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CRC Column

The right to criticize government is also an obligation to know what you are talking about. 
-Lent Upson, 1st Executive Director of CRC  


2009 Publications

Housing Trust Funds: Barriers and Opportunities
Report 358 ( December 2009 ) 73 pages

Federal, state, and local governments have all implemented various programs aimed at increasing the supply of affordable housing for low income residents. The loss of high wage, low skill jobs; the foreclosure crisis; tight credit; the national recession; and continuing problems in balancing the state budget have contributed to the need for new approaches to meet the challenge of affordable housing. While some communities are overwhelmed with vacant, foreclosed properties and dispossessed families, others are concerned with providing housing for low wage service workers, seniors, or special needs populations. The differences in regional economies within the state has resulted in a need for funding structures that can be adapted to meet particular low income housing needs.

The report also explores income metrics, federal low income housing programs, the Michigan State Housing Development Authority, state constitutional issues, land trusts, and land banks.

Michigan Private and Public Sector Employment Levels over the Business Cycle
Note 2009-01 ( October 2009 ) 12 pages

Michigan has been shedding jobs continuously since June 2000, and Michigan employment is now more than 20 percent below the June 2000 peak. In its most recent publication, the Citizens Research Council of Michigan, focuses on the job losses in the public sector over this time period, comparing public sector outcomes with what has occurred in the private sector. Michigan Private and Public Sector Levels over the Business Cycle finds that the changes in public sector employment have been multifaceted, with the public sector employment changes dependent on a number of factors.

In the short-term, public sector employment levels tend to be more stable than the private sector. This is attributable to a host of factors, including the composition of state and local government employment, the relative stability of the underlying revenues supporting state and local jobs, and the "countercyclical" nature of some governmental programs. As a result, state and local government employment may not react as quickly to the ups and downs of the business cycle. Over the longer-term, however, public sector budgets are forced to cope with declining resources and adjust personnel levels accordingly.

Over Michigan's prolonged recession, dating back to 2000, trends in public sector employment levels mirror what has occurred in the private sector, but without the severity. Since its high water mark in August 2001, the size of the public sector in Michigan has contracted. Within the public sector, however, there has been considerable variance with respect to composition. Generally, higher education and hospital employment levels are up and K-12 education and State of Michigan classified employment levels are down.

Detroit Ballot Issues -- Proposal S: Detroit Public Schools Bond Proposal
Memorandum 1095 ( October 2009 ) 8 pages

Proposal S would allow Detroit Public Schools to borrow $500.5 million for the construction and renovation of school facilities. If the proposal passes, DPS plans to use the bond proceeds to build eight new schools and modernize or renovate 10 schools. The analysis of Proposal S explains how the proposed bond issuance is structured to take advantage of the American Recovery and Reinvestment Tax Act of 2009. It looks at the finances of the school district, the amount of existing debt, and the unsettled governance issues that loom in the background.

Detroit Ballot Issues -- Proposal D: Election of Detroit City Council Members
Memorandum 1094 ( October 2009 ) 4 pages

Proposal D proposes an amendment to the Detroit City Charter to change from the current at-large system of electing city council members to a hybrid system in which some members are elected from districts and others are elected at large. The analysis provides some historical context to the council election method, discusses the context within which these changes are proposed, describes the proposed changes, and analyzes issues to be considered relative to district or at-large elections.

Streamlining Functions and Services of Kent County and Metropolitan Grand Rapids Cities
Report 357 ( October 2009 ) 45 pages and Memorandum 1093

A new report by the Citizens Research Council of Michigan analyzes existing collaboration, identifies statutory and charter impediments to the expansion of collaboration among metropolitan Grand Rapids cities, and suggests services for which the communities might benefit by collaborating for their provision. The report was conducted at the request of the communities and funded by grants from the Frey Foundation, Steelcase Foundation, and the Hudson-Webber Foundation.

The Michigan economy, in the doldrums for eight years, has placed fiscal stress on local units of government, which are searching for ways to continue to provide services to their residents in an era of constrained revenues.

"These communities already collaborate for the provision of a great deal of services, but more collaboration will be necessary if they hope to maintain the level of services to which their residents are accustomed," said Eric Lupher, CRC's Director of Local Affairs.

The report identifies provisions in several state laws that are impediments to collaboration. "These communities have used collaboration to provide services that none could afford to provide on their own, to avoid service duplication, and to maximize on efficiencies," said Lupher. "But for these communities and others throughout the state, service consolidation will become increasingly necessary because of scarce revenues. Unless provisions in the Urban Cooperation Act and others are addressed, little cost savings are likely to result from consolidating existing services."

The report suggests that the consolidation of public safety functions and an expansion of the role that counties play in assisting in the operations of local governments will have the greatest affect in streamlining service provision.

Late Budgets in Michigan: Causes, Effects, and Implications
Memorandum 1092 ( August 2009 ) 10 pages

August 13, 2009, Late adoption of State of Michigan appropriations in recent years has created significant problems, particularly for substate governments, but a deadline earlier than the end of the fiscal year probably would have little effect in alleviating the problem. That is the conclusion of a new Citizens Research Council of Michigan Memorandum, Late Budgets in Michigan: Causes, Effects, and Implications.

Economic stress and consequent falling state revenues have combined to produce an environment in which timely adoption of appropriations by the Michigan Legislature has become the exception rather than the rule. Local units of government and educational institutions that rely on the State for large portions of their expenditures are forced to make decisions regarding numbers of personnel, contracts, tuition levels, and many other financial considerations in an informational vacuum when their fiscal years begin in advance of legislative appropriation decisions.

Moreover, the Michigan Constitution contains one of the strongest balanced budget provisions in the nation and its requirement that no money may be withdrawn from the treasury "except in pursuance of appropriations made by law" means that state expenditures may not be incurred without an adopted budget. This led to a brief, but disruptive, shutdown of state government in October 2007.

Michigan State and Local Government Retirement Systems
Report 356 ( July 2009 ) 70 pages and Memorandum 1091

Today CRC is releasing its latest report, Michigan State and Local Government Retirement Systems, which describes Michiganís 138 state and local pension systems in aggregate, explores the financial and managerial state of Michigan's public retirement systems, provides details for several of Michiganís major state and local public pension systems, compares key metrics to national averages, and explores the possible ramifications of the current economic situation on public defined benefit plans and on state and local governments.

Michigan State and Local Government Retirement Systems reports on the shift to defined contribution plans, which limit the public employer's liability by transferring risk to the employee. It also reports on the balance of investment earnings, employer contributions, and employee contributions in public retirement plans; pension payments and expenses; pension board composition; pension funding strategies; the relationship of pension and other postretirement benefits; adjustments to benefits earned in the future; and potential changes in investment rules and practices.

Reforming the Process for Identifying and Funding Section 29 Mandates on Local Governments
Report 355 ( July 2009 ) 74 pages and Memorandum 1090

Today the Citizens Research Council of Michigan issued its report to the Legislative Commission on Statutory Mandates, a body created by Public Act 98 of 2007, that was created as one of two legislative commissions as part of the 2008 state budget agreement. The Commission is reviewing and investigating the extent to which unfunded mandates have been imposed on local governments, and is to recommend process reforms to the legislature so that laws that require local governments to provide new activities or services can be properly addressed in the future. The Commission engaged CRC to investigate practices in other states with similar laws.

Article IX, Section 29 of the Michigan Constitution prohibits the State from mandating local governments to provide new services or activities without proper funding. The process to implement this section of the Headlee Amendment was never fully implemented and local government associations suggest that mandates have been enacted without funding over the 30 years since adoption. CRC's report offers alternatives and options to reform the process by analyzing processes used to implement similar laws in other states.

"As local governments endeavor to balance their budgets, state mandates stand out as a fixed cost for which they have no latitude to achieve savings," said Eric Lupher, CRC's Director of Local Affairs. "A vigorous enforcement process is needed to investigate local governments' claims of unfunded state requirements, determine relevant costs, and develop a legislative response when claims are found to be legitimate."

"Processes used in other states can be adapted to implement Section 29 in Michigan," said Lupher. "While aspects of the systems used in several states are notable, the processes used in Massachusetts and California have the tools most relevant to Michigan."

Dual Deficits and Federal Recovery Assistance: Prospects for State Budget Balance
State Budget Note 2009-02 ( April 2009 ) 8 pages

Although federal stimulus funds can help balance the Michigan budget in Fiscal Years 2009 and 2010, they also create a real possibility of aggravating the ongoing structural deficit by permitting policy makers to postpone actions to bring long-term revenues and expenditures into balance. This is one of the findings of a new State Budget Note released by the Citizens Research Council of Michigan.

The State has been operating with a structural deficit, a deficit that will not be eliminated by a more buoyant economy, during the past decade. It has met the constitutional balanced budget requirement principally by using nonrecurring sources of income totalling over $8 billion over that period and has not solved the basic structural problem. Federal stimulus dollars, available from the American Recovery and Reinvestment Act (ARRA) will provide the State with $7 billion, which will help in the short run, but which may make more difficult the resolution of the structural deficit.

ARRA, which is aimed at the cyclical downturn, will provide significant new funding, but:

  • Will not be sufficient to prevent spending cuts
  • Will mask the size of the cuts necessary to deal with the structural deficit
  • Will not be available long enough see the state through the entire period of reduced revenues caused by the recession
  • Will cause a revenue "cliff" when the additional federal funding expires

"Policy makers must take steps to assure that the FY2011 budget is not more difficult than it has to be," said CRC Director of State Affairs, Craig Thiel. "While we won't be turning down the federal stimulus funding, we can't relax our efforts to eliminate the ongoing deficit."

Michigan's Weakened Financial Position and The Problem of Dual Deficits
State Budget Note 2009-01 ( January 2009 ) 8 pages

The much-anticipated Consensus Revenue Estimating Conference forecast to be released on Friday will shed light on the Fiscal Year 2009 and 2010 budget outlooks for the State of Michigan, but the basic financial condition of the State is known and shows a weakened cash position in the face of Michigan's ongoing structural deficit. This is the principal conclusion of a new analysis of the State budget by the Citizens Research Council of Michigan.

The report, Michigan's Weakened Financial Position and the Problem of Dual Deficits, notes that Michigan is ill-prepared to deal with the current cyclical problems associated with the national economic recession because it has failed to deal with the underlying structural deficits that have existed since FY2000. At the end of FY2000 the State had amassed over $3.9 billion in major fund cash reserves to deal with the 2001 recession. Today it faces a cash deficit of approximately $400 million that it must finance by means of both internal and external borrowing.

 

 

 

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Last Updated December 1, 2009