New Fact Sheet Explains Importance of Revenue Sharing to Communities

So just what is revenue sharing and why should I care?

A new fact sheet produced by the Michigan Municipal League aims to answer those questions in an ongoing effort to explain why Michigan’s system for funding the state’s communities is broken and needs to be fixed.

The “Guide to Revenue Sharing” fact sheet produced by the League as part of the SaveMICity.org explains the history of revenue sharing and why it is so important to Michigan’s communities. Cities and villages receive two types of revenue sharing – Statutory and Constitutional – to help pay for key governmental services such as police protection, fire service, roads, water and sewer service, and garbage collection. In the simplest of terms, revenue sharing is what keeps Michigan’s economic engines running.

Here’s an excerpt from the fact sheet:

Michigan’s municipalities are the backbone of Michigan’s economy. Cities and villages receive revenue earmarked by the state constitution and statute to help pay for core governmental services such as, police protection, fire service, roads, water and sewer service, and garbage collection. Known as “revenue sharing,” these funds are a primary source used to maintain the infrastructure and services that support the vast majority of our state’s jobs. Michigan’s metropolitan areas account for 89% of the state’s jobs and 88% of its gross domestic product.1 In Michigan, 140 cities and villages support larger daytime population than resident base (think jobs!). And, 42 of those see their daytime population swell by more than 50%! The revenue sharing distribution formula was designed to appropriately compensate the communities that support us all and the higher costs they bear. The underlying philosophy behind statutory revenue sharing has been to reimburse municipalities for the loss of taxing authority. Therefore, when that formula is underfunded, Michigan’s entire economy suffers.

Understanding revenue sharing and the financial challenges facing Michigan communities is especially important as signs of the next recession begin to emerge. If the system isn’t fixed before next recession Michigan communities could face disastrous consequences.

Unfortunately, the state has continually underfunded revenue sharing to the tune of $8.6 billion since 2002. This has forced communities to make drastic cuts to the services that residents rely on. A Michigan Municipal League survey found cuts in revenue sharing have negatively impacted basic community services across Michigan. Projects such as street and sidewalk repairs, and sewer and water improvements have been postponed, and recreation and library programs have been curtailed or eliminated.

Michigan needs to do better to protect its backbone — local communities — before the economy declines even more.

For the entire Michigan Municipal League Guide to Revenue Sharing, visit https://www.mml.org/pdf/advocacy/2019-SMC-RevenueSharing-4Pger-Final.pdf.