For Immediate Release:
February 18, 2015

Contact: Eric Lupher (734-542-8001)

CRC Report Lays Path for Reforming Statutory State Revenue Sharing

LIVONIA, Michigan – Introduction of the Governor’s budget proposal last week once again draws attention to a long-standing program of distributing state funding to local governments. Michigan’s state revenue sharing program has provided a decreasing amount of assistance to local governments over the last decade. Not only does the law fail to provide a method to distribute funds, but policymakers have been diverting funding from state revenue sharing to balance the state’s budget. A new Citizens Research Council of Michigan report, Reforming Statutory State Revenue Sharing, describes the role of the revenue sharing program and provides alternatives that would provide a better foundation for the future distribution of revenue sharing dollars.

“If the fiscal health of Michigan’s local governments is a priority, state policymakers should find a way to fund statutory state revenue sharing,” said CRC president Eric Lupher. “The state is only as strong as its weakest local governments. For that reason, it is a smart investment to fund those units that provide the services that keep Michigan’s residents safe and that host the economic activity upon which state taxes are levied.”

The report, prepared at the request of the House Appropriations Subcommittee on General Government, provides different paths that state policymakers could take for distributing revenues.

One path attempts to equalize the fiscal capacity of local governments by distributing state funds based on differences in their tax bases and by recognizing the varying demand for local services.

A second path suggests that the state identify the different sectors of the economy that require the greatest levels of local government services and prioritize assistance to local governments that host economic activities within those sectors.

A third alternative would transition the program from an unrestricted revenue sharing program, that allows local governments to decide how to use the funding, to a restricted revenue sharing program that funds the local government services for which the state has the greatest interest, namely public safety.

“The funding cuts since 2001 have cut about two-thirds of the local governments out of the statutory state revenue sharing program,” Mr. Lupher added. “While unfortunate for those local units that have foregone the revenues, the circumstances provide an opportunity to minimize the ‘winners’ and ‘losers’ while rebuilding the program.”

The full report, funded through a grant from the W.K. Kellogg Foundation, is available at no cost on the Citizens Research Council of Michigan website at www.crcmich.org.

Founded in 1916, CRC works to improve government in Michigan. The organization provides factual, unbiased, independent information concerning significant issues of state and local government organization, policy, and finance. By delivery of this information to policymakers and citizens, CRC aims to ensure sound and rational public policy formation in Michigan. For more information, visit www.crcmich.org.

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