For better or worse, Michigan's fiscal health post-recession

October 2, 2014

Contact: Greta Guest, (734) 936-7821, gguest@umich.edu

ANN ARBOR—For the first time in six years, more Michigan communities report that they are better able to meet their fiscal needs this year than those who say they are less able to do so.

A University of Michigan survey polled top elected and appointed officials in the state's 1,856 units of government and found that 2014 marked a tipping point for them with 36 percent better able to meet financial needs and 24 percent less able to do so.

"Local government fiscal health was in a tailspin at the end of the Great Recession and it got even worse in 2010," said Thomas Ivacko, administrator and program manager of the Ford School’s Center for Local, State, and Urban Policy. "But in 2011, the trend of gradual fiscal improvement began and has continued for a fourth year now."
 
Still, many communities continue to struggle with shrunken property tax revenue, cuts in state and federal aid and a rise in tax delinquencies and home foreclosures. The 24 percent of jurisdictions in financial decline represents 443 struggling local governments across the state.
 
The poll, part of the Michigan Public Policy Survey series at CLOSUP reports:

  • Demands for public services continue to rise with 54 percent of all jurisdictions and 82 percent of the largest ones saying they have increased infrastructure needs this year.
  • As finances improve, more local governments report stable staffing levels and plans to increase pay.
  • More officials (40 percent) predict that their communities will have good times financially in the coming year than predict bad times (12 percent).

The study, conducted April 8 to June 10, 2014, involved surveys sent via hardcopy and the Internet to top elected and appointed officials in all counties, cities, villages and townships in Michigan. A total of 1,344 jurisdictions returned valid surveys, resulting in a 72-percent response rate. The survey had a margin of error of 1.4 percentage points.

[Survey]

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Transcript:

We surveyed local leaders across Michigan for the last six years and what we found is that local government fiscal health was in a tailspin back in 2009 at the end of the Great Recession and it got even worse in 2010. But in 2011, we found the beginning of a new trend of gradual fiscal improvement. That has continued for a fourth year now into 2014.

In fact, for the first time we have just crossed a tipping point where more local governments (36%) tell us that they are doing better today than they were a year ago compared to those who say they are doing worse (24%). So this is up significantly from the low point in 2010 when just 9% were doing better and 61% were doing worse.

To understand fiscal health we asked local leaders if their jurisdictions are better able or less able to meet their fiscal needs today compared to a year ago and so for the 24% that are doing worse today local leaders tell us it is due to a wide range of factors. Compared to the places that are doing better they are more likely to tell us they have had cuts in property tax revenue, cuts in state aid and fiscal and federal aid, increase in tax delinquencies and home foreclosures. They are also more likely to tell us they face increasing public service demands so they have more pressure to spend more on infrastructure, human services, public safety and so on. So fiscal health is due to a wide range of factors on both the revenue and expenditure sides of the ledger.

Looking ahead 35% of local leaders expect their jurisdictions to be better off a year from now but a stubborn 22% expect to be even worse off so overall that’s not much more progress than what we’ve seen in the last year. In one particularly worrisome finding is that among jurisdictions that are worse off today, 76% expect to be even worse off a year from now and by comparison to those who are better off today, 81% expect to be better off a year from now and so this really points to two different groups of local governments that are moving in two different directions.