Paper addresses scarce government revenues, opportunities to create sustainable models of funding local and regional governments to provide desired services across regions
Livonia, MI – The Citizens Research Council of Michigan today released the fifth and final paper in the Michigan’s Path to a Prosperous Future series, a joint research project with Altarum that found Michigan as a whole is in decline and losing ground.
This series presented a realistic, data-informed vision of Michigan’s future based on current trends and trajectories across multiple dimensions – demographics, economy, workforce, health, infrastructure, environment, and public services. It found that other states are surpassing Michigan on a number of measures – economy, education, and infrastructure to name a few.
Michigan is suffering from stagnant population growth, brain drain, a shrinking workforce, declining health of its people, and increasingly outdated infrastructure. Our ability to stay competitive in comparison to other parts of the country is in jeopardy. We are now finding ourselves in the bottom third of national rankings, including 34th in household income, 36th in K-12 educational outcomes, 39th in health outcomes, 45th in electric service reliability, and 47th in road condition.
The final paper, Public Sector Challenges and Opportunities, focuses on the fiscal health and functionality of Michigan’s state and local government sectors, which are critical to addressing many of the challenges examined in the research series.
“Between 2000 and 2010, the state’s general fund operating budget declined by $3 billion, almost 30 percent,” said Robert Schneider, senior research associate for the Citizens Research Council of Michigan. “This resulted in drastic cuts to public services and institutions, constrained government funding, and scarce public investments to make Michigan a destination for people and businesses. It was a period of economic decline.”
Schneider noted that while state revenue has since grown, Michigan general fund revenue for the next fiscal year is projected to be 25 percent below 2000 levels, adjusted for inflation.
“A healthy, functioning government sector is the common thread to addressing many of these challenges by structuring its revenue and spending to invest in Michigan’s people, drive the economy, and create places where people want to live,” he said.
“Michigan is a low tax state,” said Eric Lupher, president of the Citizens Research Council, noting that Michigan’s state and local tax burden in 2022 was 46th among all states and has a combined state-local effective tax rate of 8.6 percent, lower than all but two neighboring states and significantly below the 11.2 percent national average.
“Being a low-tax state can be a benefit, but only if the state is also attracting residents and providing desired services at the state and local government level. Low taxes have reduced funding for key services, while the menu of public services offered has increased over the last three decades,” he said.
The paper notes that local governments, which are often primarily funded by property taxes, would benefit from a diversified revenue model, such as full funding of state revenue sharing, and could use that funding to enhance public services that improve quality of life. Underfunded local governments result in a poor quality of life, which makes it difficult to retain and attract residents.
Additionally, over the last two decades, Michigan’s public sector has experienced a tsunami of fiscal challenges.
The paper provides an in-depth look at government revenue sufficiency and how service delivery can be improved to invest in Michigan’s people, education, infrastructure, public transit, and public safety. It also discusses opportunities to create sustainable models of funding local and regional governments, enabling them to provide desired services and a standard of living across regions.
The Research Council joined forces with Altarum on the first three papers in the five-part series, which address threats and present opportunities facing Michigan, releasing a realistic, data-informed vision of Michigan’s future based on current trajectories across multiple dimensions: demographic, economic, workforce, infrastructure, environment, and public services. All papers in the series can be found on the Research Council and Altarum websites.
The series was funded by Charles Stewart Mott Foundation, The Kresge Foundation, Ralph C. Wilson, Jr. Foundation, Hudson-Webber Foundation, Grand Rapids Community Foundation, W.K. Kellogg Foundation, Max M. and Marjorie S. Fisher Foundation, Michigan Health Endowment Fund, The Joyce Foundation, The Skillman Foundation, and the Ballmer Group.
Maureen McNulty Saxton
Citizens Research Council of Michigan
Altarum is a nonprofit organization focused on improving the health of individuals with fewer financial resources and populations disenfranchised by the health care system. They work primarily on behalf of federal and state governments to design and implement solutions that achieve measurable results. Altarum combines their expertise in public health and health care delivery with technology development and implementation, practice transformation, training and technical assistance, quality improvement, data analytics, and applied research and evaluation. Altarum’s innovative solutions and proven processes lead to better value and health for all. For more information, visit www.altarum.org
Founded in 1916, the Citizens Research Council of Michigan 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, the Research Council aims to ensure sound and rational public policy formation in Michigan. For more information, visit www.crcmich.org.