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Original article URL: http://bridgemi.com/2014/06/now-lets-fix-the-rest-of-michigan/
3 June 2014
A question from an old Kalamazoo friend stopped me dead in my tracks:
“I can understand why folks are excited about Detroit making progress on the post-bankruptcy ‘Grand Bargain’. But the powers that be seem only interested in Detroit. There are lots of other communities in Michigan that are badly off and need help, so how come we never hear about them?”
He’s absolutely right. I spent some time last week at the big policy conference on Mackinac Island. From most of the optimistic chatter on the front porch of the Grand Hotel – without a doubt the most optimistic I’ve heard in many seasons on the island – you’d think the only place in Michigan that’s trying to resolve its financial problems is Detroit.
Places like Kalamazoo are suffering plenty. Not to mention Flint (maybe worse off than Detroit). Add to the mix Jackson, Saginaw, Benton Harbor, Allen Park and many places in the UP. In fact, many of the larger, older cities in Michigan are facing big time financial trouble.
And the sooner our leaders recognize that a solution to Detroit’s problems – important as that may be – isn’t the only crucial issue facing our state, the better off we all will be.
Off the Island, we face a local government financial crisis almost anywhere you look. And unless the governor and legislature start paying attention, the entire state is going to face Detroit-style problems that jeopardize our national image, not to mention our entire economy.
My friend in Kalamazoo knows perfectly well that his city faces a $190 million unfunded retiree health care obligation. Flint, already for some years in the hands of an emergency financial manager, is considering laying off what’s left of its public safety apparatus. Even relatively well-off communities are in trouble: Livonia’s retiree health care plan is only 38 percent funded and Birmingham has funded only 26 percent of its projected retiree health care costs. Jackson, where the entire city budget is $50 million, is facing $59 million in unfunded health care liabilities!
MSU professor Eric Scorsone estimates are that unfunded local government legacy costs statewide now total something like an astonishing $30 billion.
Most communities in the state have taken it in the chops from the Great Recession that decimated local property values and, thus, local property tax revenue. And, thanks to the Headlee Amendment to the Michigan Constitution that restricts annual gains in property value assessments, most communities can’t quickly gain back the revenue accruing from post-recession increases in revenue. Maybe someday, but someday is an awful long way off.
On top of that, the state has slashed nearly to extinction the revenue sharing program that used to sustain many local communities.
The plain fact is that Michigan’s entire system of financing local government is tottering on the brink of collapse, just the way it was from school finance in the early 1990’s.
And with all that’s going on just now – roads, minimum wage, the coming election, and Detroit itself – I doubt there is enough energy in Lansing just now to step up to meet the challenge.
But come next January, the newly elected leaders of this state are going to have to buckle down and start working hard on fixing our broken system of local government financing.
True enough, Michigan cannot succeed without a healthy Detroit. But it’s equally true that Michigan (including Detroit) cannot succeed without thriving communities in every corner of the state. The sooner sensible people focus on that and actually get something done, the closer Michigan will have come to a real turnaround.
Editor’s Note: Bridge Magazine earlier this year ran a comprehensive report on unfunded local government legacy costs. To read the series, go to here.