Revenue sharing cuts created uncertainty for Michigan cities: expert economist, Jim Stansell, explains

Michigan’s local communities have been hit hard by a decrease in state revenue sharing. Cities, townships and villages have been continuously underfunded by the state over the past two decades due to various cuts, according to state government officials.

During a recent policy session conducted in the Anderson House Office Building and supported by the Michigan Municipal League, Jim Stansell, a senior economist with the House Fiscal Agency, discussed the history of Michigan’s revenue sharing.

Stansell also reported that statutory revenue sharing is currently only valued at about one-third of what is specified in law.

On the implications behind revenue sharing funding cuts: “Because both the constitutional and statutory amounts were dependent on actual sales tax collections, the final distributions were a moving target throughout the year.”

“These cuts have created uncertainty for cities, villages and townships,” Stansell continued.

In the 2011-2012 fiscal year, the Economic Vitality and Incentive Program (EVIP) replaced revenue sharing, but it only existed in boilerplate and was never codified into statute. Statutory revenue sharing has never been replaced by the Legislature.

Under EVIP, a city, town or village (CVT) was eligible for payment contingent on fulfilling requirements in areas such as Accountability and Transparency, Consolidation and Collaboration and Employee Compensation Issues.

Due to limited funding, the number of CVTs eligible for EVIP funding decreased from 740 to 486.

In the 2014-2015 fiscal year, the majority of EVIP compliance requirements were eliminated, leaving only Accountability and Transparency. The program’s name was then changed from EVIP to CVT revenue sharing in boilerplate.

“The system of revenue sharing has changed slightly from one fiscal year to the next, but one fact stays the same — Michigan’s communities are severely underfunded,” Stansell said.

One city that has been heavily impacted by a decrease in revenue sharing is Bay City, Michigan as an example, Stansell said.

Revenue sharing in Bay City decreased by 96% between 2002 and 2017. The community’s total revenue also decreased by 35.5% from 2002 to 2017.

This issue of reduced revenue sharing should be cause for concern to many Michiganders because the 280 cities, 253 villages, 1,240 townships , nd 83 counties within the state are being asked to provide the same amount of services, or more, for the community with less funding at their disposal.

State funding is needed by Michigan’s communities to assist with costs attributed to core governmental services, such as police protection, fire service, roads, water and sewer service and garbage collection. Save MI City continues to work to focus policymakers and elected officials on the real toll cuts in revenue sharing have inflicted on cities and villages across Michigan.