Local officials respond unfavorably to Snyder's call for cuts in state funding for municipalities
(This story has been updated with additional details of Snyder's proposed cuts to revenue sharing, including amounts of the cuts for individual municipalities.)
Gov. Rick Snyder delivered the harsh blow that local officials across Michigan feared today when he unveiled a state budget proposal calling for deep cuts in funding for municipalities.
Snyder proposed a complete elimination of nearly $300 million in statutory revenue sharing payments for cities, villages and townships in the fiscal year that starts Oct. 1.
Taking the place of those payments, under Snyder's plan, would be a new incentive-based revenue sharing program that would make a lesser, $200-million pot of money available to cities, villages and townships that meet certain standards and adopt best practices.
Melanie Maxwell | AnnArbor.com
"To get those dollars, it's not just writing people a check, or municipalities a check," Snyder said. "We're asking them to partner — to join us in showing best practices."
Snyder said he plans to offer more details next month about how the new program would reward municipalities for working to reduce employee compensation, collaborate and consolidate services, and be more transparent about spending.
"With great conviction, I can look anyone in the eye and say I am proud of what's been put together here," Snyder said in his speech today. "By making these sacrifices, we can all win together in the long-term, and that's what we need to achieve."
Essentially, Snyder's proposal equates to a $92.1 million — or nearly a one-third — reduction in statutory revenue sharing funding. The move will impact hundreds of local units of government across Michigan, including Ann Arbor and Ypsilanti.
Snyder noted there still would be a $25.5 million or 4 percent increase — for a total pot of $659 million — in constitutionally protected revenue sharing payments to local units of government next year. That's based on estimated sales tax collections.
He also proposed a dedication of $2.6 billion in both 2012 and 2013 to state and local bridge construction and maintenance projects.
A 60-page copy of Snyder's executive recommendation for revenue sharing reductions shows Ann Arbor would lose $1.7 million — or 18.3 percent of its total payments — when balancing the elimination of statutory payments with a slight increase in constitutional payments. Ypsilanti would lose nearly $1.2 million, or about 44.3 percent of its total payments.
The city of Saline would lose $124,447, Milan would lose $50,490, Chelsea would lose $62,898, and Ypsilanti Township would lose $447,047, the document shows.
How much of that money each individual community could potentially earn back depends on what performance metrics Snyder lays out next month.
State Rep. Jeff Irwin, D-Ann Arbor, said Snyder is talking about about cutting a huge part of revenue for cities, townships and schools "in a very significant way." He said the governor's proposal makes it clear why there's so much urgency by the administration and Republicans in Lansing to reform Public Act 72, also known as the Emergency Financial Manager’s Act.
Snyder said in his State of the State address last month there needs to be better clarity over the powers of the financial managers in both municipalities and schools.
"There's a bill that the Republican leadership is really pushing hard, and it would basically make it easier for the state to take over local government in circumstances where the local governments are in financial dire straits," Irwin said. "They're moving very quickly because they know these cuts to revenue sharing are so drastic it's going to mean a major reduction in public safety services, and many communities are going to be pushed over the brink into bankruptcy."
Ann Arbor City Administrator Roger Fraser said he's not sure what impact Snyder's proposal will have on Ann Arbor. But a nearly one-third reduction in statutory revenue sharing could mean a cut of more than $600,000 in annual funding the city receives from the state.
"I don't know how that's going to shake out," Fraser said, adding he's still unsure about what Snyder has in mind for an incentive-based program.
"I didn't hear the details about that," he said. "I don't have any idea what that means or how they're going to take into consideration those of us who've been doing that sort of thing for some time. Somebody could say, 'As of this day forward, anything you do will get you a higher score for revenue sharing.' And I see one potential risk: What if you've done it already?"
Tom Crawford, Ann Arbor's chief financial officer, agreed details of how the new program would work remain unclear, but he said it appears Snyder is proposing to take the nearly $300 million pot of money that currently goes to mostly urban communities and reduce it to a $200 million pot of money that communities all across the state — urban or not — would compete for.
If that's the case, he said, urban communities like Ann Arbor stand to lose even more money than just a simple one-third reduction.
"It sounds like each community is going to be affected differently," he said. "For Ann Arbor, it looks like it's going to be a minimum of $500,000. I just don't know how high it's going to go yet."
Local officials also lamented cuts to fire protection grants and elimination of brownfield credits, a move they said will negatively impact redevelopment of urban properties.
Ypsilanti Mayor Paul Schreiber said the best approach might be to assume that Ypsilanti will lose all of its statutory revenue sharing from the state next year.
"We're going to have to wait another month to determine what metrics are going to be used to determine who will get some of the funds," he said. "So for trying to determine our budget for the next year, I think we're just going to have to say we're not going to have statutory revenue sharing and then figure out how we're going to win some of that back.
"It's confusing, to say the least, but I think we're going to end up having a revenue reduction and the question is — how much is it going to be?" he added.
With property taxes already down by about $1 million, further cuts to the city's budget will hurt, Schreiber said. And the city has few options for increasing revenues.
"We're really in a box," he said. "We've already made cuts to police and fire and we're down to some departments with a single person working in them. All of our departments are stretched, so it's going to be really tough for Ypsilanti."
Both Ypsilanti and Ann Arbor officials say they can only hope the Legislature is mindful of the importance of having healthy urban core communities when it comes time to dole out money.