A package of bills to create a Revenue Sharing Trust Fund to support Michigan’s cities, villages, townships and counties received a hearing in House Local Government and Municipal Finance Committee this week. House Bills 4274 and 4275 sponsored by Representative Amos O’Neal (D-Saginaw) and Representative Mark Tisdel (R-Rochester Hills) respectively, would establish a “Revenue Sharing Trust Fund” in the Michigan Department of Treasury.

Through this trust fund concept, Michigan would dedicate a portion of general sales tax revenue to a restricted fund for the purposes of distributing those resources to cities, villages, townships, and counties. To create the fund, these bills would amend the Michigan Trust Fund Act and the General Sales Tax Act.

We have long desired to fully fund and protect revenue sharing under the law and these bills would go a long way to preserving resources that are currently being used to fund revenue sharing. Through the concept of a “Revenue Sharing Trust Fund” we can dedicate general sales tax revenue into a restricted fund for the purposes of distributing those resources to cities, villages, townships, and counties. Below is a more detailed analysis of each bill.

Amend the General Sales Tax Act: HB 4275

• Would amend the General Sales Tax Act to provide for the distribution of sales tax revenue into the Revenue Sharing Trust Fund. Beginning on October 1, 2024, the Department of Treasury would have to deposit at least 8% of the money received and collected from the tax imposed at a rate of 4% into the Revenue Sharing Trust Fund.
• Based on the May 2023 consensus revenue estimating conference projection for sales tax revenue for FY 2024-25, the 8.0% earmark would generate approximately $601.1 million

Amend the Michigan Trust Fund Act: HB 4274

• Would amend the Michigan Trust Fund Act, to establish a Revenue Sharing Trust Fund within the Department of Treasury. The fund would receive money deposited from the General Sales Tax Act (as provided for by HB 4275), interest and earnings from the fund’s investments, and donations made to the fund from any source. The State Treasurer would be responsible for directing the fund’s investments. Money in the fund at the close of a fiscal year would remain in the fund and would not lapse to the general fund. Beginning on October 1, 2024, the State Treasurer would have to transfer and disburse money received by the Revenue Sharing Trust Fund from sales tax revenue as follows:
  • Cities, villages, and townships that are eligible to receive funding through the City, Village, and Township Revenue Sharing (CVTRS) Program would receive 52.87% of the disbursement, distributed in the same proportion that each was eligible to receive CVTRS payments for the 2022-2023 fiscal year.
    • Eligible cities and villages would receive $317.8 million.
  • Cities, villages, and townships that were not eligible to receive CVTRS payments would receive 1.00% of the disbursement, distributed on a per capita basis to each municipality based on the most recent federal census. This would now provide funding to over 1100 villages and townships that have had their statutory revenue sharing payment eliminated.
    • Eligible villages and townships would receive $6.0 million.
  • Counties would receive 46.13% of the disbursement, distributed in the same proportion that each was eligible to receive payments through county revenue sharing and the County Incentive Program for the 2022-2023 fiscal year.
    • Eligible counties would receive $277.3 million.
• Distributions would be made on the last business day of October, December, February, April, June, or August, as applicable.
• Money in the fund could not be transferred, expended, withdrawn, or otherwise disbursed from the fund except as authorized above.
• Money would be deposited into the trust fund as required by the general sales tax act.
• For each annual budget submitted to the legislature for each fiscal period beginning after September 30, 2024, the governor and state budget director would be required to include an appropriation directing the state treasurer to transfer and disburse money from the revenue sharing trust fund in the manner provided above.

Ultimately, these bills would require a statutory change by the legislature to reduce funding below current levels. It is this statutory protection, in the form of the trust fund, that creates the distinction from how we fund revenue sharing today and it being subject only to the annual appropriations process.

Should these bills pass, it would be a significant step forward in preserving resources for local units of government that can be used to provide services, invest in infrastructure, improve quality of life, and attract talent and business.

John LaMacchia is the League’s director of state & federal affairs. He can be reached at [email protected] or 517-908-0303.