Is Michigan Recession Proof? Is Your Community?
Across the country, the national economy is now enjoying its longest recovery in more than a century since that time. While Michigan has only lagged behind slightly in its efforts to get back on stable financial footing, state unemployment is at an all-time low. But are we ready for the next recession? 
More to the point – are Michigan’s communities ready?
As we look at the Michigan’s fiscal landscape, several factors are emerging that could leave our state – and particularly our communities – more vulnerable to the next downturn, from transformations in the automotive industry that are costing manufacturing jobs, to talent recruitment challenges, to trade deal saber rattling that Michigan is powerless to control.
Recent trade wars with China and even allies in Europe have economists worried that Michigan could be the canary in the coal mine for another economic downturn nationally. And if we’ve learned anything from the last recession, we know that our communities – specifically our cities and villages – will bare the brunt of another recession.
During the Great Recession, which began to affect states in 2008, rust belt states like Michigan began to feel the pinch of a slowing economy earlier, beginning as early as 2005. To survive the Great Recession, the state of Michigan decided to balance its budget on the backs of its local communities. While the state came out of the recession quickly, our communities continue to struggle. Unfortunately, the financial struggles of local communities will continue unless the way the state funds local governments is changed.
While Michigan could weather a very mild recession, it might struggle against an average or severe recession that would go on some months, according to studies that compare available rainy day funds to general fund balances. 
According to an analysis done by the Mercatus Center at George Mason University – using fiscal year 2014 data – Michigan would need an additional $1.39 billion to make it through a recession of average severity if the state decided to rely on its combined rainy day fund and general fund balances rather than cutting spending or raising tax rates.
Some economists, like Charles Ballard at Michigan State University, believe Michigan could face recessionary challenges in the future.
In a recent interview with Michigan Radio, Ballard said there has been essentially no job growth in Michigan in the first half of 2019, and there are more troubling signs on the horizon as well, with slowdowns in growth in China, and with Germany’s economy beginning to shrink.
In short, while it’s not yet time to panic, it’s important for our state leaders to be thinking about how revenue downturns might negatively impact cities and villages across Michigan and how we can develop measures together that lessen the severity of an economic slowdown.
The SaveMICity initiative has consistently warned anyone who would listen that our local communities will face severe financial challenges in the next recession if the state’s broken system for funding our municipalities isn’t fixed.
Municipal leaders need to begin thinking about how their local communities might be impacted by even a mild recession. As elected officials navigate balancing the state’s budget, it might be wise to develop ways to recession proof Michigan.
The economy has been steadily growing but, as the old adage says, what goes up must come down. Planning today to insulate our state and our communities against factors we cannot control tomorrow are critical to ensuring that recession remains a worry, not a reality.
