Michigan cities could see revenue sharing increase in 2010

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Although the Michigan House Appropriations Committee recommended increasing statutory revenue sharing by 1 percent Thursday, East Lansing officials are uncertain whether the vital local government funding source will escape the chopping block when the Legislature sets its budget in October.

Revenue sharing refers to cities getting a refund from the state in exchange for letting the state collect sales, weight and gas taxes.

Originally, a hearing was set Wednesday to discuss House Bill 5880, which would have cut statutory revenue sharing — a fund that was slashed 11 percent in 2009 as the state attempted to balance its own budget — by 3.1 percent. But Andy Schor, assistant director for state affairs with the Michigan Municipal League, said the meeting turned when testimony demonstrated removing statutory revenue sharing would lead to further degradation of Michigan communities’ services.

“They didn’t want to cut communities any further; it would have a truly negative impact on their constituents and development and jobs,” he said.

“They know communities have been cut, and as a result they’re cutting police officers and fire departments … they don’t want that to happen, and enough is enough.”

The funding boost amendment would be accomplished by tie-barring it to a package of 10 bills that would eliminate about $26 million of tax loopholes. A tie-bar necessitates the package of bills is enacted for the amendment to take effect.

Still, East Lansing Councilmember Kevin Beard said the city will not include any statutory revenue sharing in its budget projections. The loss of such money amounts to $2.4 million of the city’s estimated two-year, $5 million shortfall.

Beard said he expects the state’s revenue numbers to mirror the city’s, which has fallen victim to declining property taxes. Although the state doesn’t rely on property taxes for revenue, Michigan is the nation’s leader in unemployment and outbound migration, which could have a negative effect on sales and income tax revenues.

“I think people are looking for straws to grab that gives them a chance to be optimistic,” Beard said. “But it’s still way too early in this budget process to be optimistic about that.”

Schor said many communities have taken East Lansing’s approach by removing revenue sharing from its budgets. He said given the state’s reputation for siphoning from that fund — it has cut statutory revenue sharing each of the past 10 years — playing it safe might be the best option.

East Lansing Mayor Pro Tem Diane Goddeeris said she applauded the House Appropriations Committee for not making the easy fix by reducing statutory revenue sharing but was hesitant to give a final verdict on its actions considering the distance of October’s budget deadline. She added if the state wants to turn its situation around, it must maintain statutory revenue sharing so communities remain attractive.

“We’re in the middle of trying to draw people to our cities to live, and by doing that we will have more people coming to the state,” she said.

“But if you continue to make it difficult to provide the services that make cities desirable to live in, what draw do we have then?”

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