Laying bare the structural challenges facing Michigan's economy – from a massive unfunded pension liability to rising CEO pessimism over the state's manufacturing future – Gov. Gretchen Whitmer sat down for an unusually transparent financial review on YouTuber Caleb Hammer's "Financial Audit" show on Nov. 3.
The headline number that should worry taxpayers: Michigan carries an unfunded pension liability of approximately $27 billion, which is scheduled to be amortized and fully addressed within a 15-year period ending around 2038, roughly five times the state’s annual K-12 school aid fund contribution.
Don't Miss:
- Fast Company Calls It a ‘Groundbreaking Step for the Creator Economy' — Investors Can Still Get In at $0.85/Share
- 7 Million Gamers Already Trust Gameflip With Their Digital Assets — Now You Can Own a Stake in the Platform
While the pension system improved its funding ratio to 74.83% from 66.3% the previous year, Whitmer said, that gain came primarily from market recovery rather than structural reform.
“Pensions are being phased out as a policy,” Whitmer said on the show, noting that future generations of state employees won’t receive them—a move designed to shrink the liability over time.
The Real Threat: Tariff Chaos and CEO Pessimism
Perhaps more concerning than legacy pension obligations is the current business climate. A staggering 87% of CEOs in Michigan expect a weaker overall state economy over the next decade, Whitmer said during her appearance.
The culprit? Trade policy uncertainty that’s hitting Michigan’s manufacturing and agricultural sectors particularly hard.
“The tariff chaos and unpredictability of trade policies coming out of Washington, D.C.” is creating stress and uncertainty throughout the state economy, Whitmer said. Michigan’s heavy reliance on advanced manufacturing—especially automotive—makes it uniquely vulnerable to tariff fluctuations.
Whitmer advocated for using tariffs “like a scalpel, not a sledgehammer,” suggesting a more targeted approach to trade policy.
Trending: From Chipotle to Red Bull, Top Brands Are Already Building With Modern Mill's Tree-Free Wood Alternative — Here's How You Can Invest Too
The EV Transition Gamble
Michigan is betting big on electric vehicles and battery manufacturing to maintain its automotive dominance. The state pledged $1 billion through its “Make It in Michigan” program for five EV battery-related projects.
“Batteries are the heaviest component, where they are built will become the center of gravity for the long-term dominance in mobility,” Whitmer said, positioning Michigan to be the place where batteries are manufactured.
But this strategy carries risk. The University of Michigan's Michigan Economic Outlook for 2025–2027 projects a 3.9% increase in per-capita income this year, but warns that overall growth will slow. Meanwhile, Michigan ranks 49th nationally in population growth—a major long-term economic headwind, according to the Michigan State Revenue and Economic Outlook published by the House Fiscal Agency.
See Also: GM-Backed EnergyX Is Solving the Lithium Supply Crisis — Invest Before They Scale Global Production
Controversial Revenue Sources
Michigan’s school aid fund relies on sales tax but also draws from marijuana taxes generating $270 million and gaming taxes. These revenue sources—often called “sin taxes”—are described as the “easiest taxes for legislators to take votes on,” though critics argue they disproportionately affect lower-income individuals, according to Whitmer.
The state also increased its Working Families Tax Credit from 6% to 30%, a form of redistribution that Whitmer said incentivizes full-time work and disproportionately supports families raising children.
For investors watching Michigan’s municipal bonds or companies with significant Michigan operations, the combination of CEO pessimism, slow population growth, and massive unfunded pension liabilities suggests caution. The state’s EV bet may pay off long-term, but the transition period looks increasingly turbulent.
Read Next: Have $100k+ to invest? Charlie Munger says that's the toughest milestone — don't stall now. Get matched with a fiduciary advisor and keep building
Image: Shutterstock
