Commentary

Dead Last In Payments to Local Governments And Everything Else

The dangers of relying on outdated data

The Michigan Municipal League regularly makes the case that the state government should transfer more money to municipal governments. But MML Communications Director Matt Bach overstated one point when he said, “Across the country, Michigan ranks 50th — DEAD LAST — in investing in its communities since 2002.”

Bach’s point is not as straightforward as it sounds. The figures he cites are from the once-every-five-years Census of Governments, and the most recent figure is from 2012. The 2017 version hasn’t been released yet, so his assessment covers the 10-year period from 2002 to 2012.

That might matter to the state’s ranking among the states because it misses out on 7 years of growth, when state transfers to local cities, villages, counties and townships increased by $267 million, or 12.5 percent when adjusted to inflation.

It’s also unclear what the Census Bureau’s numbers actually mean. It says that the numbers cover the amount of money transferred from the state to municipal governments and that the state transferred $3 billion to municipal governments in 2002 and only $1.3 billion in 2012.

Local governments want the state to give them a greater share of the sales tax it collects. The Census Bureau numbers include more than that revenue stream, however. It also includes state transfers to local governments for roads as well as other grants to local governments.

In any case, the trend for state payments to local governments isn’t as stark as the Census Bureau indicates. Sales tax transfers declined from $1.5 billion to $1.0 billion over the 10-year period. Transportation funding was steady then, and it has increased since 2012. So it’s not entirely clear what drove the decline the Census Bureau reports.

The “DEAD LAST” comment from the Municipal League sticks out, though, not because it’s unclear what it references or because it doesn’t include much of the recent recovery. Rather, it does not acknowledge that Michigan was at or near the bottom of many comparisons of economic health over the 2002-12 time span. Michigan went through a one-state recession for most of that period. Michigan was also 50th in employment growth and 48th in average income growth.

Unsurprisingly, Michigan’s economic problems didn’t leave local governments untouched. Lawmakers reduced payments to them as one consequence of the state’s poor economic performance. But even with the reported decline, state transfers to municipal governments are still right around average in the country, ranking 25th in per-capita transfers to local governments as of 2012.

We should be a little more careful about shaming state policymakers over their willingness to make tough decisions during a recession, especially when they have been willing to increase funding for local governments in the recovery that followed.