Following Gov. Rick Snyder’s call in his State of the State address to base statutory revenue sharing to municipalities more on “best practices” employed by communities, a freshman state senator has proposed instead to revamp the current revenue sharing system by making the payments to municipal and county governments based entirely on their population.
Senate Bill (SB) 90 was introduced by state Sen. Tory Rocca (R-Sterling Heights) on Monday, Jan. 27 and has been referred to the Senate Appropriations Committee, which is chaired by state Sen. Roger Kahn (R-Saginaw).
The revenue sharing program essentially distributes sales tax collected by the state to local governments as unrestricted revenues. Funding for the revenue sharing is two-fold. The constitutional portion amounts to 15 percent of the 4-percent gross collections of the state sales tax; and statutory revenue sharing comes from 21.3 percent of the 4-percent gross collections of the state sales tax, according to the Michigan Department of Treasury.
Payments are made in February, April, June, August, October and December for the two-month period preceding Dec. 31, Feb. 28, April 30, June 30, Aug. 31 and Oct. 31.
“Basically, what’s happening now is that many communities in the state are essentially donor communities with a large portion of their revenue sharing dollars going to the city of Detroit,” Rocca said, adding that “8 percent of the population gets 50 percent of the funding.”
He also said that he is “not wedded” to the idea of a simple per-capita system of divvying up the revenue sharing payments.
Rocca said that communities would have to report their populations to the state Department of Treasury and the department would have to verify the accuracy of those figures before the statutory revenue sharing dollars would be doled out.
Local lawmakers in the state’s upper chamber said they support the idea of revamping the statutory revenue sharing payment formula and agreed that the city of Detroit gets an unfair share of the pot.
State Sen. David Robertson (R-Waterford) said that since his days in the state House, he has argued that the largest city in the state “has gotten a disproportionate share of revenue sharing.”
He said that Detroit gets a larger percentage of statutory revenue sharing than its current population levels would suggest that it should, and that Detroit is automatically first on the list of municipalities to get the payments. Detroit gets its share first, and then everyone else plays second fiddle, Robertson said.
“I do, in fact, agree with the philosophy of the bill,” he said. “It’s been a legitimate issue for a long time. The sponsor is a serious person who has legitimate issues for his district, just as I have with mine.”
State Sen. Mike Kowall (R-Commerce, Highland, Milford, Walled Lake, Wixom, Wolverine Lake, White Lake, Orchard Lake, West Bloomfield) argued that while the bill is “technically” good for townships and smaller cities, the concern that he has is about “the law of unintended consequences” that could negatively impact cities like Wixom, Novi, and Walled Lake, which he said have done a good job of managing their budgets and deserve their fair share of revenue sharing.
“The last thing we want to do is punish cities that are being fiscally responsible and doing everything they are supposed to be doing,” Kowall said.
David Bertram, legislative liaison/team leader for the Michigan Townships Association, said his organization has “no reservations” about the proposed shift in revenue sharing payments and that it’s something the association has advocated for a long time.
“When you have 50.4 percent of the state’s population in townships, we certainly think that more revenue sharing should be coming towards us than what is currently,” Bertram said. “We’ve been underfunded for years in revenue sharing. We think that a per-capita approach is the right approach. We know there is obviously strain on the revenues because of the (fiscal) situation the state is in, but we remind people that we are under stress, too.”
However, Dan Gilmartin, president and CEO of the Michigan Municipal League, said that the idea is foolish.
“With respect to the per capita revenue sharing, we don’t think that makes sense, not at all,” he said in an interview with the Spinal Column Newsweekly last week. “At a time where the real problem with funding isn’t necessarily formulas, it’s the size of the pie, if you will, to take money from areas providing services from governments that provide things like police, fire and roads and simply take the focus out of that and spread that money around and take it from areas that really need it — we don’t think that makes sense in driving a new economy as we move forward.”