Stephen Henderson, Detroit Free Press Editorial Page Editor State government tells cities in Michigan that they'd better balance their budgets, keep debt under control and not promise more to retirees than can be paid.
Slip up too many times, and local elected officials can be displaced by emergency managers — or, in the historic case of Detroit, municipal bankruptcy can be the consequence.
That relationship, the expectation that municipal governments stay out of financial trouble or face state intervention, puts a lot of responsibility on local officials. They deliver most of the services people need, and have to maintain them (or cut them) without over-spending.
But Michigan's laws also handcuff cities when it comes to the ways in which they might grow revenue (even in accordance with overall economic growth) or find new sources of it. And state policy has deprioritized the share of state tax dollars that are sent to local governments (the ones that provide most of the services people need) in the name of cost-cutting and frugality.
The result is a set-up of sorts, according to a report released last week by Michigan State University. "Michigan incubates financial distress (with its) particular mix of stringent limitations on local revenue and its relatively low level of financial assistance to cities," the report said.
A week ago, I wrote that an obsession with dollars and cents, unmoored from considerations of the value of the services they buy or provide, had made state government in Michigan something of a joke. Money matters — but effectiveness, and whether spending delivers on its promise, has become secondary.
Cities — the way their finances are structured by state law, the manner in which state government funds them — are Exhibit A in the strained relationship between cost and value in Michigan.
They deliver most of the services that matter to people — police, fire, trash pick-up, public lighting — and yet, as the MSU study shows, they're nickel and dimed to the point that even the best-managed among them face an awful choice: Scrimp on services, or strain financial integrity.
No doubt, local management foibles and corruption have contributed to the trouble that Michigan cities face each year at the budget table.
But even accounting for local responsibility, the odds that a city in this state can manage financial strain and service delivery in a reasonable balance are beyond absurd.
The MSU report says, in essence, that Michigan's cities are "structured" to fail.
Compared to other states
While the state is in the middle of the pack nationally when it comes to growth in per-capita aid to cities, it has also diverted more than $6 billion in planned revenue sharing away from cities since 2001.
In addition, Michigan employs some of the toughest restraints on growth in locally raised revenue. In addition to a general restraint on local tax increases, the state has added two others in the last four decades. The Headlee Amendment, passed in the late 1970s, caps the growth of property tax rates to the rate of inflation. And Proposal A, passed in 1994, further restricts growth on locally collected property taxes.
That makes Michigan one of only eight states that have three state-imposed restrictions on local tax revenue.
And the effect, since the massive reset of property valuations in the recession, has been to practically leave municipal governments out of the economic recovery. Even as assessments and values rise, Michigan's limits on local tax revenue growth keep city coffers from experiencing the full benefits.
It's worse than having to do more with less. It's having to do more with an artificially imposed limitation on resources.
We're asking cities to focus on cost — and completely ignoring the value of what they provide — or don't.
Losing police and firefighters
Cities have turned to one-off taxes to pay for critical police and fire services and have borrowed to the hilt just to keep basic services running.
And they have cut, and cut, and cut. Headlines each year expose how many police officers or firefighters will be reduced.
By 2008, Michigan cities had lost 1,800 police positions since 2001, according to the Associated Press, even as levels of violent crime stayed consistent or increased.
This spring, cities like Port Huron and Saginaw struggled with budget decisions that would close firehouses and eliminate firefighting jobs, even as call volume remained largely unchanged.
Adding to the woes in places like Port Huron are so-called legacy costs — promises made to previous employees about retirement benefits that cities have not had enough revenue to fully fund, largely because of state-imposed limitations.
In Port Huron, for instance, the city's pension and retiree health care obligations have a $100-million gap; the city's payments are expected to spike from $7 million to $12 million annually in the next 14 years — all the while revenue sharing has dropped nearly 40% since 2001.
Low resources, more troubles
But the bigger-picture shift has to come in the way we think about cost, and value.
Yes, tax bills are kept lower by constraining cities' ability to benefit from economic growth, but the result is governments that can't keep people safe, or effectively put out fires.
Yes, state government has balanced its own books by shorting revenue to cities, but the consequence is more municipal governments in financial distress, and more necessary state intervention that is both costly and less effective than properly funding cities on the front end.
If we funded cities in a way that placed more emphasis on what they're asked to do, and how important those services are, we'd certainly avoid many of the fiscal crises that cost precious time and resources.
City services are what residents pay taxes for — the safety provided by police and firefighters, the quality education delivered by public schools. For the public works that keep our streets clean and our water safe. To short cities for taxpayers' presumed benefit is a false economy. And it may make sense on paper. But that's the only place it makes sense.
No comments:
Post a Comment