News Story

Municipal Lobby Ignores State’s Hard Times In Pleading For More

For all the recent growth Michigan still clawing back from an economic ‘lost decade’

The amount of sales tax revenue that the state of Michigan shares with local governments has risen faster than the rate of inflation since the state’s 2009-10 fiscal year.

It increased from $994 million in 2009-10 to $1.3 billion in 2018-19. That $994 million in revenue sharing funds becomes $1.1 billion if stated in 2018 dollars.

In pleading for more dollars from the state, lobbyists for municipal governments often use comparisons dating back to before the impact of Michigan’s “one-state recession” of the 2000s, which was followed by the national Great Recession. A new video from the Michigan Municipal League illustrates the practice.

The Michigan Municipal League uses 2001-02 as the starting point in its analysis of state-shared revenue. In the league’s video, various municipal administrators complain about cuts in state funding.

Among the critical voices is Ferndale City Councilwoman Melanie Piana, who complains about having to downsize the city’s workforce “to make a balanced budget.”

But from 2014 to 2017, Ferndale’s general fund revenues increased above the rate of inflation, as did its state-shared revenue. Ferndale’s general fund revenues increased from $18.1 million in 2014 to $19.2 million in 2017, an increase of around $500,000 when adjusted for inflation.

State revenue sharing payments to Michigan local governments peaked in 2001-02, the year on which the league bases its revenue comparisons. Over the decade that followed, Michigan lost a total of 805,900 jobs. State-shared revenue to local governments decreased significantly from the $1.5 billion it reached in 2002. It has not reached that point since. State revenue and revenue sharing payments have been growing again since 2011, but from a low starting point.

Revenue sharing is just one source of revenue for municipalities. While shared revenues from the state have increased, property tax collections that comprise a much larger part of local government budgets have also rebounded significantly over the past few years.

Look at the city of East Lansing for an example. In 2014, it received $5.0 million in state-shared revenue and $15.7 million in property taxes. By 2017, those numbers had increased to $5.2 million in state-shared revenue and $16.5 million in property taxes.