Funding local government in Michigan: A broken system?

[ Background sounds ] >> Good evening everyone and welcome to the Ford Presidential Museum. My name is Elaine Didier and I it's my pleasure to serve as the Director of both the library in Ann Arbor and the museum here in Grand Rapids. We are delighted to have you here this evening especially as it seems that spring has finally come to West Michigan. Yeah. Let there be a chorus of Amens to that. As you know 2013 is the centennial year of President Ford's birth. And both we and our partner this evening, the Ford School of Public Policy and the Ford Foundation, are planning a number of special programs to take course over the course of the year. Tonight's program is unique as it is the very first partnership event between the Ford Presidential Museum, the Ford Presidential Foundation and the University of Michigan Ford School of Public Policy. As you may know the newer presidential libraries have often been built with an institute or school of public policy adjacent to them. And while each entity has its own mission and agenda, the library, museum and the school or institute often collaborate on public programs or initiatives. In our case because of our split locations collaboration gets a little bit more complicated. The Ford Library and Museum are run as one institution but the two parts are located 130 miles apart. The Ford School at the University of Michigan, while named for President Ford is on the campus and has a long history of its own evolution which predates the existence of this library and museum. Tonight's program is a new initiative whereby we seek to bring a new form of programming here to Grand Rapids by partnering with the Dean and the faculty of the Ford School. Tonight's program is brought to you with the support of the National Archives and Records Administration which is our parent body and with additional support from the Ford Presidential Foundation which makes possible most of our public programs and events. Before we get started, one small item of housekeeping, please turn off your cell phones and other electronic devices. The Dean of the Ford School of Public Policy is Susan Collins who is the Joan and Sanford Weill Dean of Public Policy. Her specialty area of research is international economics in which she has published widely. Dean Collins holds degrees from Harvard and MIT and previously held faculty positions at Georgetown and Harvard and was also a visiting scholar at the International Monetary Fund. In addition to her role as Dean, Susan Collins is currently a nonresident Fellow at the Brookings Institution in Washington. She is Vice President of the Association for Professional Schools of International Affairs. She's a member of the Council of Foreign Relations and was recently named to the Board of Directors of the Detroit Branch of the Federal Reserve Bank of Chicago. Please welcome Dean Susan Collins who'll introduce our program. [ audience applause ] >> Elaine, thank you very much for that very kind introduction. I am just delighted to be here today and with a number of members of the Ford School team. It is really wonderful for us to have partnered with the Gerald R. Ford Presidential Museum on tonight's event. As Elaine already mentioned this is a special initiative that we are very proud to be presenting here this evening. When the Ford School initiated this project we were really eager to showcase the work of our center on local, state and urban policy or CLOSUP, to a broader Michigan audience. And we're very grateful to have a number of partners here, in particular at the Presidential Museum to welcome and support tonight's event. And we really also look forward to future collaborations and hope that you will come and join us as we move that initiative forward. Well you've come here tonight to hear about a very timely and important issue for Michigan citizens and that is local government funding. Leading this presentation this evening are researchers from the Ford School's CLOSUP Center, Tom Ivacko and Debra Horner. Their full bios are in our program and I invite you to take a look at those. I won't go through them in detail here tonight. But we're delighted that they are able to join us. Unfortunately because of a last minute family issue, the Director of CLOSUP, Professor Barry Rabe is not able to join us tonight and he sends his regrets. He has really become the Ford School's resident scholar and expert on President Ford. And I know he was looking forward to doing as he does so eloquently speaking about President Ford. And also to hearing the CLOSUP team present about the very important local funding issues. If he were here tonight I know that Barry would want to acknowledge a very important tie that really binds together Ann Arbor and Grand Rapids. And that is that President Ford considered both to be his home. Well as you've heard and may already have known, 2013 marks the 100th anniversary of President Ford's birth. And as you will read in your insert in our program, the Ford School has planned a number of very special events to celebrate his remarkable life and extremely impactful career. And for example I wanted to highlight that on April 16th, General Brent Sowcroft will visit the Ford School to dedicate a small replica of the statue of President Ford that is both in the capitol rotunda and also is in front of the museum that you would have seen when you came in the entrance recently. And so I hope that all of you will join us for that event. And I'll also ask you to help us celebrate this centennial and share the news about all of the ways that President Ford made such an impactful legacy in many ways. And we had a number of our Ford legacy buttons out there and I hope that you will as we do wear one proudly and share them. And so I invite you to take a button if you did not already when you came in. And so now for the main event, tonight we'll hear a presentation from CLOSUP, the longest standing research center at the Ford School and a really unique institution among public policy schools. It's dedicated to helping among other things to understand public opinion of elected officials. And CLOSUP has engaged very closely with policy making and policy leaders around the State of Michigan. The most recent survey is on funding local government and that's the focus of the discussion this evening. A word about our format. Tom will introduce the discussion by providing some background about the history of the some of the current events that have affected local government funding in Michigan. And then highlighting CLOSUP's findings, Debra Horner will discuss some of the ways that Michigan is moving forward on this issue. We are going to save about at least 20 minutes for question and answers at the end of the program and a discussion with the audience. And I hope that you picked up a card when you came in. Volunteers will be collecting the question cards so please pass them to the aisles at around 7:50 p.m. And Ford School Alum and former City Manager of Grand Rapids, Kurt Kimball will read the questions. And so we look forward to that part of the event this evening. And with no further ado, it is my pleasure to turn the floor over to Tom Ivacko and Debra Horner. Tom? [ pause ] >> And the Ford Presidential Museum and the Ford Foundation for hosting us. And in particular thank you all for being here tonight for a discussion we think is really a critical issue for communities all across this great state of ours. Before we begin with the survey findings I want to give just a brief overview of the Michigan Public Policy survey itself so that you have a sense of where these data come from and what they represent. The Michigan Public Policy survey is a twice per year survey of local governments, general purpose local governments all across the state. We take a census style approach to this so we try to get responses from every county, city, township and village. And there are a lot of them in Michigan, 1,856. We have been remarkably lucky to have responsive local officials working with us on this. In the last three surveys we've gotten 72, we've gotten responses from 72 percent of these jurisdictions which is pretty remarkable for a survey research. We target the chief elected official and the chief appointed official in each of these local jurisdictions. So we are interviewing mayors and city administrators, county board chairs and county executives, township supervisors, village presidents and so on. And we have covered a wide range of topics in these surveys. You can see a partial list of the topics here. Tonight's topic we think is perhaps the most important issue that we've dealt with yet over about eight surveys that we've conducted. This really gets to the heart of local government which is the ability of local government to help improve quality of life in our communities. The topic begins with kind of a general overview of what has been called a local government fiscal crisis which at its heart really is quite simple. Local governments have been dealing with declining revenues over a long period of time. At the same time that costs to provide public services continue to rise. And this has created pretty severe budget gaps that have to be dealt with in some fashion. I'm going to start tonight with a couple of quotes that we think set the stage and really kind of sum of the issue at hand pretty succinctly. The first quote is from Ed Kurtz who is currently the City Manager in Flint, I'm sorry, the Emergency Financial Manager in the City of Flint. Mr. Kurtz recently said within five years all of our urban cores are going to be where Flint is at today unless some significant changes are made. The way we finance cities is broken. That of course is not good news. That's a big red flag to capture all of our attention. The second quote is from David Hollister, he's the former Mayor of the City of Lansing. A very respected local official. He's currently heading up that city's blue ribbon commission is making recommendations to the City of Lansing to help it avoid its own fiscal crisis and emergency manager. In presenting recommendations of that commission to city council Mr. Hollister said we cannot continue to do all things for all people. We try as we've done in the past. We've tried doing more with less and that worked for a while. But doing more with less has reached its limits and now we're suggesting that we're going to do less with less. That really sums of what we have heard here from local leaders across the state. And it also fits perfectly with our presentation outline. So I want to give you a quick sense of the presentation that we'll be reviewing tonight. We're breaking it into three main sections. The first section here is a retrospective. It looks back at the last decade or so, a period of local government retrenchment, a downsizing which have been driven by these declining revenues and rising costs. The section really, it concludes with a look at fiscal health today of local governments. And it could be subtitled the era of doing more with less. The second section which Debra will present is prospective. It looks forward and reviews what local government leaders tell us they see coming down the road in their jurisdictions. And that could be subtitled the era of doing less with less. And the third section is also prospective. It reviews what local government leaders tell us they think should happen in order protect fiscal health in their jurisdictions and their ability to provide public services. Now there's a lot of talk these days about data driven decision making. Tonight's presentation is going to be a data driven discussion. We will review a lot of data from our surveys. At times it may feel a little bit like sitting in class in Ann Arbor. We're do our best to explain the data as clearly as possible. But please do write down your questions as we're going along and we'll look forward to discussing them. So in terms of reviewing the data we're going to start with a look back to the early 2000s. And looking at one of the most important sources of funding for local government and that is revenue sharing from the state government. Revenue sharing comes in two main streams to local governments. The first is constitutional revenue sharing and second is called statutory revenue sharing. The constitutional revenue sharing is the lower portion of these bars. This is one bar for each fiscal year stretching back in time. So the shaded in portion is the constitutional revenue sharing. This is really an automatic part of the annual state budget. The formulas are written into the constitution. So there's really no debate about how this money flows to the local governments. And you can see that going back to about 2000, 2001, it was about 650 million or so. It has grown very slowly and steadily for the most part over that decade where to about 671 million. So a very slow steady growth in constitutional revenue sharing. Statutory revenue sharing is a different story, that's the upper portion of these bars. And it is part of the annual budgeting process. So it's determined by the state legislature and the governor each year. You can see clearly it peaked at 684 million dollars in fiscal year 2001. And it has been cut repeatedly since then to the point where it was 215 million dollars last year. About a third of what it was a decade ago. In that decade these cuts in the red shaded area sum up to more than 4 billion dollars that has not been invested in local communities across the state. So this has really been a major blow to local government finances all across Michigan. Now we'll take a look at how these kinds of cuts play out for different kinds of communities. This, there's a lot of data on this slide. So I'm going to kind of walk us through it slowly. Once we understand how to interpret these data, we have additional slides that kind of follow the same format and we'll move through those ones much faster. The first thing to notice here is that is dealing with state aid, declining state aid. So it is tied to that last screen that we just saw. Although this deals with more than just revenue sharing. There are other types of state aid that flow to local governments. The next thing to see is we're dealing with four years of data. These are our last four surveys from the Michigan Public Policy survey. And the final thing to understand is we've broken Michigan governments down by their population size, the population size of their communities. So, down here on this end we have Michigan's smallest jurisdictions with fewer than 1,500 residents. As we move to the right increasingly large communities until we get out to this side which are Michigan's largest urban communities such as Grand Rapids that have more than 30,000 residents. So if we look down here at this first light green bar, you see that's from out 2009 survey, and what it shows is that about 61 percent of these small local governments were taking cuts in their state aid in 2009 compared to what they got in 2008, the year before. If we move forward one year to 2010, we see that that grew to about 81 percent. So this aspect of the local government fiscal crisis was growing more widespread between 2008 and 2009 and then 2010 affecting more of these local governments. However, by 2011 in the light blue bars you see that it has begun to ease back. It was down to about 63 percent of these small governments taking cuts in state aid. And it continued to ease back in 2012 to the point where about 50, 51 or 52 percent of these small governments taking cuts. So that decline is good news for the local governments who are no longer in those bars. But for the local governments that are still in these bars, it's important to understand that these are cuts on top on top of cuts the year before on top of cuts the year before. And so staying in these bars becomes increasingly more difficult as time goes by. And our surveys began in 2009 but as we saw in that last slide cuts in statutory revenue sharing began back in 2001. So if our survey had begun earlier we would see these bars stretching back in time. This has been a very long period of severe fiscal stress for local governments. Next we will stay on this aspect of the fiscal crisis which is declining revenues. And we'll look at the most important source of funding for local government and that's property tax revenues. We see similar patterns on this slide as we saw, I'm sorry, there's one other thing I point out on this last slide is differences between small and large local governments. So in 2009 again 61 percent of the small jurisdictions were taking cuts in their state aid. In the large jurisdictions about 85 percent were taking cuts in state aid. This is very common thing that we find on these surveys. Fiscal issues much more difficult in the large communities compared to the small ones. And that's a pattern we'll see tonight on numerous slides including property tax revenue declines. So again we see things getting worse between 2009 and 2010 for just about every type of local government. And then beginning to ease back again in 2011 and 2012. These declining property tax revenues really came from the housing sector collapse that launched the great recession back around 2007 or so. And again, this is the most important source of funding. So the fact that we have such a high percentage of local governments of all sizes taking these cuts is another indicator that this has been an enormous source of fiscal stress. We have additional data points on declining revenues. We won't show anymore slides on that. But for instance local governments have been taking cuts in fees for services, fees for licenses and so on. But instead of continuing to look at declining revenue, we're going to switch to the other side of the fiscal crisis and look at the rising costs. And so the first thing that we'll look at here is rising healthcare costs for local government employees. Now here we see dramatic differences between the large and the small communities. And this is because these very small local governments, quite a few of them have very few employees in the first place or if they do have employees quite a few of them simply don't provide fringe benefits to them. So fewer local governments down here are facing this source of fiscal stress. But even still, close to 40 percent in 2009, in the large jurisdictions 80 percent. So this has been another source of extreme fiscal stress. And again if our surveys had begun before 2009, we would see this stretching back in time. Rising healthcare costs have been an issue for quite a long time. The next thing we'll stay on the side of the rising cost equation and look at pension costs. Again similar to the last slide we see significant differences between the large and the small jurisdictions. And we see this pattern of things kind of easing after, after 2010 certainly, in this case after 2009. But again if our survey stretched back in time we would see these bars going back. Retirement and pension cost systems for local government employees have been an issue for quite a long time. And at the same time it's important to understand that there's, for jurisdictions that are still in these bars as of 2012 there's a compounding problem going on here. These are rising costs in 2012 on top of rising costs of 2011 which were on top of rising costs from 2010 and so on. So there's a compounding problem over time where these costs become ever more difficult to deal with. Now similarly we have quite a few other data points about rising costs for local governments but we won't show anymore slides on that front. But for instance as gasoline prices rise for all of us it's more expensive for local governments to have police patrols out on our streets, it's more expensive for the fire department to make a fire run, more expensive for parks and maintenance department to get across town to mow parks and so on. But so you get the idea. We've had declining revenues and rising costs that create this pretty severe budget hole. So now we're going to switch gears and look at how Michigan's local governments have responded to that budget crisis. And the first thing that we're going to look at is actually something that very few local governments in Michigan have done. And that is to be increasing their levels of debt. We think this actually a pretty good sign. Now, you know, very low here, below 20 percent for the most part. Debt of course is in and of itself is not a bad thing. Debt is a very useful tool for local governments to manage very large infrastructure projects that can only be paid off a little bit each year. So debt isn't bad on its own. But if local governments had been issuing debt to cover this budget gap, that would be a very bad financial management practice. And so we see for the most part they have not been doing that. That's a good sign. Instead of that what we found is local governments relying on what's called their general fund balance. For the purposes of tonight that can be thought of kind of like a rainy day fund. So, local governments should keep about a 15 percent or so general fund balance each year. It's unobligated funding that can be used for emergencies to deal with, you know, the rise and fall of the economy and aid. So what we saw especially in the early years of our survey and at the, you know, the height of the great recession was local governments relying on their rainy day funds to help fill in that budget gap. And that's a much better practice than issuing new debt which of course brings new costs with it. In addition to relying on their rainy day funds, local governments have been very active in downsizing their staff levels. Again we see very significant differences between the large and the small jurisdictions for the reasons that we've said, these governments don't have many employees. But in jurisdictions that do have lots of employees, cutting staff has been one of the main strategies to deal with this fiscal crisis, try to cut costs. In fact the Rockefeller Institute at the State University of New York at Albany recently put out a report on declining local government employment across the nation. And they found that on average employment levels were down about 3-1/2 percent since its peak in 2008 on the national level. In Michigan, these employment levels are down about 8.6 percent. So if things are bad across the nation for local governments, they are really bad here in Michigan. And we know of course in large urban jurisdictions employment levels in many cases are down 30 percent or more. So this has been a prime strategy to deal with that fiscal crisis. In addition to cutting staff, local governments that have employees have been actively shifting their healthcare costs to be paid increasingly by the employees themselves. So these include things like monthly healthcare premiums, copays for doctor visits and prescriptions and so on. This again, you know, big differences between the large and small. We didn't ask this question in 2009 so we only have three years' worth of data here. But you can see for jurisdictions that have lots of employees, this has been one of their key strategies again to close that budget gap. In addition, the most common action that we have seen from local governments is increasing their intergovernmental cooperation. Working with neighboring jurisdictions to jointly provide services and share in the costs. So that can include things like a regional fire department, county wide 911 dispatch service and so on. This has been another one of the key strategies to close that budget gap. We actually had done, one of our previous surveys in this program focused on just on intergovernmental cooperation that was in 2010. And at that time we found that it was incredibly common all across the state, more than 70 percent of local governments were in some kind of formal joint project with neighboring jurisdictions. So the fact that even though they started from a very base on this kind of activity that has been such a common strategy is pretty noteworthy. And then the last thing that we'll look at here in terms of strategies is cutting service levels. So certainly in jurisdictions that provide a lot of services, and again small jurisdictions that have few employees tend to provide few services to start with, so they don't have many places to cut. But in jurisdictions that do provide a lot of services, cutting back on service levels has been a fairly common strategy. But what stands out to us here is that this is much less common than most of the other actions that we've just looked at. It's less common than cutting staff. It's less common than shifting your healthcare costs to be paid by your employees. It's less common than working with neighboring jurisdictions. And what this says to us is that local governments have really tried to protect front line services from cuts as far as they could. This is the era of trying to do more with less. So we're almost done with this first portion of the presentation. But before we switch gears and kind of look to the future, we want to kind of step up to like a 10,000 foot view and get a summary look at local government fiscal health how it has changed over the last four years and how it stands today as local governments emerge from the great recession. And so in our surveys we ask an awful lot of questions on fiscal health issues, on budget policy and so on. We use one particular question as kind of our summary fiscal health indicator. And that is asking whether the local government is better able or less able to meet its fiscal needs today compared to how it was doing last year. And as we've seen in some of these other slides, what we found was things getting worse between 2009 and 2010. And then beginning to ease back in 2011 and continuing on that course in 2012. And so these next slides show how that kind of played out geographically across the state. So what we see here is from 2009 and this is at a county level and green shaded counties are where less than 25 percent of the local governments within that county were in declining fiscal health at that time. So green here is relatively good. Yellow shaded counties are where between 25 and 50 percent of the governments in that county were in declining fiscal health. So yellow is worse. And red shaded counties such as Kent here are where more than half of local governments within that, within that county were in declining fiscal health. So, overall a pretty concerning picture in 2009. Not enough green certainly. By 2010, things had gotten significantly worse. Only one green shaded county left. Most of the counties that were yellow have become red and that, you know, clearly is a bad sign. By 2011 things were starting to ease back as we've seen on many of the slides. And the easing, you know, appears to have begun more so on the west side of the side than on the east side. And in 2012 things continued to improve to the point where very few red shaded counties left. Some of the yellow has turned to green including here in Kent County. So we think that this easing of the local government fiscal crisis is due to a number of factors, certainly due to the improving economy. The great recession ended in 2009, although it's been a very slow recovery. But we also think that this easing is due at least in part to the rightsizing efforts of these local governments and how they've been so proactive in trying to cut their costs to downsize their fiscal needs and be able to live within a reduced means. Now before we, before we turn our attention away from the past and look to the future, we want to get one last set of readings about fiscal health. And we were pretty surprised by these findings. So the first key indicator on fiscal health is general fund balance. We looked at that previously. This is kind of the rainy day fund. And so we asked in 2012 whether each governments general fund balance is generally about right or is it too low or maybe is it even too high. They may have a little bit too much money set aside. And what we found is that 66 percent of local governments across the state were, told us that their general fund balance was about at the right level. A small percentage, 5 percent overall said it was actually too high. They had a little bit too much money set aside at that point. Overall this is pretty good. There are areas of concern especially in the large urban communities, 41 percent said that their general fund balance was too low. Fairly significant percentages across all government sizes. So there is some concern here but overall things could be worse. And the other fiscal indicator is cash flow. And so we asked whether cash flow is a problem or not. And 91 percent of jurisdictions told us that cash flow was either not much of a problem or not a problem at all. So we were surprised that it was that high. Again in the large urban places, 18 percent said it was somewhat of a problem, 2 percent said it was a significant problem. Any jurisdiction that has a significant problem with cash flow is in very bad straights. But again, 91 percent overall said things were generally okay. And the last question on current fiscal health, we asked local government leaders how satisfied they were with the package of services that they still deliver after having made all these cuts? And we were surprised to find that 79 percent said that they were either very satisfied or somewhat satisfied with this package of services that they still deliver today. And so again, that really tells us that this has been the era of trying to do more with less. Rather than cutting services right away, they've looked to other sources to deal with their fiscal stress. Now we wish that that was the end of the story. We could say that the worse is behind us and local governments have come out generally okay. But unfortunately that is not the end of the story. We asked them what they see coming down the road and there's a lot of concern. Debra Horner will present that part now. [ audience applause ] >> Okay, yeah sure. So did you survive Tom's data driven, a lot of data slides? So the bad news is I also have some data slides for you. But the good news is I'm quicker. So let's, there we go. So I'm going to take over where Tom left off, here we are. We've seen that the state's economy has improved slowly in the aftermath of the great recession. And more of Michigan's local government currently reporting they're surprisingly okay. That they're either holding steady, they're actually better able to meet their fiscal needs. And they're pretty satisfied with their right sized service provision. But now a new question presents itself. Will these local governments be able to sustain their operations at this new normal level or will they face further retrenchment if the state system of funding local government as a whole doesn't keep up with the rising costs in the future? So as these costs continues to rise many of our local officials that we talked to worry that revenues won't keep pace. And though some local governments have been able to stabilize their current operations at reduced funding levels, there's concern going forward from here that the state system of funding local governments will come up short and force a new round of local government retrenchment in the future, that less with less. So the, it's gone, did it go away? Okay, great. So the MPPS actually asked this question of our local officials. We said do you believe that Michigan's system of funding local government will provide adequate revenue in the coming years assuming that the economy continues to improve to allow you to maintain your current package of service that you currently provide? And fewer than half, 43 percent statewide said that they believe the funding system will allow them to maintain their current package of services in the future even with continued economic improvement. Optimism on this issue is primarily found in Michigan's smaller jurisdictions. Let me see if I can do as well as Tom did with the little pointer. Probably not, oh there you go. Come back. There we go. I'm not going to use the pointer. You guys are familiar with these slides look like from Tom's presentation. So, optimism is found within the local, the smaller jurisdictions which coincidently tend to offer fewer services. And even among those small jurisdictions, less than half feel they can maintain their services going forward in the future even if the economy continues to improve. Meanwhile the outlook is particularly pessimistic among the larger jurisdictions where only 22 percent of state leaders believe the funding system will allow them to maintain what they're doing. We can look at this issue on a county by county level. The counties in green on my map indicate those where 50 percent of the jurisdictions within them report they believe they can maintain their service levels going forward. The counties in red represent those where the majority of jurisdictions say they will not be able to maintain their level of services going forward. And of even more concern, the problem is the maintaining may not be enough. So as one of the, as Tom showed you in a lot of our tracking data, one of the things that we do track is whether or not officials feel that their service demands are increasing or decreasing year over year. And in this chart you can see that we asked our local leaders whether they thought their for example, human service needs are going to be increasing, going up. And you can see that many of them say yes. From 2011, 2010 to 2011 and 2011 to 2012 these human service needs are increasing. And you can see that when it comes to public safety, the public safety needs also continue to rise, not to ease. And you can compare this rising levels with those fiscal stress slides that Tom showed where the slope was going the other direction. You can also see that infrastructure needs are even more dire. Almost half of all jurisdictions in the state in 2/3 of the state's largest jurisdictions say their infrastructure needs have increased just in the past year from 2011 to 2012. Now many jurisdictions have been delaying their infrastructure maintenance for someday in the future where they're going to have more money available. And the local government officials that we talked to realize that they're going to have to pay that infrastructure piper very soon. In other words, looking at these three slides, we can predict that local governments don't just have to maintain what they're doing today, they're going to need to deal with increasing service demands in the future. What if they need to improve their services? What if they need more police officers out there to meet those public safety needs? What if they want to improve their roads and their sewer and their water systems to deal with the grading infrastructure they haven't dealt with over the past few years? Well our local officials say good luck with that because only 26 percent of them say that Michigan's system of funding local governments, how they fund their services will provide adequate revenue to allow for improvement of current services or addition of new services in the future. Almost 2 in 10 strongly disagree they'll be able to add or improve services in the current system of funding. And on this side, among the state's largest jurisdictions that you can see that tiny blue bar at the top, only 14 percent believe that our current system of funding local governments will allow them to improve or add to their package of services in the future. Almost half disagree. Again looking from that bird's eye view, you can see there's only four counties in the state where the majority of jurisdictions say that they think they'll be able to improve or expand services going forward under the current system of local governments. And keep in mind, these responses are for a scenario that we put out that said that the economy is going to continue to improve. So that makes this outlook even bleaker if for some chance Michigan's economy were to take a turn for the worse anytime soon. So the dark times have lightened recently for local jurisdictions as a result of retrenchment after the great recession. And according to local officials all across the state, the outlook isn't so good for the long term. So, we wanted to know what they think is going to happen next? What are they going to do to forestall further cuts in local budgets that they've already seen years and years of cuts and rightsizing in order to protect those services that they're pretty satisfied with? Well first of all they believe there should be significant reform to the entire system. Indeed, 58 percent say they're either strongly or somewhat agree that the system for funding local governments needs significant reform. And only 16 percent say they disagree that it needs reform. Given that our larger jurisdictions do, have faced severe fiscal challenges over the last decade, it's not surprising that the belief in the need for reform is more common among the state's largest jurisdictions. Among local leaders shown, those big jurisdictions, 77 percent say we must reform the system including 51 percent who say strongly believe that way. Still even among those small jurisdictions, the one with few employees, the one with fewer pension and healthcare obligations, a majority, 52 percent say that significant reforms are necessary. This is a great slide because it shows you that there is relatively bipartisan support for the need for reform of the local government funding system. They're only slight differences, bipartisan identification among Michigan's local leaders on this topic. Those who identified themselves as independents or as democrats are more likely to believe that significant reform is necessary. However a majority of local officials who are republicans also believe the system needs significant reform. There's support of this across the aisle. So this is going to be a big slide, get ready, okay. What we did is we asked respondents what should we do? We asked them how important, if at all, do you believe it is a significant reform of a variety elements of the funding system. So in this slide the dark blue on the bars indicates that percentage of our respondents who said that is was very important to reform something. The light blue bar is somewhat important to fund, to reform something. And the green is that it's not at all important. You can see we must change everything according to our local official respondents. Among the potential areas for reform that we actually talked about, the state's gas tax has the most wide spread support for reform. Eight nine percent of those local leaders overall think that the, among those who think that we need reform, they point to the gas tax. And this corresponds to one of the policy initiatives Governor Snyder indicated in his State of the State address earlier in this year. Widespread reform is also expressed for the state's sale tax which as Tom said is shared with the local governments as part of revenue sharing. There are also two aspects of property tax law that see a lot of support for reform among local officials. The first is the Headlee Amendment and the second is Proposal A. Now I don't claim to be a tax expert by any means nor do I even play one on TV, but I will tell you a little bit about what the Headlee Amendment and Proposal A do. The Headlee Amendment regulates taxes unit wide within a jurisdiction. And what it says is that as property tax value within the jurisdiction grows, the local mileage rate must shrink back to keep up with the rate of inflation. So as a consequence, as property taxes go up the mileage rate is automatically what's called rolled back to maintain within the level of inflation. Overriding that kind of automatic roll back requires a local vote of all the residents anytime they want to raise it beyond what has rolled back and because of the Headlee Amendment. For Proposal A which also sees widespread support for reform, it's a similar kind of regulation on property tax but for individual units. And it says that it limits tax increases on a specific unit of property at the rate of inflation or 5 percent whichever is more regardless of how fast property values are growing within a jurisdiction. What the combination of Proposal A and the Headlee Amendment did during the booming years of the property increase in value is that it restricted local governments to be able to collect tax on some of the rising property costs. And since then in the intervening years where the property values have collapsed, it has caused local governments problem with these roll backs and with the caps that have been put on with the collection of taxes. So Proposal A and Headlee are very much within the sights of local government leaders as a need of reform. In addition, you can see constitutional revenue sharing, some of the things Tom talked about at the very beginning of his part of the conversation, is something that they believe need reform. And personal property tax which is a tax on business items that are not nailed down essentially was also a target for reform by local officials. Now interestingly enough we asked this question before personal property tax was brought up for reform in the lame duck session in late 2012. So it'll be interesting to track that over time as policy evolves on that particular issue. In addition, the economic vitality incentive program, which is what used to be statutory revenue sharing, is also targeted by local officials as a target for reform. Only 64 percent of them statewide say that that's something they believe is important for reform. But among those jurisdictions who are actually eligible for the economic vitality incentive program, 90 percent say we must reform this particular aspect of revenue generation. There was also significant report for reform for two other items that we asked about. Local income tax law and support for reforming options for regional taxation. But those were less popular among the items that we asked about. So, on the survey we had made this list of items and asked to rank the importance, how important those were. But then we followed that up with a question that was an open end. It was a, good, it was a big box on the survey as you may have seen when there's these open ends like this on surveys you've done. Where people could write in and tell us how they thought the system should be reformed and then specific what they considered the most important out of all of those things that we talked about or other things they might want to suggest to us. And all in all there were 385 officials who provided over 880 suggestions for different ways of reforming the system. So we took all of those comments and we sorted them and we coded them and we looked for patterns within them of the comments they suggested what was important and how to do it. The most common recommendations did focus on the issues related to the property tax. Within the area, the bulk of suggestions talked about either eliminating the Headlee Amendment, eliminating proposal A or at the very least reforming them in order to provide more flexibility in the funding, in funding in local tax policy. Recommendations for reform included things like easing the current revenue caps that promote Proposal A and Headlee provide, removing or easing those automated mileage roll backs that happen whenever values go up. Or finding ways to deal with the previously unforeseen effects of the housing sector collapse and the resulting drop in property values. So an example of one of the kind of comments we would get in this section of the survey was I would revise Proposal A to get rid of the tax rate, differences between homestead and non-homestead and eliminate the caps. I would revise Headlee Amendment so that mileage rates could both be rolled back and rolled up without a vote of the people. The next most common recommendations we saw focused on the sales tax with specific emphasis on increasing the rate of the tax. So increasing the state's sale tax rate, increasing the tax rate base. So adding services in or taxes on food or taxes on internet sales. Or allowing a local sales tax or local control of the state tax so that the state collect. And this is one of my favorite quotes that came out of this section. It's a bit like a three legged stool a local official told us. Right now we only have the ability to collect revenues from one leg, that would be property taxes. And as a result the whole system's unbalanced. Making it possible to levy a local sales tax or easier to levy an income tax would rebalance the stool and allow us to reduce our property tax rates. So needless to say out of 880 comments there was lots of other suggestions for places we could look for reform in the system of funding local governments. Issues related to revenue sharing including constitutional revenue sharing and the EVIP were the third most common area of respondents felt were important in need of reform. Within this area suggestions clustered around providing more funding. Really? They really want more money? That's a surprise. But interestingly there were also very important to them to focus on stability and predictability. That year over year as the state has cut their state aid to jurisdictions and their revenue sharing, that's made it very uncertain for local governments and how to budget for the future as they try to do year over year budgeting or even multi-year budgeting. So they're looking for more stability and their looking to eliminate the EVIP by either restoring the regular statutory revenue sharing they've done before or just bundling it in with constitutional revenue sharing too. Suggestions specifically from county leaders included making counties eligible for revenue sharing as well. That's something we heard a lot of from county leaders. So as I mentioned there was overall 385 people who gave us almost 900 comments. And I want you to take from that is that there is a lot of energy and eagerness and enthusiasm to begin this process of reforming and changing how the system works. But at the same time the suggestions on what was most important to people were all over the board. And there was little consensus on where to start. So let me summarize a little bit about this set of research that we've done through the Michigan Public Policy survey. We've come through this long period of fiscal stress, falling revenues and rising costs that started before but was made more severe by the great recession. But local governments, they were really active in how they were going to respond. They largely preserved their fiscal health with a few notable exceptions across the state. Tried to protect their services by taking other actions, intergovernmental cooperation, privatization, trying, asking their employees to take on more of the burden of healthcare. But only 43 percent across the state say that their, the current system of funding local governments will allow them to maintain the services they have. And only 26 percent think it's going to allow them to improve or add to the services they provide their citizens. Almost 60 percent say that significant reform is needed. And only 16 percent say that it's not. And among them an overwhelmingly large percentages say that each major piece of the interlocking system of funding local governments is in need of reform. But there's no particular consensus on where these fixes should start. So what we'd like to suggest that it is time to start the conversation about this system of funding local government. Not just tweaks individual components but by the state and local leaders working together, looking at the system as a whole and restructuring it and refining it to provide Michigan's local governments with the support and the stability and the flexibility in the broad range of revenue sources that they have in order to meet the needs of their residents going into the future. So that's our presentation tonight. We look forward to your questions. Thanks so much. [ audience applause ] >> That was exciting, we'll see. >> Yeah. >> Want to trade? >> Sure. Before I ask the first question that came from the audience let me compliment CLOSUP for the general work that you do. I don't know of another such focus in the state and you do good work. And particularly you're work with the Michigan Public Policy survey, your enduring focus on the subject matter provides a great service. And I'm particularly enamored with this particular topic tonight as a former local government official. So thank you. >> Thank you. >> Getting to the first question, one of the persons in the audience asked this. Was the survey data compared to the empirical data, e.g. were actual fund balance levels compared to officials perceptions of fund balance adequately? In other words, how does perception compare to reality? >> Yeah so with the Michigan Public Policy survey the data that we gather are primarily opinion data. The questionnaires that we put out for these local leaders are actually very in-depth, 7, 8 pages of just item after item after item. And so, you know, we're very cognizant that are these local leaders are extremely busy and they get a lot of requests to do surveys like this. So we have decided with this survey that primarily we ask questions that don't force them to go through their books. We don't want them to actually do an audit. However, we do get data from, we get what we call contextual data. So for instance the State of Michigan gathers audit data from local governments and that's available. And so we do our own technical analysis behind the scenes to kind of calibrate and see how accurate the responses are. And for the most part what we found is, is pretty good. We've looked at a number of different things. Once in a while we see things that are maybe off a little bit. But for the most part we have pretty high confidence in the data. And the other aspect of this kind of data quality gets back to that first slide that we put up saying that this is a census based survey and we get 72 percent response rates. Many types of public opinion surveys will get 10, 15, 20 percent response rates. And that raises questions about whether the data are truly representative of the larger population. The fact that we are reaching out to every one of these local governments and we're getting responses from about 3/4 of them goes a long way to make the data very high quality. >> One of the challenges though that we face in terms of comparing our data contextual data is that we're moving much faster than a lot of the contextual data we can get our hands on. So audits available for local governments, for one, they're not census. So not everyone within the state in any given fiscal year will turn in audit data to the state. And then two, that will be from 2009 or 2010 before the state releases that data and it makes it available to us. We already have collected 2012 data and are moving into 2013 next week, next month. So there is a challenge in terms of doing this, this double check against what might be considered reality. But we have found when we have done it that our respondents are very reliable in their reports. They know what's going on in their jurisdictions. >> Second question. How important are unfunded obligations, unfunded mandates to the future of funding local governments? Did the survey focus on that and have you collected thoughts on some of the respondents on that subject. >> Yes we have, you're elected. >> Oh sure. So we actually asked about that in the spring of 2011. We asked two separate questions on their unfunded mandates. Overall about 31 percent of Michigan's local governments report they don't offer retirement packages to former employees, so including about 43 percent of their state, the state's smallest jurisdictions. So they don't have to worry about it. But among the jurisdictions that do have future pension and retiree obligations, about 35 percent of those local leaders feel that they're somewhat of a problem or a significant problem. So it's over 1/3 but it's just 1/3. So depending on whether you want to see the glass 2/3 empty or 2/3 full, it's, it can be a significant problem for many of our jurisdictions. As you have seen through all the data we've collected, it's most severe among the large jurisdictions where it's about 82 percent that say they have significant or somewhat of a problem with their unfunded obligations for retirees. And similarly many jurisdictions have unfunded healthcare obligations to retirees. And it's about similar levels of that for those obligations. So it is a concern for many jurisdictions particularly the big jurisdictions going forward as we look again this prospective into the future, the problems that are coming down the pike. >> You mentioned that some local governments have actually been eliminating services. You have anything to share with us on what they're getting rid of? >> Yes, for the most part we were actually kind of surprised that when we look statewide, most local governments have been kind of trimming back services rather than outright elimination of complete services. I believe in the largest jurisdictions though I think 22 percent, close to 1/4 have completely eliminated individual services. In many cases they work with public private partnership to have someone else take on services. But it can include things like park maintenance, trash pickup, recycling options. Tends not to be, you know, the most core services like public safety and so on. I think the big take away there is again that most local governments have really been trying to protect services and they've been trimming them back as opposed to kind of slashing them out entirely. >> Have you asked local officials about the issue of consolidation should small units around the state look into merging? >> We did ask about that in our survey in Fall 2010 which was our survey that we talked about intergovernmental cooperation. Toward the end of that summary we said do you, have you outright considered issues of joining together and merging with other jurisdictions as a whole? Particularly they asked if they would be, they would do it in order to bolster their financial, if it made sense fiscally. Very little support across the state as you might imagine for consolidation. Most of, particularly among the townships, townships are very protective of their township status. And we found that while county and city officials might be more likely to agree that there are too many local governments in Michigan and maybe they should consolidate. Township officials, I think it was in the 70s that said that they didn't think there were too many local governments. And across the board when we said what about your local government? If it made fiscal sense for your local government to consolidate with ones around it. It was 15 percent support for what they thought their citizens would do. It was about 15 to 20 percent of what they thought if there was support in the community among business or among the jurisdictions employees as to whether they thought consolidation would be a good idea for their jurisdictions. And then among local officials themselves who said well what about you personally? Do you think this is a good idea? Because sometimes we want to have them step back from their role as the jurisdiction and say as a local leader do you think this is a good? And there was a little bit more support again when we said if this made fiscal sense, would you do it? There was about 1/4 of them who said yeah, we'd consider consolidation. But it was still very, very low numbers that would support it. >> There were a couple of questions submitted on the general subject of the personal property tax. So let me throw out a couple questions and you can jump back and forth or add some insight. The first one is how important is the personal property tax to local governments? Another one was was any account taken of declining revenue due to the removal of personal property tax and its uncertain replacement funds? And I'll add one of my own and that is there's a large percentage of who felt that the personal property tax was in substantial need of reform. And I wonder whether or not that's because they know the legislature and businesses poised to eliminate it and so they want replacement funds or is it something else that's afoot in terms of their interest in reform for the personal property tax? >> Well the personal property tax as Debra mentioned, it's a tax on businesses on things like furniture, art work, computers and so on. It's not real property such as land or buildings. It affects local governments in a wide range of ways. Some jurisdictions get less than $100 of revenue from the personal property tax. Others get multiple millions of dollars of revenue through this source. And we asked how important the personal property tax is to local governments overall? And I believe a majority said it's a very important portion of their budgets. There are a lot of arguments against the personal property tax. It's a fairly cumbersome system both for the businesses that have to pay it and for the local governments that have to audit it and manage that revenue system. So I believe in terms of the reform that local government leaders were talking about for the personal property tax, they were primarily, a lot of these local leaders agree that it is too cumbersome. They told us they, a significant portion told us they are not able to audit what businesses report as much as they would like to. So I think the reform was primarily to look for an easier less burdensome source of funding. But among those local governments who say it's a particularly important source of funding, there's overwhelming support for it. They say they would much rather deal with the burdens of administering it and still get the revenue than not. >> They also told us that the problem they had with reforming the personal property tax was they didn't really trust the state government to come up with the replacement funds. So they said hey, if the government writes into the constitution that they will replace these funds fully, we're all for it. Seventy, eighty percent said please lets reform this as long as we get full replacement and it's guaranteed to us. We said well what if it's guaranteed but you're only getting partial replacement funds. They said no. No, we don't trust the state to actually give us those funds. So there was a big trust gap we found when we asked this battery of questions about the issue of replacement. So they said we need the money, we hate gathering the money, we would like to reform how it's gathered. But if the state tells us we can't gather anymore, we need replacement and we're not sure we're going to get that out of the current system. So that was, that's kind of the arch of their concerns about the personal property tax. >> Two questions on the general subject of the Michigan Fair Tax. Since 2005 the Michigan Fair Tax group has been trying to get residents to adopt that type of change in funding Michigan governments. What is your stance on the Michigan Fair Tax? Is it possibly an avenue to create more stable funding for state and local government? >> Well we got a few suggestions from local leaders about moving to the fair tax. The fair tax as I understand it would replace most forms of taxation with I believe it's a form of sales tax. Kind of a flat, much, much higher rate than our current 6 percent and it would apply to many more types of purchases, goods and services and so on. We did not get a lot of suggestions from local leaders that we should move to the fair tax. I believe there are a lot of economic arguments, concerns about it that can be kind of regressive. So for lower income citizens it could potentially have a larger burden if they're paying a large tax rate on food and medicine and things like that. So, in our surveys this was not particularly common suggestion to move to the fair tax. >> Government response addressed mostly cuts to the budget in terms of solving the fiscal problem. Has there been many requests for additional revenue from citizens by asking for tax increases as a way to solve the problem? Or is just everyone so beaten up at the prospect and down about the likelihood of having taxpayers empty their pockets even more in this day and age? >> Well our survey is just of the local officials, not of citizens. So we can't directly answer that. But one thing that we have found that is really pretty fascinating to us, we've asked local leaders a couple of times about if they had more authority at the local level to raise taxes themselves, how likely would they be to do that? And it turns out they say not likely at all whether it's increasing their property mileage rate. Even less likely that they would try to implement a local income tax. Also extremely unlikely that they would try to implement a sales tax. So local leaders themselves seem pretty unlikely to try to take on a burden of higher taxes at the local level. We also asked them whether they think their citizens, if it was up to the citizens, whether citizens would choose to pay higher taxes and get more services or whether they would choose lower taxes and fewer services? And for the most part other than on fire protection and roads, local leaders seem to think their citizens would choose lower taxes and fewer services. But another terrific organization, the Center for Michigan, has done some unofficial tallying on the last two sets of statewide primaries. And they have found 90 percent of local mileages have been approved both in August of 2010 and in August of 2012. Most of those have been and for scale, in August of 2012 there were over 800 statewide requests for local mileage increases. Ninety percent of those were approved by citizens. Same, roughly the same number of August 2010. And maybe most surprising of all, those high percentages of approval were really across the board whether it was for police services, fire services, roads, parks and recreation, transportation, senior services. So there's some kind of interesting thing going on where local government leaders are concerned that their citizens aren't just interested in raising taxes. But when it goes to a vote on the citizens in the last couple of rounds, there's been overwhelming approval. >> Your comments on unfunded mandates must have triggered another question on this subject. This questioner writes, unfunded mandates are when the state mandates the local unit do something without funding it such as enforcing a new state law. Have you looked at that aspect of unfunded mandates? >> The, this also came up and so as Debra pointed out we asked at the end of the survey we asked an open ended question or local leaders could just tell us whatever they thought was the most important thing to fix. And dealing with unfunded mandates did come up. It wasn't the most common thing but it was relatively common. So this is one thing we did not put in our slides but back in 2009 Governor Granholm and the leaders of the Michigan senate and house created the legislative commission on statutory mandates to look at this issue. As part of the Headlee Amendment in 1978, the state government was supposed to be, was supposed to be restricted from placing anymore unfunded mandates on local government. They couldn't ask local government to do anything new if they didn't provide the funding to do it. They have clearly broken that law for 30 years. And this legislative commission that was created by the state legislature looked at this very closely in 2009 and determined they couldn't identify all of the funded mandates that had been put in place. But for the ones that they could, they estimated there were more than 2 1/2 billion dollars of expenses that local governments had to take on that by law they should not have had to. So that's yet another driver of this fiscal crisis. You know, beyond the falling revenues the state government has imposed new mandates on local governments and required them to spend money to do it without funding it. >> And once in a while local governments including local schools have sued the state when they've imposed unfunded mandates and won. The state has had to retract them. But as the Granholm commission found that it's less likely to be the case than the local governments just suffering under and taking on the burden without the funding from the state. >> This questioner wants to know did you have opportunity to collect feelings from local government officials about EVIP strings attached to funding. That's a relatively new development and so what can you tell us about perspective of local officials on that subject? >> Right. So back in 2011 the Governor Snyder recommended that we move from this statutory revenue sharing where the legislature allocates a specific amount to a small group of local governments, not every local government was eligible for statutory revenue sharing. And they moved that pot of money into this program called the EVIP, the Economic Vitality Incentive Program. And instead of giving the money to the local governments, that small group of local governments, they actually said that you have to earn the money by hitting specific targets. We're going to ask you for example increase your intergovernmental cooperation. We're going to ask you to increase the amount of healthcare costs that your employees pay as part of your healthcare costs. We're going to ask you to run a local government dashboard where up online or some place in your jurisdiction there's information about this fiscal health about your jurisdiction that citizens can see as part of a transparency and accountability effort. So if they did any of these three types of policy change, they could then access the money. And so they were incentivized to change their policies to meet these policies and then get that statutory revenue sharing what it used to be. Local governments had somewhat of a problem with this in a couple of ways. One of the things that we heard the most in terms of the dissatisfaction with the EVIP program is a lot of people as Tom said were already doing intergovernmental cooperation. In fact 70 percent across the state. Those people didn't actually get credit for the intergovernmental cooperation they were already doing. They were asked to do more intergovernmental cooperation. So a lot of our local officials told us look, this is just make work. We're not saving money by doing these extra programs. We're just making up new programs to do in order to get this state money. Or we've already asked our employees to increase their healthcare costs last year. And we can't get credit for that in order to get this EVIP money. And so there were some protests by local officials about how the program was structured. And how they were being asked to jump through hoops as they put it in order to, that was actually a quote from one of our officials to chase this money that they used to get just directly from the state government through revenue sharing. >> And so one of the things that we pointed out in the slides is that fiscal health and fiscal challenges tend to be worse in the large urban communities and not quite as bad in the smaller jurisdictions. But on this EVIP program in particular from the small jurisdictions they tend to provide very few services in the first place. And tied into what Debra said, if they already were working with a neighboring jurisdiction to provide those services, they simply didn't have the opportunity to expand that intergovernmental cooperation. And so they were kind of, you know, cut off from this EVIP funding even if they should have been able, eligible to get it. >> And those small jurisdictions too have very few employees. And so if you have new regulations with new paperwork being asked to create dashboards, being asked to do these documents, these things that provide documentation to the state, that's just another layer of work you're being asked to lay upon the jurisdiction in order to chase less funding than they used to get before. So it was a very frustrating process for them to have this reduced. The other thing that I mentioned was one of the things that came up over and over again in the comments of these local governments is we really need stability. We really need predictability. We need to know what we're getting every year. And one of the problems with the EVIP program is it's not very clear what kind of incentives they're going to asked to do year over year. Are we going to continue to have to dashboard? Are we going to have to continue to increase our intergovernmental cooperation year over year? And scurry around to find new programs? And so it was this unpredictability issue too that is really difficult for local governments that need to be able to predict a look ahead in their budgets to be able to know what they're going to have for the following year. >> One last thing I'd like to say about intergovernmental cooperation is these local leaders who are doing this stuff are overwhelmingly satisfied with it. So as we said about 70 percent of these jurisdictions were already doing formal service sharing with a neighboring jurisdiction. Among those 70, 72 percent, over 80 percent said that they were very satisfied with how it was going and meeting its goals whether that was to cut costs or to provide better services. And so we have been kind of, you know, in this presentation pointing out some of the difficulties with intergovernmental cooperation and it's already so widespread. You know, I think it's fair to say there still are lots of opportunities for local governments to continue to expand some of these. Especially in the really large jurisdictions that provide a lot of services. I think we'll continue to see growth in service sharing. So it's not completely cut off. But in particular for these small jurisdictions it'll be difficult to continue to try to expand that. >> We've exhausted questions from the audience. So I'm going to exercise my prerogative to ask you the last question. And it's a toughie. You've done a great service by putting a spotlight on the subject matter and asking the question is the funding of local government in Michigan a broken system? I happen to agree with those who think it is. But I also know that identifying and putting a focus on the problem, it can be many moons before anything is actually done about it even when the vast majority of respondents are universal in calling and demanding for change. I can remember as a graduate student at the Ford School doing a Master's thesis on the need for school finance reform. This was back a long time ago. And it was many, many years after that before there was even a partial cure for the problem. So since you prognosticate and look, if you look in your crystal ball and give us your own sense, and you can have different opinions, of your optimism that because the crisis has been so clearly identified, because so much is at stake, what are your thoughts about the prospects for actual reform to avoid the future that most local government officials fear? >> Well I think my sense is we have not seen this as a high priority in Lansing. Currently this has not been the topic of discussion. The governor's budget that was presented in February really didn't include significant new funds for local government much less fixing the system. I think a lot of local government leaders would be happy simply to get some kind of boost in funding right now even if the system wasn't fixed and not even that seems to be on the table right now. So I think my sense is it seems likely that it may take a while to make significant progress on this. On the other hand just within the last couple of months I think at the local level we really are starting to see a ground swell on this issue. That comment that we showed from Ed Kurtz, this is, you know, the state government's appointee to fix Flint is saying the system of finance is broken and we have to fix it otherwise all urban core communities are going to end up looking like Flint. So I think we're seeing kind of a ground swell here. It doesn't seem to be on the agenda yet. On the other hand we're seen with the current administration and legislature in Lansing, they can move very quickly if and when they decide something is important enough. So there's always some hope. >> Yeah well I was going to say too, you know, the EVIP program for all of its difficulties in being administered at the local level and the criticisms that the local level leaders would level at it, is an attempt I think to move things along in terms of reform at the local level. And then again too, the PPT tax reform that the legislature and the governor was trying to do at the end of 2012. So it does appear there's some incremental movement in that direction. And so what we're hoping to do by bringing this to the forefront is talk about the need for a holistic approach. And so instead of just biting at different pieces to the puzzle to look at the entire picture. So there may be some work on the margins and it would be good if we could dig in and look at the system as a whole. >> [Inaudible] I came in part to hear what you had to say and based on what you say asked me to carry some stuff back to the School of Public Policy [inaudible]. I've got a couple reasons for saying that, [inaudible]. >> Go Blue. >> [Inaudible] for 12 years I was Mayor of this city [inaudible] in 1991 to 2003. Something in the brochure that [inaudible] why I came because I'm quoting your brochure that I got at home, the majority of Michigan's local leaders think our system of funding local government is broken. Well it is broken. But I didn't hear much and I did come in a little late and missed of this. I know I missed the part of on revenue sharing. But cities are nothing more than [inaudible] government. We tend to think that there are three levels, local, state and federal. No, there's really only two in Michigan. There's the federal and there's the state. We can't do anything as cities without expressed permission from Lansing. And that's carried through into our 1963 constitution. And in that constitution it was interesting because as you pointed out and I know [inaudible] revenue sharing was cut in half. Constitutionally it was money that the legislature couldn't tinker with, they didn't trust them. So they said you can't touch that. The other half they said okay, go ahead with it. But when I became Mayor in the first year was 1992, this city got 28 million dollars of revenue sharing without any strings attached, without proving anything or doing anything. It was part of the partnership between the state government and the cities. And ladies and gentlemen, that's gone. The EVIP program is a postage stamp compared to what happened. And I watched it diminish on three different now governorships under Engler, under Granholm and now under the current governor. This has been chipped away and chipped away without any replacement, without any tighten your belt, lay off people in good times even [inaudible]. And I think you people need to understand that this history is what's driving this situation while the people trying to do their best in their jobs in local government are cutting corners and squeezing and trying to figure out new ways to do things. And yes consolidating this city. And during [inaudible] they just got 32 million bucks from the federal government to put the first BRT line in [inaudible]. So we were doing things like that but we were being squeezed. I've been out of office almost 10 years and I sound a little grumpy. Because I've been watching what's been happening here and I didn't hear much about that. You know, the revenue sharing was a huge thing [inaudible] second biggest city in the second largest metropolitan area. It was a huge thing. Personal property tax was a huge thing. Without replacement they're talking about, they already cut it off so it's dead. But there isn't, they didn't put a said here's what we think we're going to do, what do you think about that? Now it's after the fact, it's just gone. I don't know whether that's what 9 million bucks? Something like for the City of Grand Rapids is gone. So when you're talking about how to fix it, you better understand, better than I heard tonight why and how we got into this mess? >> All right well I think, yes. >> I hope that when you go back and look at that, of course there's a bipartisan thing across the board. Mayor Laguardia in New York City 75 years ago said there's neither a republican or democratic way to clean the streets. And then so... >> So I'm going to, I'm sorry, I'm going to suggest that our panel make a very brief response to it. It's a really important topic but we also have a reception outside to continue the conversation. Do you have, I mean these are very important topics. [ Audience Applause ] >> So I want to... >> And we very much appreciate having them raised. You have a brief comment? >> Yeah, I do. I just want to, I want to come to Tom's defense because he did, our very first slide in the entire presentation was the big red gap between revenue sharing that we saw in the '90s. And it's, and it's increased decline. So Tom did cover that. >> I think what I'd say, Mayor Logia? >> Logie. >> Logie. I think what I would say is your effort right, local government is simply a creature of the state. It doesn't exist unless the state says there can be cities and villages and townships and so on. And it really is supposed to be a partnership and local governments provide the front line services to all of us citizens. But those, you know, ultimately are a state level. A state uses local government to get these local services provided. And there seem to be a partnership these days. It seems to be somewhat more adversarial. We've also asked questions about local leaders trust in state government and it's extremely low. There is a broken relationship between local and state government in Michigan. And I think the revenue sharing is a big part of it. >> [inaudible] term limits? >> Yes, term limits may be an issue. So yeah, this absolutely is a major thing going on. We're about to go into the field with our next survey and we're going to be digging into some of these issues again. So thank you very much for the comments. >> [Inaudible] >> Well this is clearly an ongoing topic of very great importance. I wanted to thank Tom and Debra for sharing some of CLOSUP's work and their perspectives on this topic. I'd like to thank Kurt for asking the questions and the mayor for his questions as well. But I'd particularly like to thank each of you for joining us this evening and for engaging with us. I have to say that was a tremendously thoughtful and vital set of questions that you posed to our speakers. And we really appreciate that. We do have a light reception that is just outside the auditorium. We hope that you will stay and join us to continue the conversation. Clearly there are many issues on the table. These surveys will continue and we hope that we will encourage you to take a look at some of the results that come going forward. So with that please join me in thanking both Tom and Debra. [ audience applause ] [ Music ]