Expect the pinch on local budgets, services to worsen

After years of service cuts, Michigan cities and counties say they’re on firmer financial footing, happy with the package of services they deliver to residents and with, in large part, comfortable balance sheets.

Good news, right?

Not so fast. A University of Michigan Gerald R. Ford School of Public Policy survey – the same survey that elicited those happy tidings from Michigan communities – found that county and municipal leaders don’t think their current financial situations are sustainable.

In the last 10 years, local governments have been hit by a budgetary double whammy: property values have dropped precipitously, drastically reducing the amount of property tax revenue cities and counties collect.

At the same time, the state has consistently cut revenue sharing to cities, eliminating statutory revenue sharing payments to counties entirely.

And another shoe is ready to drop. At the end of last year, the Legislature voted to eliminate the personal property tax, a cumbersome levy on industrial and commercial equipment that business advocates and municipal leaders said was impractical to impose.

A new arrangement will replace some, but not all, of the revenue generated by the personal property tax in some, but not all, of the cities that collected it.

All of which means that cities and counties have had to learn to do more with less, achieving, it seems, a new normal of funding and service delivery.

A small percentage of survey respondents said they’d eliminated services; much more common is service reduction – waiting longer to mow grass at parks, increased police response times, less frequent road maintenance.

But the U-M survey results suggest that the new normal isn’t a sure thing.

Just 43 percent of the cities and counties surveyed said they’d be able to continue to offer the same array of services in the absence of funding reform.

Among cities with more than 33,000 residents, the outlook worsens: Just 22 percent said the current level of service was sustainable. Only 26 percent said they’d be able to improve services or add new services – 14 percent in the largest cities and counties.

And 67 percent of leaders in the state’s largest cities said that the funding system would force further budget cuts.

It’s important to note that the survey assumed continued economic recovery; should the state’s economy begin to slump, budget problems would likewise worsen.

City and county leaders say almost every part of the funding mechanisms for local governments is broken and needs reform: Proposal A and the Headlee Amendment, which limit the amounts by which residential properties gain in taxable value, the gas tax, the sales tax, revenue sharing.

Gov. Rick Snyder has balanced the state’s budget, but at what cost? While Snyder can’t bear the blame for the vagaries of the housing market, the governor has championed initiatives that have had direct negative consequences for Michigan’s cities and counties.

In the year ahead, it would be nice to see the data-driven Snyder move to protect the well-being of Michigan cities and counties, and the quality of life of Michiganians who dwell in them.

While the state’s financial health is important, the health of its cities and counties is equally so – interconnected, some might say.

Without healthy local governments, it’s hard to argue that the state is truly financially stable.