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Fiscal health of local goverments gradually improving, but many still in bad straits

Center for Local, State, and Urban Policy
UM's Ford School of Public Policy

Michigan's cities, towns, and villages are seeing an overall improvement in their ability to meet their financial needs, but hundreds continue to struggle. That's according to an annual report by the Center for Local, State, and Urban Policy at the University of Michigan's Ford School of Public Policy.

The report finds that smaller municipalities are having a tougher time than those with populations of more than 30,000. And municipalities in central Michigan and the southern lower Peninsula have been particularly hard hit.

Twenty-nine percent of all municipalities surveyed reported that they can meet their financial needs better this year than last, but the same number said they are worse off. And 41% percent reported no change from the previous year.

This is a substantial improvement from the low point of 2010 when 9% said they were better off than the year before and 61% said they were worse off.

Thomas Ivacko co-authored the Center's report. He said despite the improvement, there's not much optimism among local leaders.

"We see a three year trend now of gradual improvement in fiscal health, but the speed of that improvement has been cut almost in half in the last year. So that's a concerning sign, I think, looking ahead," said Ivacko.

Among the reports findings:

  • Almost half of local governments reported declining property tax revenues in 2013, down from almost two thirds in 2012. Larger municipalities are more likely than smaller ones to report rising property tax revenues.
  • Local officials continue to report reductions in state aid as a key fiscal challenge for local governments, although fewer than last year.
  • Demands for public services such as public safety are on the rise. Half of all the reporting municipalities, and 71% of the largest ones, reported increased infrastructure needs this year, including deferred maintenance.
  • About the same number of local officials think their jurisdiction's financial health will be worse in one year (30%) compared to those who think it will be better (28%).

The report noted:

Local governments continue to pursue a variety of actions to improve their fiscal status, including shifting health care costs to be paid increasingly by their employees.

At the same time, slightly fewer municipalities are planning to cut services, use general fund balances to fund budget gaps, or increase joint service sharing with other jurisdictions.

- Virginia Gordan, Michigan Radio Newsroom

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