to meet budget shortfalls, which would lead to increased additional expenditure obligations in future fiscal years.

Article IX, Sec. 15. Long-Term Borrowing by State.

"Sec. 15. The state may borrow money for specific purposes in amounts as may be provided by acts of the legislature adopted by a vote of two-thirds of the members elected to and serving in each house, and approved by a majority of the electors voting thereon at any general election. The question submitted to the electors shall state the amount to be borrowed, the specific purpose to which the funds shall be devoted, and the method of payment."

Full faith and credit borrowing means that the State through the collection of State revenues is guaranteeing that the debt will be repaid in a timely manner. This provides a secure type of debt for the entity loaning funds to the State. Absent the appropriations necessary to repay full faith and credit type of borrowing, the State would automatically repay this type of debt out of existing revenue before any other appropriations were met.

Article IX, Sec. 16. State Loans to School Districts.

"Sec. 16. The state, in addition to any other borrowing power, may borrow from time to time such amounts as shall be required, pledge its faith and credit and issue its notes or bonds therefor, for the purpose of making loans to school districts as provided in this section.

If the minimum amount which would otherwise be necessary for a school district to levy in any year to pay principal and interest on its qualified bonds, including any necessary allowances for estimated tax delinquencies, exceeds 13 mills on each dollar of its assessed valuation as finally equalized, or such lower millage as the legislature may prescribe, then the school district may elect to borrow all or any part of the excess from the state. In that event the state shall lend the excess amount to the school district for the payment of principal and interest. If for any reason any school district will be or is unable to pay the principal and interest on its qualified bonds when due, then the school district shall borrow and the state shall lend to it an amount sufficient to enable the school district to make the payment.

The term "qualified bonds" means general obligation bonds of school districts issued for capital expenditures, including refunding bonds, issued prior to May 4, 1955, or issued thereafter and qualified as provided by law pursuant to Section 27 or Section 28 of Article X of the Constitution of 1908 or pursuant to this section.

After a school district has received loans from the state, each year thereafter it shall levy for debt service, exclusive of levies for nonqualified bonds, not less than 13 mills or such lower millage as the legislature may prescribe, until the amount loaned has been repaid, and any tax collection therefrom in any year over and above the minimum requirements for principal and interest on qualified bonds shall be used toward the repayment of state loans. In any year when such levy would produce an amount in excess of the requirements and the amount due to the state, the levy may be reduced by the amount of the excess.

Subject to the foregoing provisions, the legislature shall have the power to prescribe and to limit the procedure, terms and conditions for the qualification of bonds, for obtaining and making state loans, and for the repayment of loans.

The power to tax for the payment of principal and interest on bonds hereafter issued which are the general obligations of any school district, including refunding bonds, and for repayment of any state loans made to school districts, shall be without limitation as to rate or amount.

All rights acquired under Sections 27 and 28 of Article X of the Constitution of 1908, by holders of bonds heretofore issued, and all obligations assumed by the state or any school district under these sections, shall remain unimpaired."

Article VII, Sec. 11. Indebtedness, Limitation.

"Sec. 11. No county shall incur any indebtedness which shall increase its total debt beyond 10 percent of its assessed valuation."

Article VII, Sec. 21. Cities and Villages: Incorporation, Taxes, Indebtedness.

"Sec. 21. The legislature shall provide by general laws for the incorporation of cities and villages. Such laws shall limit their rate of ad valorem property taxation for municipal purposes and restrict the powers of cities and villages to borrow money and contract debts. Each city and village is granted power to levy other taxes for public purposes, subject to limitations provided by this constitution or by law."

Article IX, Sec. 6. Real and Tangible Personal Property; Limitation on General Ad Valorem Taxes; Adoption and Alteration of Separate Tax Limitations; Exceptions to Limitations; Property Tax on School District Extending into Two or More Counties.

"Sec. 6. Except as otherwise provided in this constitution, the total amount of general ad valorem taxes imposed upon real and tangible personal property for all purposes in any one year shall not exceed 15 mills on each dollar of the assessed valuation of property as finally equalized. Under procedures provided by law, which shall guarantee the right of initiative, separate tax limitations for any county and for the townships and for school districts therein, the aggregate of which shall not exceed 18 mills on each dollar of such valuation, may be adopted and thereafter altered by the vote of a majority of the qualified electors of such county voting thereon, in lieu of the limitation hereinbefore established. These limitations may be increased to an aggregate of not to exceed 50 mills on each dollar of valuation, for a period of not to exceed 20 years at any one time, if approved by a majority of the electors, qualified under Section 6 of Article II of this constitution, voting on the question.

The foregoing limitations shall not apply to taxes imposed for the payment of principal and interest on bonds approved by the electors or other evidence of indebtedness approved by the electors or for the payment of assessments or contract obligations in anticipation of which bonds are issued approved by the electors, which taxes may be imposed without limitation as to rate or amount; or, subject to the provisions of Section 25 through 34 of this article, to taxes imposed for any other purpose by any city, village, charter county, charter township, charter authority or other authority, the tax limitations of which are provided by charter or by general law.

In any school district which extends into two or more counties, property taxes at the highest rate available in the county which contains the greatest part of the area of the district may be imposed and collected for school purposes throughout the district."

Article IX, Sec. 31. Levying Tax or Increasing Rate of Existing Tax; Maximum Tax Rate on New Base; Increase in Assessed Valuation of Property; Exceptions to Limitations.

"Sec. 31. Units of Local Government are hereby prohibited from levying any tax not authorized by law or charter when this section is ratified or from increasing the rate of an existing tax above that rate authorized by law or charter when this section is ratified, without the approval of a majority of the qualified electors of that unit of Local Government voting thereon. If the definition of the base of an existing tax is broadened, the maximum authorized rate of taxation on the new base in each unit of Local Government shall be reduced to yield the same estimated gross revenue as on the prior base. If the assessed valuation of property as finally equalized, excluding the value of new construction and improvements, increases by a larger percentage than the increase in the General Price Level from the prior year, the maximum authorized rate applied thereto in each unit of Local Government shall be reduced to yield the same gross revenue from existing property, adjusted for changes in the General Price Level, as could have been collected at the existing authorized rate on the prior assessed value.

The limitations of this section shall not apply to taxes imposed for the payment of principal and interest on bonds or other evidence of indebtedness or for the payment of assessments on contract obligations in anticipation of which bonds are issued which were authorized prior to the effective date of this amendment."

Statutory Limitations on Government Debt

The laws of the State of Michigan provide the details necessary to implement the constitutional limitations regarding the issuance of governmental debt. Several important points must be understood when State laws governing debt issuance are reviewed. First, the State Treasurer has broad authority and responsibility to regulate and oversee the issuance of governmental debt in Michigan. In many respects the State Treasurer can be viewed as the top level manager of all debt issued by State and local government.

The second important issue in reviewing State laws regarding the issuance of governmental debt is that while Article IX, Sec. 12 of the State Constitution appears to limit long-term State debt to voter-approved issues, the fact of the matter is that the State issues millions of dollars of long-term debt each year without voter approval. Through numerous court decisions and legal opinions the State has developed specific procedures and State statutes that provide for long-term debt to be issued without voter approval. Technically, this type of debt is not backed by the full faith and credit of the State. Often there have been developed legal structures that allow what appears to be State debt to be issued by quasi-public agencies instead of the State itself, thus avoiding the necessity of voter approval.

This type of long-term State debt that is levied without voter approval is typically referred to as revenue bonds. These revenue bonds are long-term borrowing instruments that are backed by dedicated revenue streams, but are not technically guaranteed by general State revenues as is the case in full faith and credit debt. This means that these revenue bonds carry a greater level of risk to the purchaser and most typically require a higher interest rate to sell than does full faith and credit debt.

Examples of revenue bonds prevalent in Michigan include transportation bonds financed by dedicated transportation revenues and housing development bonds financed by rental income generated from publicly subsidized housing.

This distinction between State full faith and credit debt and bonds issued by the State without full faith and credit backing is important to understanding the recent history of State debt issuance. While the level of full faith and credit debt issued by the State has stayed fairly constant over the past 15 years, the level of debt issued without the full faith and credit of the State has grown rapidly. This trend has allowed the State to greatly increase State long-term debt without voter approval.

Type of State and Local Debt in Michigan

As previously stated, State and local government debt can be broadly characterized as either full faith and credit debt or debt issued without the full faith and credit backing of the unit of government. This section of the report will examine the specific types of State and local government debt currently being issued in Michigan. Throughout the remainder of this paper, debt issued with full faith and credit backing will be referred to as general obligation debt. Debt issued without full faith and credit backing will be referred to as nongeneral obligation debt.

General obligation long-term debt currently outstanding by the State of Michigan falls into four categories. The following information summarizes these four types of general obligation debt.

School Loan Bonds: As previously stated, Article IX, Sec. 16 of the State Constitution provides for the issuance of State general obligation bonds for the purposes of making loans to school districts. As of September 30, 1996, the State had $180.0 million of bonds supporting these loans outstanding. The financing of these bonds is made from repayments from school districts of State loans.

Water Resource Bonds: During the November 1968 general election, the voters authorized the State to issue general obligation bonds for planning, acquisition, and construction of facilities for prevention and abatement of water pollution and for loans and grants to municipalities for this purpose. The voters authorized the issuance of $335.0 million of these water resource bonds. As of September 30, 1996, the State had $14.0 million of these bonds outstanding.

Environmental Protection: During the November 1988 general election, the voters authorized the State to issue up to $660.0 million of general obligation bonds to finance environmental protection programs that would clean up environmental contamination sites and address related environmental issues. As of September 30, 1996, the State had $377.8 million of these bonds outstanding.

Public Recreation Bonds: During the November 1988 general election, the voters authorized the State to issue up to $140.0 million of general obligation bonds to finance State and local recreation projects. As of September 30, 1996, $113.2 million of these bonds was outstanding.

Local General Obligation Bonds: Units of local government, including counties, cities, villages and townships, also may levy general obligation bonds subject to voter approval. These bonds must be for a specific purpose and must spell out the maximum amount of bonds to be levied. As of September 30, 1995, counties, cities, and villages had $3.4 billion of general obligation debt outstanding.

School Districts General Obligation Debt: School districts have the ability to issue general obligation debt for capital construction projects. This debt is subject to voter approval in the local school district and is guaranteed by property taxes specifically levied for debt retirement. As of September 30, 1995, K-12 school districts, intermediate school districts, and community colleges had $4.5 billion of general obligation debt outstanding.

Nongeneral obligation debt issued by State and local governments is the fastest growing type of governmental debt in Michigan. The following information summarizes the major types of nongeneral obligation debt issued by State and local governments in Michigan.

Michigan Department of Transportation Bonds: The Michigan Constitution, Article IX, Sec. 9, authorizes the Legislature to provide for the issuance of bonds by the State Department of Transportation to support transportation projects across the State. Any transportation bonds to be issued will be repaid with dedicated transportation revenues. As of September 30, 1996, the State had $854.2 million of transportation bonds outstanding.

Michigan State Housing Development Authority Bonds: The Michigan State Housing Development Authority was created by Public Act 346 of 1966, to issue notes and bonds to finance housing for sale or rental to families with low-to-moderate incomes and to finance home improvements. The authority assists individuals in acquiring single family homes through mortgage subsidy programs and also provides low-interest loans to developers to build rental housing designed for low-to-moderate income families. The bonds sold by the authority are repaid with mortgage payments and rental charges from housing projects. As of September 30, 1996, the Michigan State Housing Development Authority had $1.99 billion of bonds outstanding.

Michigan State Hospital Finance Authority Bonds: The Michigan State Hospital Finance Authority was created by Public Act 38 of 1969, to lend money to nonprofit, nonpublic hospitals and health care corporations. The authority uses the volume of borrowing available to receive lower interest rate borrowing that is in turn passed on to the health care corporations. As of September 30, 1996, the Michigan State Hospital Finance Authority had $2.8 billion of bonds outstanding.

Michigan Higher Education Facilities Authority Bonds: The Michigan Higher Education Facilities Authority was created by Public Act 295 of 1969, for the purpose of assisting private nonprofit institutions of higher education in financing facilities on their campuses. Financing is provided through the issuance of revenue bonds which are repaid by the higher education institutions. As of September 30, 1996, the Michigan Higher Education Facilities Authority had $179.1 million of bonds outstanding.

Michigan Higher Education Student Loan Authority Bonds: The Michigan Higher Education Student Loan Authority was created by Public Act 222 of 1975 for the purpose of making loans to qualified students attending higher education institutions in the State. The students begin repaying their loans when their college education is completed. As of September 30, 1996, the Michigan Higher Education Student Loan Authority had $625.4 million of bonds outstanding.

Michigan Municipal Bond Authority Bonds: The Michigan Municipal Bond Authority was created by Public Act 227 of 1985 to assist local units of government in reducing their financing costs for public improvements, deficit reduction, and various other municipal purposes. The authority pools the borrowing needs of various local units of government and issues bonds, the proceeds of which are used to make loans to local units. The pooling of many local units provides a saving in interest and issuing costs to the local units. As of September 30, 1996, the Michigan Municipal Bond Authority had $1.4 billion of bonds outstanding.

Michigan State Building Authority Bonds: The Michigan State Building Authority was created pursuant to Public Act 183 of 1964, to issue bonds to finance the acquisition or renovation of buildings for use by State or public institutions of higher education. The bonds are repaid by rental charges levied against the occupants of the buildings. As of September 30, 1996, the Michigan State Building Authority had $1.5 billion of bonds outstanding.

Michigan Strategic Fund Bonds: The Michigan Strategic Fund was created by Public Act 70 of 1984, to help diversify the economy of the State and provide for economic development, primarily by assisting business enterprises to obtain additional sources of financing. The Strategic Fund was originally financed with oil and gas revenues generated from the extraction of oil and gas on State lands. The Strategic Fund loans funds to businesses that have financing needs that cannot be satisfied by conventional bank lending. As of September 30, 1996, the Michigan Strategic Fund had $2.0 billion of bonds outstanding.

Local Government Revenue Bonds: Counties, cities, villages, and townships issue revenue bonds under various sources of statutory authority. Proceeds from these bonds are used for promoting commercial and industrial development projects and other purposes in the municipalities. As of September 30, 1995, counties, cities, villages, and townships had $5.3 billion of revenue bonds outstanding.

Local Authority Bonds: Local units of government have the authority to create special authorities for purposes such as hospital operation, transportation, and public power generation. These authorities have the ability to levy bonds that are repaid by dedicated revenue streams. As of September 30, 1995, local authorities had $4.4 billion of bonds outstanding.

Amount of State Debt Outstanding in Michigan

This section of the paper will examine the amount of State debt outstanding in Michigan. Unless indicated otherwise, information used in the following tables and figures was provided by the Michigan Department of Treasury. Table 1 provides a summary of Michigan State government debt outstanding for four fiscal years. As evidenced in these tables, State governmental debt continues to grow.
 

Table 1
OUTSTANDING MICHIGAN STATE GOVERNMENT   DEBT BY FISCAL YEAR   (thousands of dollars)
	Outstanding as of September 30
STATE GOVERNMENT DEBT	1979	1985	1990	1996
GENERAL OBLIGATION DEBT
School Loan	$ 66,500	$ 26,700	$ 9,725	$180,000
Water Pollution	186,000	144,000	78,000	14,000
Public Recreation	52,000	6,000	10,000	113,160
Environmental Protection	---	---	89,998	377,823
Vietnam Veteran Bonus	178,000	65,000	---	---
Total General Obligation Debt	$482,500	$241,700	$187,723	$684,983
NONGENERAL OBLIGATION DEBT
Michigan Department of Transportation
Tax Dedicated Bonds	115,960	409,905	500,711	854,196
Joint Venture Tax Dedicated Highway Bonds	8,315	---	---	---
Department of Natural Resources
State Park Revenue Bonds	11,500	10,045	5,635	---
Public Building Corporation Bonds
State Office Building Corporation	1,886	1,046	346	---
Special Authorities-Revenue Bonds and Notes
International Bridge Authority	10,303	7,850	7,850	5,905
Mackinac Bridge Authority	37,988	3,285	---	---
Mackinac State Park	255	480	1,477	2,520
Michigan Economic Development Authority	0	0	0	0
Michigan State Housing Authority	945,855	1,949,430	2,091,879	1,987,286
Michigan State Hospital Finance Authority	469,203	1,698,959	1,819,730	2,777,024
Michigan Higher Education Facilities Authority	2,125	69,015	70,025	179,135
Michigan Higher Education Student Loan Authority	49,000	192,982	206,645	625,424
Michigan Job Development Authority	8,100	---	---	---
Michigan Municipal Bond Authority	---	---	712,044	1,368,035
Michigan State Building Authority	89,450	539,535	1,083,600	1,478,896
Michigan Strategic Fund	---	614,175	1,115,814	1,991,591
Michigan Family Farm Development	---	4,884	3,696	1,659
Michigan Underground Storage Tank Authority	---	---	---	216,600
Total Non-General Obligation Debt	$1,749,940	$5,501,591	$7,619,452	$11,488,271
TOTAL STATE GOVERNMENT DEBT	$2,232,440	$5,743,291	$7,807,175	$12,173,254
Source: Michigan Department of Treasury

 
Table 2 separates State government debt into debt categories of general and nongeneral obligation for fiscal years 1978-79 through 1993-94. Again, the distinction between general obligation (full faith and credit) debt and nongeneral obligation (bonds without full faith and credit) debt is that the latter does not require voter approval. In Michigan, the growth of nongeneral obligation debt has greatly exceeded general obligation debt. Comparing FY 1978-79 with FY 1995-96, State nongeneral obligation debt (in nominal dollars) increased from $1.7 billion to $11.5 billion, an increase of 556.5%, while the level of State general obligation debt outstanding has increased by only 42.0%.
 

Table 2
MICHIGAN STATE GOVERNMENT DEBT OUTSTANDING   AS OF SEPTEMBER 30 OF EACH YEAR
	STATE GOVERNMENT DEBT
Year	General Obligation	Nongeneral Obligation	Total State
1979	$482,500	$1,749,940	$2,232,440
1980	439,100	2,353,199	2,792,299
1981	409,600	2,692,335	3,101,935
1982	361,000	3,205,816	3,566,816
1983	309,300	4,059,541	4,368,841
1984	259,300	4,790,151	5,049,451
1985	241,700	5,501,591	5,743,291
1986	198,000	6,631,876	6,829,876
1987	157,700	6,661,528	6,819,228
1988	129,500	6,824,257	6,953,757
1989	106,400	6,878,901	6,985,301
1990	187,723	7,619,452	7,807,175
1991	162,133	8,534,758	8,696,891
1992	402,934	9,877,394	10,280,328
1993	420,813	9,667,846	10,088,659
1994	438,040	10,442,492	10,880,532
1995	706,006	11,073,285	11,779,291
1996	684,983	11,488,271	12,173,254
Source: Michigan Department of Treasury

 
Figure 1 examines the growth of State nongeneral obligation debt outstanding for specific bonds during the period FY 1978-79 to FY 1995-96. The greatest increases in State debt outstanding occurred in Hospital Finance Authority bonds ($2.3 billion) and Strategic Fund bonds ($2.0 billion). The smallest increase was in Higher Education Facilities Authority bonds ($177.0 million). These types of bonds are repaid with dedicated State revenues or with repayment schedules mandated for the entities receiving the proceeds of the bonds.
 

Growth of State Debt in Michigan

Figure 2 attempts to examine State debt relative to other economic factors in Michigan. In order to make such a comparison, State debt, inflation (Detroit consumer price index), and the State budget (total State spending) are indexed using FY 1978-79 as the base year. Thus, the rates of change for each of these factors are made comparable.

As Figure 2 illustrates, State debt has consistently outpaced the rate of inflation. From FY 1978-79 through FY 1995-96 inflation increased 107.1%, while State debt showed an increase of 445.3%. Finally, total State spending increased 208.9%, at a considerably lower rate than the State debt increase.
 

State Government Debt in Michigan Compared With Other States

The United States Bureau of the Census publishes annual data regarding the level of debt outstanding in each state. The Bureau of the Census debt data include both general obligation and nongeneral obligation state debt. In order to provide a meaningful comparison among the states, the Census Bureau state debt data are also published on a per capita basis.

Table 3 provides a summary of state government per capita debt outstanding for fiscal years 1980, 1990, and 1996. Over this 16-year period the national average level of state government per capita debt outstanding increased from $681 in FY 1980 to $1,966 in FY 1996. During FY 1980, Michigan had $315 of per capita debt outstanding. This increased to $887 in FY 1990 and $1,425 in FY 1996.

Michigan's FY 1996 level of $1,425 per capita debt is significantly below the national average of $1,966. Michigan's FY 1996 per capita debt is 27.5% below the national average. In order for Michigan to have reached the average level of state per capita debt outstanding in FY 1996, an additional $5.2 billion of Michigan State governmental debt would have had to have been issued.

While the level of per capita debt outstanding in Michigan is significantly below the national average, Michigan's relative rank in per capita debt outstanding as compared with other states has increased in recent years. Table 4 provides a state-by-state ranking of per capita debt outstanding for FY 1980, FY 1990, and FY 1996. In both FY 1980 and FY 1990, Michigan's level of per capita debt outstanding ranked 36th among the states. By FY 1996, Michigan's ranking among the states had increased to 25th.

The growth in the level and the ranking of Michigan per capita debt outstanding is further illustrated in Table 5. This table provides a summary of state per capita debt outstanding in FY 1990 and FY 1996 and the dollar and percentage change in the level of per capita debt for each state over the past six fiscal years. Over this six-fiscal year period, the average level of state per capita debt increased by $312 or 19%. The increases in Michigan were $538 and 61%. Michigan's 61% increase in state per capita debt over the past six fiscal years ranks fifth among all states over this time period. Over the six-fiscal year period a total of nine states managed to reduce their level of per capita debt.

The state-by-state comparison of debt outstanding leads to two primary conclusions. The first is that Michigan is still a relatively low debt state. Michigan's FY 1996 level of per capita debt outstanding is 27.5% below the national average. The second conclusion is that the level of per capita state debt outstanding in Michigan has increased at a significantly faster rate than the national average over the past six fiscal years. This has resulted in Michigan's ranking in per capita debt outstanding increasing from 36 among the states in FY 1990 to 25th in FY 1996.
 

1. Over the period 1970 through 1990 state and local government revenues increased by 565% while inflation over the same period increased by 372%.