Public Finance Issues
Catalog of Local Government Services in Michigan
Memo 1079 ( September 2005 ) 8 pages
The Catalog of Local Government Services is the result of a survey sent to the governments of 670 counties, cities, villages, and counties in 24 Michigan counties. The surveys asked which services are provided to residents of each community, and if the services are provided, whether they are provided by the units themselves, through cooperative arrangements, by another unit, or by contract.
Responses were received from about 70 percent of the units contacted. The data show that Michigan cities, villages, and townships cannot be characterized in simple terms. The menu of services provided by different units is broad and the methods used to provide those services equally diverse. The Citizens Research Council plans to use the Catalog of Local Government Services for future studies to expand on opportunities for efficiencies. The information is made available at this time for others to use the data for their own needs.
Article IX -- Finance and Taxation
Report 360-12 ( August 2010 ) 15 pages
The Great Recession has had significant negative effects on state and local government services in Michigan, including public education, as tax revenues declined in response to the slowdown in economic activity. As governments struggle to balance their annual budgets during these austere times, they do so within the confines of the constitutional limitations contained within Article IX. These limitations range from prescribing the proportion of value at which property may be taxed, to requiring voter approval before units of local government may increase certain taxes and indebtedness, to limiting the forms and rates of taxation (state and local), to specifying how the revenues from certain taxes are to be expended.
Prior to the recent economic slide, Article IX has been the subject of the most attempts to amend the Constitution (29 proposed amendments), indicating the importance of the issues contained therein. The article has been successfully amended 10 times, most recently in 2006. The two most significant amendments were Proposal E of 1978 (Headlee Amendment) and Proposal A of 1994; both dealt with multiple sections and both created tax and/or spending limitations. It is expected that given the State of Michigan's fiscal challenges over the past eight years and the public's general interest in state and local tax and finance issues, a constitutional convention would spend considerable time addressing the complex and varied provisions of Article IX.
"In addition to the specific tax and finance provisions of Article IX, a convention is likely to address the level of complexity and detail contained in the current constitution," said Eric Lupher, CRC's Director of Local Affairs. "The inclusion of finite detail in the Constitution results in a great deal of complexity in the management of state and local fiscal affairs. Furthermore, the level of detail in the state's foundational legal document effectively limits the legislature's discretion with respect to carrying out its fundamental "power of the purse."
Administration of the property tax, the main revenue source for local governments and an already complex tax by its very nature, has been made more complex by a series of constitutional amendments which have had the effect of layering tax limitations on top of existing provisions. "A constitutional convention may want to begin with a goal of eliminating some of the complexity of the property tax system," Lupher said.
Michigan's Deteriorating Cash Position
Note 2007-02 ( May 2007 ) 8 pages
Actions to maintain balance in the State general and school aid funds since Fiscal Year 2001 have relied heavily on the depletion of reserves and the use of one-time accounting maneuvers, which have served to erode the State cash position, by $4.2 billion. Actions to balance the FY07 and FY08 budgets will be subject to the realities of cash constraints brought about by failure to resolve the underlying structural deficit.
Avoiding Local Government Financial Crisis: The Role of State Oversight
Report 329, ( July 2000 ) 56 pages
Over the years, the State of Michigan has enacted a number of laws to prevent or react to local government fiscal distress. Despite these laws, the state has remained relatively inactive in the oversight of local government finances, and a few units of local government have experienced fiscal distress. Through proactive monitoring of local government finances, the state could identify local units with management policies, financial practices, or debt management practices that allow financial conditions to erode. By continuously working with local governments, the state could assist in changing the course of those unit’s finances. Based on the experiences of other states, the likely result of such actions is tax savings for residents of those units likely to get into fiscal distress, improved management practices by officials of those units, and reduced interest costs for all Michigan residents.
This report considers the proper state response to local government fiscal distress, examines the policies of other states, and makes eight recommendations for how the state might alter its current practices to better deal with fiscal crises.
Avoiding Local Government Financial Crisis: The Role of State Oversight
Memo 1053, (July 2000 ) 8 pages
Summary of Report 329
Wayne County Charter Issues ... Debt Concepts and Provisions for Michigan Charter County Government
Report 272, ( April 1981 ) 12 pages
The purpose of this paper is to review concepts related to authorizing debt provisions under the Constitution of the State of Michigan and to define the issues involved in developing debt provisions for the Wayne County Charter. This paper will also analyze debt provision alternatives by comparing the concepts of such provisions for the Wayne County Charter. This paper does not seek to analyze statutory provisions pursuant to which county debt may currently be incurred or to suggest any revisions to such provisions which might be necessary to desirable in the implementation of any of the debt authorizing concepts discussed herein.
Michigan and Local Debt
State Assumption of School Debts
Memo 1135 ( April 2015 ) 8 pages
A recent report addressing the future of public education in the City of Detroit recommends that the State of Michigan assume responsibility for certain debts of Detroit Public Schools as part of a larger plan to reform governance and finance for all public schools in the city. A new Citizens Research Council of Michigan (CRC) report, "State Assumption of School Debts," examines the issues involved with such an state assumption of school debts by examining the consequences associated with previous instances where the state assumed responsibility for school debts. The CRC report urges policymakers to develop a statewide policy for dealing with school district debts, especially if the state is going to make additional resources available for such purposes.
The Coalition for the Future of Detroit Schoolchildren has recommended that the state assume $124 million annually of Detroit Public Schools’ (DPS) financial obligations. The obligations include debt service payments for long-term notes issued to finance current operations as well as required payments to the school employee retirement system for employee "legacy costs." If the state takes on these debts, DPS would see an almost $2,500 per-pupil increase in the amount of money available for classroom instruction; however, this will come at the expense of $124 million fewer state dollars available to share across all other public schools in the state. When the state assumes a district’s debts, the benefits are retained locally but the costs are socialized.
"While DPS is currently the most recent financially and academically struggling district requesting direct state assistance with its debts, 55 other school districts across the state began the current fiscal year in a deficit situation," said Craig Thiel. "A request from any one of these districts, some of which are under the control of state-appointed emergency managers, may not be too far off."
State Bailouts to Erase School District Accumulated Deficits
Memo 1113 ( June 2012 ) 5 pages
Beginning in the fall of 2012 all educational services in the Muskegon Heights School District will be turned over to a charter school operator and the District will no longer be involved in the direct provision of such services under a plan proposed by the state-appointed emergency manager. This plan would be implemented under Public Act 4 of 2011. As part of this "charter conversion" plan, the District's multi-year accumulated operating deficit, projected to be $12 million as of June 30, 2012, effectively will be eliminated through a state bailout.
CRC Memorandum State Bailouts to Erase School District Accumulated Deficits explores the plans being proffered by the Muskegon Heights School District emergency manager and what they mean for the District and the state at-large.
The state bailout comes as a result of the unique interaction of Public Act 4 and the architecture of the per-pupil foundation grant, the primary school operating funding source. By turning educational services over to a charter school operator, the Muskegon Heights School District will be able to retain 100 percent of proceeds from the local 18-mill school operating tax to finance its accumulated deficit; effectively redirecting the use of this dedicated millage. To make up for the lost local revenues used to finance the foundation grant, additional state School Aid Fund dollars will be provided, dollar-for-dollar. Thus, the foundation grant will be financed 100 percent by the School Aid Fund. In total, this bailout is expected to cost other districts in the state approximately $840,000 each year.
Both the conversion of the entire district to a charter school and the attendant increase in state funds that comes with the new foundation grant occurs without state legislative deliberations or actions. While it is entirely possible that a state bailout is the only option available, the method in which this will occur is not completely transparent nor is it the product of a consistent state policy concerning the provision of additional resources to financially distressed school districts.
CC 983, Detroit School Ballot Issues: 1 -- Proposed $160 million Unlimited Tax General Obligation Bonds 2 -- 5 Mill Increase in Extra-Voted Property Tax for 5-Year Period ( August 1989 ) 6 pages
State Ballot Issues on the August Primary Ballot,
CRC Memo 1062, ( June 2002 ) 8 pages
Proposal 02-01: Compensation of Certain Elected State Officials discusses a proposed Constitutional amendment that would alter the process for accepting recommendations of the State Officers Compensation Commission.
Proposal 02-02: Changing Limits in Natural Resources Trust Fund and State Parks Endowment Fund; Investing Trust and Endowment Funds in Stocks discusses a proposed Constitutional amendment that would increase the overall cap on assets in the Natural Resources Trust Fund; permit one-third of revenues to the trust fund to be appropriated until the fund reaches $500 million in assets; permit $6.5 million to be appropriated from the Genevieve Gillette State Parks Endowment Fund; and remove the prohibition against ownership of stock by state permenant and endowment funds.
Benchmarking the City of Manistee
Report 365 ( October 2010 ) 85 pages
CRC benchmarked Manistee against a number of peer cities (Albion, Alpena, Cadillac, Charlevoix, Ludington, Petoskey, Springfield, St. Joseph, Traverse City) to compare operations on a number of the recommendations made in an operational services assessment performed for the city. The study compares the demographics and finances of the cities and then benchmarks a number of service areas in human relations, finance, fire protection, police protection, public works, water/wastewater, refuse collection, and strategic planning.
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Last Updated April 22, 2015