MSU Study: As Cities Struggle with Lack of Revenue Sharing, Local Governments’ Dependency on Nonprofits Grows

A new study from Michigan State University examines how Flint and Detroit’s dependency on nonprofits has increased as the size of local government has decreased significantly, far outpacing population decline. The study showed both Detroit and Flint have lost over half of their city government workforce between 2003 and 2016 – a timeframe that corresponds with the huge drop in revenue sharing payments to cities by the state of Michigan – “extreme declines” that the study’s author found “startling and disturbing”.

Sarah Reckhow, associate professor of political science at MSU, described how the inverse relationship between local governments and nonprofit help has led to what she calls “nonprofit governance,” where unelected nonprofit staff are making urban policy decisions that should be in the hands of local officials. 

“Our research shows when local governments are so weak they can’t provide basic services like affordable and safe drinking water and public safety, nonprofit involvement in urban politics greatly increases,” Reckhow said. “Nonprofits are doing heroic work, but they shouldn’t be providing basic public services.”

“Local governments need their own resources to invest in themselves and maintain services,” said Chris Hackbarth, MML’s Director of State & Federal Affairs. “Foundations and nonprofits are great partners on capital projects and one-time expenses, but propping up city budgets is not an efficient use of nonprofit resources and it papers over the problem we have with local governments being left behind in the recovery.”

Cities can’t easily stop depending on private philanthropy when local government is constantly underfunded by state policy decision-makers. They will continue to have a difficult time competing and succeeding unless state leaders act to set our cities up for success by providing funding solutions. Fixing the state’s broken municipal finance system would reduce dependency on nonprofits, and allow them to do other important work for society, instead of stepping in to fill the holes left by underfunded local governments. 

“Our findings indicate quite clearly that Michigan state government needs to revisit its revenue sharing policies,” Reckhow said. “Certainly, private funding can help cities, for which we are all very grateful, but essential public services such as clean drinking water, police protection and public education is a local government responsibility. So the question becomes: How much longer are state leaders going to stand by and watch our urban citizens suffer?”