CLOSUP report: Mixed signals in local government fiscal health across Michigan

November 15, 2018

By Mandira Banerjee | Originally published by Michigan News, November 14, 2018

ANN ARBOR— Michigan’s local governments report improvement and decline in fiscal health over the last year, according to a University of Michigan survey.

The biggest improvements were found in the state’s largest jurisdictions: 55 percent said they were able to meet their fiscal needs, compared to 10 percent who said they were less able to do so.

A map of the state using this indicator shows net fiscal health at its best since the survey started in 2009, said Thomas Ivacko, associate director of the Center for Local, State, and Urban Policy at U-M’s Ford School of Public Policy.

“While most jurisdictions report marginal improvements, few say that their fiscal conditions have gotten significantly better,” he said.

Jurisdictions of all sizes report continued gains in both property tax revenues and in state aid—two of the most important sources of funding local governments in the state.

“The MPPS survey looks not only at changes in ability to meet today’s fiscal needs, it also captures a current snapshot of jurisdictions’ fiscal stress,” said Debra Horner, project manager at the Center for Local, State, and Urban Policy. “While more jurisdictions say they can meet their short-term needs, we are also tracking a trend of increasing stress, using a measure with a longer term perspective.”

More than 62 percent of local leaders rate their jurisdiction’s fiscal stress as low. The increases in mid-level and high stress come primarily from smaller jurisdictions that identify themselves as mostly rural.

The data come from the Michigan Public Policy Survey, an ongoing survey of Michigan’s 1,856 local governments conducted by U-M’s Center for Local, State, and Urban Policy. The spring 2018 survey received a 74-percent response rate with results from 1,372 jurisdictions.

Among the survey’s key findings:

  • One in three officials predict that their jurisdiction will have to increase their reliance on general fund to meet their government’s budget needs.
  • When it comes to expenditures, 61 percent of jurisdictions across the state plan to increase employee pay next year.
  • While 55 percent of local leaders expect “good times” for their local economies next year, 34 percent believe this will translate to improved fiscal health for their local governments. Many expect their levels of fiscal stress will worsen over the next five years.