Legislation has charged the Michigan Department of Treasury with measuring and identifying municipalities that may be in fiscal distress. To make certain the process of identifying fiscal distress was based on a transparent and vetted methodology, the State charged Michigan State University Institute for Public Policy and Social Research with the task of developing a fiscal distress scoring system. A paper was published in 2002 based on their research and conclusions. One of the primary authors of this paper was former Michigan State Treasurer, Robert Kleine. The algorithms and terminology used in the Munetrix software tool are based on this paper. During 2012 the Michigan School Business Officials (MSBO) identified several school district financial directors to meet and modify the municipal algorithm for use with school districts. Munetrix utilizes two versions of the algorithm; one for municipalities and another for schools. For more information about the fiscal scoring history and a link to the actual 2002 paper see, the Michigan Department of Treasury Fiscal Score Explained webpage.

The algorithm can be called a digital system in that a local unit, for any given year, scores either a 1or 0 for each factor. By adding the individual factor scores an overall number is calculated for the local unit. The lower the number the more fiscally sound a local unit is determined to be. There are three categories of scores grouped by color; shades of green, blue and red.