Politics & Government

Legislation to make revenue sharing more stable for local governments

Michigan Public

Published December 3, 2024 at 2:32 PM EST

Cities, villages, and townships are backing legislation that would stabilize the amount of money they get from revenue sharing. The costs of maintain infrastructure and public safety have been increasingly carried by the municipalities. The revenue sharing payments are hundreds of millions of dollars below where they would be if the state shared the way it did before the Great Recession.

Local government officials are calling for a change in how the state shares sales tax money. Municipal governments are never sure how much statutory sales tax they’ll get, if they get anything at all.

Representatives of cities, townships, and counties called for a change and held up 500 letters from their colleagues, urging the passage of legislation that would help make municipal funding be more stable.

As previously reported, sales taxes are sent to the state and a portion is redistributed to cities, villages, and townships. Part of it is mandated by the Constitution. A second formula, called the statutory share, ended when the state budget got tight during the Great Recession. Now, instead of sharing that portion of the sales tax, the legislature simply distributes what it wants each fiscal year.

This graph illustrates how the state sales tax has not been shared in the way it was before the Great Recession.

Families are still paying the same rate of sales tax that goes to state government, but their communities are getting less of it back. That’s led to municipalities relying more on millages. Citizens pay more in property taxes, which also leads to higher rent. Local governments are issuing bonds for road repair, implementing more fees or increasing fees for utilities such as water and sewer. It’s all an attempt by local government to keep something close to the same level of service.

The payments to cities, villages, and townships are hundreds of millions of dollars less than they would be under the old method.

Bipartisan legislation would establish a Revenue Sharing Trust fund to stabilize funding for local governments.

“We’ve reduced the amount of statutory revenue sharing to balance our own budget, but they still have to deliver those necessary, needed day-in and day-out services,” said Republican Representative Mark Tisdel, one of the sponsors of bills that would establish trust fund.

The House passed the bills by a wide majority. Now the question is whether the Senate will take up the legislation during the lame duck session.

Democrat Representative Amos O’Neal is one of the sponsors.

“Our cities, our townships and villages are depending on us to get this over the finish line.”

If the Senate takes up the bills, it’s still unclear whether Governor Gretchen Whitmer will sign them.