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News Story
State pension debt drops $3.6 billion in Michigan
Pension reform pays off for state finances
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Debt in two of Michigan’s pension systems dropped by $3.6 billion in 2025, according to reports released earlier this year.
Debts in Michigan’s school retirement system dropped from $28 billion to $25.1 billion, and debt in the State Employees’ Retirement System decreased from $4.8 billion to $4.1 billion.
Bondholders — the people who lent the state money — are owed $23.1 billion, according to the state treasurer’s report, and pension systems are the state’s largest creditors.
SERS – Pension Report -2025 (FINAL 20260429) (1) by mcclallen
The state senator whose 2018 pension reform moved new hires into a defined contribution plan applauds the decrease but calls for further reductions.
“There is no question the reforms I sponsored in past years are working and have made a positive impact in reducing long-term debt,” Sen. Thomas Albert, R-Lowell, told Michigan Capitol Confidential in an email. “While we’re moving in the right direction, there’s still a lot of work to be done – and it is imperative that we stay on track. Democrats and state bureaucrats have tried to undermine our progress a few times over the past several years – trying to free up money to continue inflated government spending in recent state budgets. We must avoid that temptation. We can get to the finish line and pay off this debt completely if we stay disciplined, saving money for taxpayers and ensuring more school aid money goes directly into the classroom.”
Total debt in these systems is almost as much as the state collects from all of its taxes in a year. A report from the Senate Fiscal Agency found that Michigan’s major taxes and and net revenue from the state lottery totaled $3.1 billion as of July 2026.
SERS – OPEB Report -2025 (FINAL 20260429) (1) by mcclallen
The drop in debt is good, said James Hohman, director of fiscal policy at the Mackinac Center for Public Policy.
“The state isn’t supposed to have any pension debts at all,” Hohman wrote. “Lawmakers are supposed to set aside enough money to pay what employees have earned. It’s good that they are catching up and have made the system less susceptible to underfunding.”
