Many local officials in Michigan are increasingly doubtful about their ability to maintain or expand public services due to the current state funding structure, according to a recent study by the University of Michigan’s Center for Local, State, and Urban Policy.
The latest Michigan Public Policy Survey reveals that only 29% of local officials believe the existing funding system will allow them to at least maintain current service levels. This is a decline from 40% in 2016 and 43% in 2012. Additionally, just 16% of respondents expect they will be able to improve or expand services in the future.
At the same time, more local governments report concerns about maintaining current services: the percentage has increased from 34% in 2010 to 43% today.
Local property tax remains the main revenue source for Michigan’s local governments. However, it is limited both by the Headlee Amendment of 1978 at the community level and Proposal A of 1994 at the parcel level. Another significant funding source—state statutory revenue sharing—has declined over decades and currently falls hundreds of millions of dollars short each year compared to full funding.
Researchers indicate these trends show that Michigan’s system does not provide flexible or sustainable funding as demands on local government grow. Many officials think residents would prefer service cuts over higher taxes for most operations except police and fire services.
Some policy experts suggest that expanding access to local-option taxes could give municipalities more control over raising revenue. Such changes would likely require legislative action before local governments could consider seeking voter approval for new taxes.
Despite ongoing discussions, there is no clear agreement among local leaders on whether policies should be enacted to expand taxing authority at the municipal level.
“Other states give their local units more tools for capturing revenues from regional and local economic activity such as tourism taxes or local sales tax,” said Debra Horner, senior program manager for the survey. “Michigan policymakers must recognize not only the limitations of the existing system of funding but also the variety of local preferences and willingness to embrace new revenue streams.”
The survey was conducted between April 7 and June 12 with responses from county, city, township, and village officials representing 1,328 jurisdictions across Michigan. The response rate was reported at 72%.
