For Immediate Release: May 3, 2022
Livonia, MI – The Citizens Research Council of Michigan released a report today that gives an in-depth look at the City of Detroit FY2023 budget.
After two years of pandemic disruption, the new Analysis of FY2023 City of Detroit Budget (Hyperlink with Report) report assesses the recovery of tax revenues, rebound of spending to pre-pandemic levels, and the long-term sustainability of city finances.
The Detroit City Council recently adopted the Fiscal Year (FY)2023 budget that was approved by Mayor Duggan. As a condition of the 2014 Plan of Adjustment, the budget must now receive approval from the Financial Review Commission. This report provides information for the commission and concerned residents to assess the plan created by the elected officials.
In a nutshell
- The City of Detroit’s FY2023 $1.2 billion General Fund budget has been lauded as a “return to normal” spending plan to restore the pre-pandemic status quo and manage fiscal risks with contributions to reserves and spending restraint.
- City revenues have recovered from their pandemic hit with income tax revenue gains from non-resident workers returning to their Detroit workplaces and the addition of blue collar and service industry jobs. Appropriation highlights focus on returning operating department funding to pre-pandemic levels, paying off debt and putting tax dollars into various savings accounts.
- While the approved FY2023 budget is balanced, the long-term budget forecast projects that on-going revenue growth will not be sufficient to meet estimated spending pressures in the near future. This forecast, based on a number of assumptions, presents a small, but growing, operating budget shortfall beginning in FY2027.
The analysis shows Detroit’s improvement in adopting a balanced budget, however, it does highlight some long-term risks the city will face
“We were very pleased to see that the city has crafted a balanced budget without relying on federal American Rescue Plan funding or any other one-time revenue sources to support city services,” said Esmat Ishag-Osman, Research Associate for the Detroit Bureau of the Research Council. “However, the city is a year away from pension costs returning to the budget. Revenue growth is not on a path to sustain ongoing and newly adopted city services when these pension costs return to the budget.”
While the approved FY2023 budget is balanced, the city’s long-term budget forecast shows that projections of on-going revenues will not be sufficient to meet spending pressures in the near future. This forecast, based on a number of assumptions, presents a small, but growing, operating budget shortfall beginning in FY2027. City officials must monitor the long-term health of the budget and take all necessary steps to maintain operating balance or risk heightened oversight from the Financial Review Commission.
While the Plan of Adjustment bought the city time to get its financial house in order, the administration and council have used the opportunity to extend the city into new services. Moving forward, the city must continue growing its tax base to increase city revenues in a manner that will sustain new, acquired expenditures or use more restraint when considering new expenditures to live within realistically expected revenues.
“This report returns the Citizens Research Council to its long practice of analyzing the City of Detroit’s financial health,” stated Eric Lupher, President of the Citizens Research Council of Michigan. “The Detroit Bureau will continue to provide analysis and information so Detroiters can advocate for the services they desire in a sustainable, viable fashion.”
Download Report or Contact Office for Paper Copy