the michigan budget crisis

I just received an email from a reader named David Palmer. He wanted me to read a MySpace post by our former Assistant City Manager (who is now the City Manager of Ferndale) on the State of Michigan’s current budget crisis. As I found the analysis to be pretty damned good, I thought that I’d reprint some of it here for your consideration:

Tomorrow is the big day. The state legislature and governor must make a budget deal tomorrow to avoid a shutdown. Republicans are calling on Governor Granholm to accept a 30-day budget extension. However, this will only increase the budget deficit and make it more difficult to balance. Why should we believe the state legislature will do in the next 30 days what they have failed to do in the last 300?

I do not normally weigh in on state policy issues. However, I cannot remain silent on the state’s current budget crunch any longer. I am a non-partisan professional administrator appointed by the Ferndale City Council based solely on my qualifications and I refrain from all political activities which may undermine public confidence in professional administrators. I mention this so that you may understand that my comments and concerns are those of professional resident rather than a partisan.

Like many Michigan residents, I have been watching the budget negotiations in Lansing with bated breath. I receive daily communications from colleagues in education, local government and other sectors warning of the harms of further state budget cuts. As a result, I am convinced spending cuts will jeopardize vital public services such as public safety, health care and education.

Michigan’s communities and public safety agencies are heavily dependent on state revenue sharing. Revenue sharing is an important promise the state has been making to local communities since the 1930s. Today revenue sharing is more important than ever before because the interaction between the Headlee Amendment and Proposal A has created an institutional formula for bankrupting Michigan’s communities. 2006 marked the sixth consecutive year of cuts to revenue sharing. That amounts to a $1,100,000 annual reduction for the City of Ferndale. We have 1,600 fewer police officers and 2,400 fewer firefighters in Michigan today because of state budget cuts….

The facts are clear: Michigan is not a high tax state. Michigan is spending less as a percentage of total state income on state government today than it has in 20 years. The Detroit Free Press reported this spring, “A new study by Federal Funds Information for States (FFIS) ranks Michigan 23rd in per capita state and local taxes and fees, and 21st in total revenue as a percentage of personal income statewide.” Michigan taxpayers in 2005 paid 9% less of their income to state and local taxes than they did 10 years earlier. In state spending, Michigan is spending a far smaller piece of its income today than it did in 2000 — in fact, we are $5 billion below the Headlee limit, the level proposed in conservative Richard Headlee’s Constitutional Amendment as the amount of state spending Michigan must not exceed.

At one point in the recent debate, state lawmakers seemed to have reached consensus on increasing the state income tax rate from 3.9% to 4.3%. The debate then focused on whether to make cuts of about $1 billion or increase the state income tax rate all the way to 4.6% to resolve the remaining deficit. For historical reference, Michigan’s state income tax rate was reduced from 6.35% to 4.6% in 1986, to 4.2% in 2000, to 4.0% in 2003, and to the current 3.9% in 2004. The state income tax rate has not been this low since 1971. That means the income tax rate has never been lower for an entire generation of taxpayers like myself. According to the U.S. Census Bureau’s 2006 American Community Survey, Michigan’s median family income (in 2006 inflation-adjusted dollars) was $57,996. That means state lawmakers were essentially debating whether to jeopardize vital public services or increase the average income tax bill by $173.99 a year, $14.50, a month, or $3.35 a week. How much is Michigan’s future worth to you?…

If I knew more about the intricacies of the Headlee Amendment and how it’s fucking* older Michigan towns like ours, this is the point where I would insert a rant and call for its immediate destruction. As it is though, I’m just going to make my way across the room, pop in a Battlestar Gallactica video, and try to forget about the fact that my City and my State are tanking.

(*Sorry for the profanity. I tried to substitute “making love to,” but it just didn’t pack the same punch.)

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12 Comments

  1. egpenet
    Posted September 26, 2007 at 11:14 pm | Permalink

    I miss Bob Bruner. They’ve done a fabulous job of revitalizing Ferndale, but all of that effort will be for naught should Michigan continue on this track.

    In my opinion, income taxes SHOULD be at 4.6 or more, and property taxes should be reduced accordingly to satisfy local needs and NOT to fill the gaps in revenue sharing.

    I hope the voters also realize what a bad idea term limiting is after watching the inexperience on both sides of the aisle and in the governor’s mansion fumble program after program. We have a very serious lack of political leadership in the state. And on top of that, to quote the prison guatrd in Cool Hand Luke, “What we have here is a failure to communicate.”

    The right decision in Lansing would also obviate the neeeeed to do something stupid in Ypsilanti this November, like start a City income tax.

  2. Robert
    Posted September 27, 2007 at 8:46 am | Permalink

    See Mark, I am totally with egpenet on this one. I’m not that bad.
    Also, I think your idea of making love to Michigan towns is a sick fetish. Is that what they mean by ‘metro-sexual’?

  3. Posted September 27, 2007 at 9:19 am | Permalink

    Very good information. The state is taking the municipalities money as if it is theirs. Its called revenue sharing for a reason. The state took away the right of municipalities to levy their own sales tax. In return the sales tax money generated in the municipalities was washed through Lansing then distributed out to all of the cities, towns and villages using a formula. While they have to provide the constitutional portion of the revenue sharing the portion mandated by statute has been cut drastically by the lawmakers in lansing.
    The State lawmakers are strangling the finances of the local government in order to cover their behinds and balance their budget at the expense of the municipalities. Times are tough and about to get tougher. If you think the state legislature is going to bail out the local governments your not informed.

  4. egpenet
    Posted September 27, 2007 at 11:18 am | Permalink

    A significant part of me wants to add up what the state owes Ypsilanti and hold it back from the county and the state, saying: it’s ours and we need it here … including fire protection for EMU, fully staffed local fire and police and parks and rec … and I’d throw in public transit. Anything left over, Jennifer can have it for mad money. Screw the state.

  5. Posted September 27, 2007 at 5:17 pm | Permalink

    Good point egpenet. I’ve often wondered why the Ypsilanti, possibly in consort with other cities, has not filed suit against the state for money it is owed. Our legislature is so inept (Rep. Wheeler-Smith, Sen. Brater included) that we almost need a judge to oversee the fairness of revenue sharing disbursements to municipalities; a-la redistricting oversight and Voting Rights Act enforcement. It would seem simple, develop a formula and pass the appropriate amount along to local oversight bodies. Of course nothing in fragmented democratic intuitions is ever that simple, and that is why a judge comes in handy. This could be a solution short of having charismatic, effective and forceful political leadership from our elected & well paid Representatives and Senators.

    We have been witness to, and to some degree participants in, the calculated and purposeful emaciation of public institutions in this state. This is one of the primary reasons why I so strongly oppose the income tax, for it is simply a band-aid local solution to push off dealing with the reality of a structural problem in our fair state. In this culture we are conditioned to be self-reliant, fix our own problems and keep our hardships to ourselves. That’s fine and great, but when the problem is caused by that harsh cocktail that is Headlee and Prop. A, local solutions are non-existent. Those who smirk while supporting the status quo may point out consolidation options, or local income taxes, or privatization. These “options”? all reinforce their end-game: slowly starve local governments until they are broken and “need”? to be replaced with an alternative proposal like school vouchers, private security firms, etc.

    I’ve sat through a fair amount of public meetings over the years watching these events unfold. The story is pretty much the same across the board: we have less money from the state so we must become more efficient and make cuts. When efficiencies don’t work, or are too late, we must cut more services. The cycle has continued making everyone involved more and more impatient, less and less diplomatic.

    A step in the right direction could include helping a handful, or more, independents and third party candidates get elected to the State House & Senate. I know from experience in another state that when the numbers are even, the Ds & Rs will continue their shouting match and the Independent, Green or Libertarian despite only being one, or two, votes has amazing leverage to get reality based legislation passed.

  6. vistor
    Posted September 27, 2007 at 10:17 pm | Permalink

    I agree that the income tax is a temporary solution. But do you let the city go down the drain just to show the state legislators/public that they should have been funding Ypsilanti and local governments more?
    This is a real situation with real facts and real people. If this tax doesn’t pass the budgets going to have to get balanced using the Solvency Plan.
    SO WHAT IS GOING TO COST THE RESIDENTS MORE?
    A)One percent income tax with a 2mill rollback on propert tax
    B)Cuts in police, fire, administration, and DPW. Meaning no ordinance enforement (overgrown lawns, graffiti, more run down buildings), less police, slower response times for fires, more lawsuits b/c of lack of administrative oversight, and the maintenance of City property will be vastly decreased. Translating into DECREASED PROPERTY VALUES, HIGHER INSURANCE RATES, AND UNSAFE NEIGHBORHOODS TO NAME A FEW ITEMS. Don’t wait for the state b/c they have their own agenda which doesn’t include Ypsilanti.

  7. Posted September 27, 2007 at 11:32 pm | Permalink

    Greetings Visitor. I could go point for point with you, but I’m not sure a tit-for-tat exchange is the right way to go here. What you say comes across loud an clear, I live right in the middle of it. Unfortunately, the problems that you claim will happen, either already have, or will occur with or without the income tax. It’s just a matter of which of the next 3 years you choose to invite the State Receiver in for dinner.

    Sometimes good people get stuck in a bad position through mixed, or no fault of their own. Did I ask our city to buy a bunch of land laced with industrial contamination to build condos on as the market began a downswing… no. Did I vote for Prop A & Headlee… no. Do I have great sympathy for my friends and neighbors who are losing their shirts because of the loss of a job at Ford, or for buying a house in MI in the last 5 years… yes.

    Stuff happens and life isn’t fair. I’m a bigger fan of holistically treating a problem rather than taking more pills to cover up the symptoms.

  8. mark
    Posted September 28, 2007 at 12:03 am | Permalink

    Still no resolution.

  9. Posted September 30, 2007 at 6:59 pm | Permalink

    As I’ve mentioned before, I’ve heard the Mayor of Ann Arbor say multiple times over a few years that he believes Ypsi will be the tipping point – as he presented it, nobody gave it much thought when Hamtramck, Highland Park, or Flint went into receivership, but Ypsilanti will cause some action, as the first fiscally well-managed city to go under.

    Ann Arbor, of course, will be among the last cities in line to jump off the fiscal cliff, and they’re hoping enough of us go over soon to cause things to change before they get into truly tough times.

    In that framing, dp, a temporary fix could be considered a good idea – does a temporary fix get us far enough back in the pack that aren’t forced to be Ann Arbor’s sacrificial lamb? Will it buy us enough time for the State (government and residents both) to get its act together?

  10. Posted September 30, 2007 at 9:44 pm | Permalink

    The temporary fix, even without the 2 mil roll back, buys us 1 year. Neither our State Representative or our State Senator have any prominent mention of the structural budgetary problems that cities like Ypsilanti have, they sure don’t have any suggestions for improvement. This doesn’t give me much hope that it will be fixed before 2009. This is, of course, providing we have to make Water Street payments in 2009.

    Don’t get me wrong, I am not thrilled at the prospect of getting into my seat on the hard times train, but what else will instigate change for the better?

    Incidentally, we Ypsilanti has been well managed. Except for that whole Water Street thing (that’s our own fault), we’ve witnessed how well the emaciation process works. Meaning the long-term goals implemented by the Republicans in the 90s, and passed by the voters of Michigan, work! We’ve figured out a novel way to run an entire state into the ground by slowly starving it. The privatization schemes that are just around the corner will be fantastic!

    So I will vote no on the temporary fix and take the hand we dealt to ourselves many moons ago.

    I don’t have time at the moment to research it, but it would be interesting to see what the voting break down was in Ypsi for Prop A & Headlee.

  11. mark
    Posted September 30, 2007 at 9:57 pm | Permalink

    I don’t have the time right now – or, probably, the necessary knowledge – but I’ve been thinking that someone should make a short documentary on Prop A & Headlee, explaining what they are, the history behind them, and what they’ve meant to cities like ours. Maybe I should pitch the idea to a docmentary class at UM or something.

  12. mike_1630
    Posted October 9, 2007 at 3:39 pm | Permalink

    Thanks for posting this – it helped clear up some things I was curious about… it frustrates me to see this happening to Michigan… even more so that it took this long to address the problem.

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