For Immediate Release:
June 29, 2015
Contact: Eric Lupher
New CRC Paper Questions Why Judgment Levies are not Counted Within Constitutional Tax Limitations
A number of jurisdictions have been in the news lately because new taxes will be levied as a result of judgments against each one of them. Judgment levies that were imposed recently in the Pontiac School District and are scheduled to be levied by the City of Inkster and Wayne County. Each tax increases the cumulative tax rate beyond the tax limitations in place for the jurisdictions. A new Citizens Research Council of Michigan paper, Harmonizing Judgment Levies with Tax Limitations, describes how judgment levies came to by levied in these places and calls for change that would not permit these taxes to increase the total tax rate to levels that would exceed the constitutional and statutory tax limitations.
Unlike most other taxes levied by local governments, judgment levies do not require voter approval and may be levied in addition to other operating and extra-voted millages. Provisions in the 1963 Michigan Constitution 1) require voter approval to levy new taxes or to increase the rate of an existing tax beyond the rate authorized when the Headlee Amendment was ratified and 2) limit directly, or requires the legislature to limit, the power of local governments to tax and incur debt. Judgment levies were authorized prior to 1978, so voter approval is not required. The courts have ruled that the language of the Revised Judicature Act, which authorizes judgment levies, places judgment levies outside of the tax rate limitations.
This and prior CRC papers argue that judgment levies can be harmonized with tax limitations. Instead of levying taxes beyond the rates set legislatively or in city or county charters, judgment levies could be considered a garnishment, claiming the first amounts of tax revenues generated by taxes levied within the tax limitations.
“The use of judgment levies in the Pontiac School District and Wayne County exemplify the potential dangers of allowing judgment levies to fall outside of tax limitations,” noted CRC President Eric Lupher. “If these jurisdictions had the latitude to levy taxes without a vote of the residents and without limitation, they would not have to take the actions that led to the judgments. These judgement levies provide the elected officials the best of both worlds… they were able to avoid making difficult financial decisions and they were able to exceed their tax limitations. They could continue performing certain functions without diminishing the resources for other services.”
The CRC report is available at no cost on the Citizens Research Council of Michigan website.