New Survey Shows Local Officials’ Decreasing Economic Optimism

A new CLOSUP report from the University of Michigan’s Public Policy Survey (MPPS) shows that our state’s system for funding local government is broken and needs reform.

Hmm, that sounds familiar doesn’t it?

We’ve been saying this for years at the Michigan Municipal League and through our SaveMICity initiative, but it’s extremely refreshing to hear another organization saying it too. And it’s not just any organization saying it – it’s a December, 2019, 25-page report from the prestigious well-respected Center for Local, State, Urban Policy (CLOSUP), operated out of the Gerald R. Ford School of Public Policy at the University of Michigan.

There are multiple key take-aways from the survey, but one that jumped out at us was how for the first time in a long-time local officials are not as optimistic as they used to be about the financial situations in their communities. The report also references a study supported by the League that shows on average, cities in Michigan today have 12% less revenue than they had in 2002. View that study by Public Sector Consultants (PSC) here.

In response to the PSC study, the MPPS report adds, “These findings align with the view of most local leaders that Michigan’s system of funding local government is broken. A decade of economic growth should produce a rising tide that lifts all boats, but local governments in Michigan have not necessarily enjoyed such outcomes.

“Despite the most recent decade of economic growth in Michigan contrasting with the earlier decade of Michigan’s ‘one-state recession’ that preceded the Great Recession, the 2019 MPPS finds that statewide, less than half (48%) of local
leaders say their jurisdiction is significantly (14%) or at least somewhat (34%) better off today than before the Great Recession (see Figure 3a). Another 22% report that they are neither better nor worse off now. Meanwhile, 17%—similar to the percentage of jurisdictions that report recent fiscal decline this year—say that they are somewhat (12%) or significantly (5%) worse off today than they were before the last recession. Finally, around 13% of local officials are unsure about the
comparative status.”

Here’s another excerpt from the MPPS survey report explaining the declining optimism of local government leaders: “Looking ahead, local leaders are less optimistic about economic conditions in their communities: just 49% expect ‘good times’ next year, compared with 55% who said the same in 2018. In addition, increasing numbers of officials from jurisdictions of all sizes predict their governments’ fiscal stress will worsen over the next five years.”

The survey also breaks down responses by jurisdictions and found that leaders in larger communities are more likely than those in smaller places to offer an assessment about current government fiscal health compared top their health in pre-Great Recession 2007-08. And these larger jurisdictions are also more likely to say they are better off today. Here is an interesting excerpt related to the jurisdiction types (see related chart, right):

“Breaking these data down by jurisdiction type shows that much of the concern about a lack of long-term fiscal recovery can be found among Michigan city officials.  Although 41% of city leaders say they are better off today than they were prior to the Great Recession, the same percentage report that they are worse off. Only among counties (54%) do a majority say their fiscal health is better off now than a decade ago, though county officials are also the second most likely to report being worse off today (27%).”

Some of the conclusions of the survey are:

• In 2019 the MPPS again finds mixed evidence for both optimism and concern regarding Michigan local government fiscal health overall, using a variety of fiscal indicators tracked over time. Although, statewide, local officials in 2019 report a slight improvement in their governments’ current levels of fiscal stress, short-term improvements year-over-year have slowed, and few say
  their fiscal conditions have gotten significantly better.
• On the optimistic side, this year more local governments (69%) self-rate their current levels of fiscal stress as relatively low, a reversal of a steady (if gradual) downward slide over the past five years. These improved assessments of current fiscal stress can be found among jurisdictions of all population sizes and types.
• On the other hand, MPPS tracking of year-over-year fiscal change clearly now shows a new period of stagnation, despite a decade of economic growth for the state. Cause for concern also comes from looking toward the future. Local officials—particularly those in larger jurisdictions—report growing service  demands. And when it comes to infrastructure and human services, they predict
  increasing demands will outpace increased spending, leaving local communities worse off in the coming year.
• Furthermore, fewer local officials forecast good economic times for their community in the year ahead than did so last year—a first in the decade-long MPPS series. Moreover, officials from jurisdictions of all sizes predict a drop in their fiscal health in the longterm, with 62% expecting to have low fiscal stress in five years (down from 69% today), while 11% expect to face high fiscal stress in the same timeframe (up from 7% today).

About the survey: The Michigan Public Policy Survey (MPPS) is a program of  is a program of state-wide surveys of local government leaders in Michigan. The MPPS is designed to fill an important information gap in the policymaking process. While there are ongoing surveys of the business community and of the citizens of Michigan, before the MPPS there were no ongoing surveys of local government officials that were representative of all general purpose local governments in the state.

The MPPS was launched in 2009 by the Center for Local, State, and Urban Policy (CLOSUP) at the University of Michigan and is conducted in partnership with the Michigan Association of Counties, Michigan Municipal League, and Michigan Townships Association. The associations provide CLOSUP with contact information for the survey’s respondents, and consult on survey topics. CLOSUP makes all decisions on survey design, data analysis, and reporting, and receives no funding support from the associations.