Revenue Sharing Lawsuit Could be Game Changer for Michigan Communities
The Craig Fahle Show, a statewide podcast featured on Deadline Detroit, reports the state of Michigan has been shortchanging Michigan citizens for the past 20 years by chronically reducing revenues to local cities and towns. Listen to the excellent podcast here.
“Small communities have struggled for years making cuts straight to the bone in order to keep their local budgets stable,” host Craig Fahle said on the June 18 edition of the program.
In the podcast, Fahle said the state of Michigan is required to pay nearly 49% of state shared revenue back to communities in order to pay for their designated local government services, but a recent lawsuit alleges that Michigan has been returning significantly less, resulting in billions of dollars in shortfall, just in 2018 alone.
The coverage by Fahle is the first of many featured podcasts on Deadline Detroit seeking to shed light on these important municipal finance issues for local communities and municipal government alike. These are topics directly tie to the messaging of the SaveMICity initiative and we greatly appreciate Fahle’s interest and coverage.
Fahle aired a second segment on the topic today, June 25, featuring Eric Lupher of the Citizens Research Council and he’s scheduled to interview the Michigan Municipal League’s Anthony Minghine later this week.
“The people in every community have been shorted a lot of money, causing the loss of countless crucial positions like police officers and firefighters,” Fahle said.
This significant shortfall for Michigan communities has resulted in large cuts in some communities, cutting infrastructure, police departments, fire departments and more, the suit alleges.
“The question is: How many issues could have been resolved or how many jobs could have been saved if the state was returning the correct amount of money to each community?,” he said.
The lawsuit, now before the Michigan Court of Appeals, alleges that the state has been violating the Headlee Amendment, shortchanging locals on revenue-sharing for 20 years — including $2.5 billion last year alone, or 10 percent of the state’s total annual budget. If the courts rule in their favor, it will have a huge impact on how the state puts together its budget and what it can afford.
During the podcast, Fahle spoke with Wayne State University Law Professor John Mogk, who brought the lawsuit on behalf of the group Taxpayers for Michigan Constitutional Government.
“The basis of the state’s argument is that a payment is a payment, but our counter is that payments that result in a tax shift are not permissible and that by counting the payment to school districts as part of its share, it’s only increasing the burden on local communities. The state of Michigan has been enjoying a free ride for years,” Mogk said.
Despite rising property values and an improved economy, not everyone has recovered from the great recession. Because of state restrictions on property tax revenue, and limited powers to raise additional money, many cities still struggle to provide basic services.
In 2018, the Michigan Treasurer’s office found that 77 communities are in danger of further state oversight, and many of those cities still have property tax revenues that are lower than they were in 2000.
It also found that local governments statewide are staring at a $1.2 billion gap in infrastructure funding. State lawmakers and the governor take credit for balancing the budget, while local governments and schools make the tough choices on where, or who, to cut.
Listen to the podcast below:
