Matt Bach, Director of Media Relations
Michigan Municipal League
FOR IMMEDIATE RELEASE: March 18. 2014
New Analysis Tallies the Impact of Revenue Sharing Diversion on Northern Michigan, U.P. Communities
Absent the Diversion, Some Urban Areas in Fiscal Distress Would Likely Have Fewer Problems
LANSING, Mich. — Alpena, Cadillac, Charlevoix, Ironwood, Marquette, Sault Ste. Marie, Traverse City, and Wakefield are among the Northern Michigan and Upper Peninsula cities that lost millions of dollars in statutory revenue sharing over the past decade because the governor and Legislature diverted the funds to the state budget.
If the funds had not been diverted by state lawmakers, the fiscal crises facing many local Michigan communities today might not be so severe.
Statutory revenue sharing funds are earmarked by state law for local communities across Michigan to support essential local services including police and fire, water systems, road maintenance, parks and libraries, and more. The funds represent a percentage of sales tax revenues collected at the local levels. Instead, between 2003 and 2013, the governor and Legislature diverted $6.2 billion in statutory revenue sharing from local communities to plug holes in the state budget and to pay for tax cuts for businesses.
According to 2003-2013 state Treasury Department data compiled and analyzed by the Michigan Municipal League, the diversion slashed revenue sharing to Alpena by $4.4 million; Cadillac, $3.5 million; Charlevoix, $714,465; Ironwood, $2.6 million; Marquette, $6.9 million; Sault Ste. Marie, $5.7 million; Traverse City, $4.3 million; and Wakefield, $853,022. Other Northern Michigan communities were also reduced.
The data was released today during a media roundtable discussion hosted by the League in Lansing. Much of this data was also included in the March/April 2014 edition of the Michigan Municipal League Review magazine for an article titled, “The Great Revenue Sharing Heist” by Anthony Minghine, associate executive director and chief operations officer for the Michigan Municipal League. The article is available at mml.org: http://www.mml.org/advocacy/great-revenue-sharing-heist.html.
“You can look at pretty much any Michigan community and see where they might be today if the statutory revenue sharing had been fully funded,” said Samantha Harkins, state affairs director for the League. “For example, look at Flint, which is now under an emergency manager. Flint will have lost $54.9 million dollars by the end of 2014. The deficit in its 2012 financial statements is $19.2 million. Flint could eliminate the deficit and pay off all $30 million of bonded indebtedness and still have over $5 million in surplus. In Detroit, a city facing the largest municipal bankruptcy in history, the state took over $700 million to balance the state’s books.”
For years local leaders across the state have called on the governor and Legislature to end their annual raids of statutory revenue sharing funds. The 2015 state budget proposed in late January by Gov. Rick Snyder proposes the first significant percentage increase in revenue sharing support for local communities in more than a decade. Discussions about revenue sharing, also known as the Economic Vitality Incentive Program (EVIP), are ongoing in the state Legislature.
“The revenue sharing increase proposed in the 2015 state budget is a good start in restoring the Legislature’s massive diversion of $6.2 billion in funds from local communities of the past decade,” said Jacqueline Noonan, Utica mayor and president of the Michigan Municipal League. “While some Michigan communities would likely still be in financial straits today, it is certainly reasonable to conclude that their fiscal problems would not be as severe if state lawmakers and the governor had followed the revenue sharing earmarks required in state law. We are hopeful Lansing’s annual raid on local revenue sharing has ended and a period of fund restoration has begun and will continue until all cuts are restored.”
The League’s analysis of the Treasury data is the second research project to quantify the diversion of revenue sharing funds by the Legislature and governor. A Sept. 23, 2013 report by the highly respected Citizens Research Council (CRC) of Michigan pegged the revenue sharing diversion at about $5 billion over the past decade. The CRC report also noted that while the state’s spending increased 26 percent during that time, local governments across Michigan were forced to cut budgets and shed 17 percent of all local government jobs.
“There is total consensus on the fact that Michigan will never truly prosper again until we have local communities and local places where the high-wage jobs and industries of today, and the highly talented workers who fill those jobs, want to be,” said Daniel Gilmartin, CEO and executive director of the League. “Revenue sharing funds enable communities to provide the fundamental services that make neighborhoods safe, strong, and inviting places.”
The League will continue to urge the Legislature to increase statutory revenue sharing by a larger amount in the 2015 state budget, continue to make larger increases in future budget years, and never again raid funds that, by law, are supposed to come to local communities for essential local services.
The Michigan Municipal League advocates on behalf of its member communities in Lansing, Washington, D.C., and the courts; provides educational opportunities for elected and appointed municipal officials; and assists municipal leaders in administering services to their communities through League programs and services.