Taxes Up $4.3 Million, State Money Down $200K: So Who 'Compromised' Services?

Revenue sharing payments from the state of Michigan to the city of Jackson were $219,300 lower in 2015 than in 2010. But Jackson’s overall annual tax revenues grew by $4.3 million over the same period, including $2.3 million more from its city income tax.

The decline of $220,000 in state revenue sharing funds, though, was the subject of a recent public meeting in Jackson hosted by a statewide local government lobbying organization called the Michigan Municipal League. The MML is trying to make an issue out of state revenue sharing payments as part of a pitch for municipalities to get more.

The MLive news site published an article on the meeting it called, “State revenue sharing system is ‘broken,’ city leaders say.” The story did not mention that Jackson’s overall revenue has increased faster than the rate of inflation from 2010 to 2015.

The city’s total revenues grew from $35.4 million in 2010 to $39.7 million in 2015, which is a 3 percent increase when adjusted for inflation. (The 2010 budget would be equivalent to $38.5 million in 2015 dollars, or $1.2 million less than what Jackson actually did take in last year).

The city has seen increases in overall tax revenues despite having a high proportion of low-income residents. Jackson’s median household income was $27,342 from 2010 to 2014 (the statewide average is around $48,000) and its poverty rate is 36.7 percent.

There are two components to state-shared revenue. The first is mandated by the Michigan Constitution and is based solely on population: More populous cities get more. The second part is at the discretion of lawmakers. Jackson received $4.5 million in revenue sharing in 2010 and $4.3 million in 2015. The 2015 amount consisted of $2.54 million from the constitutional portion and $1.70 million from the statutory formula.

“Clearly, a city’s finances are not as simple as one line, revenue source or fiscal year,” said MML spokesman Matt Bach when asked about the media coverage. “The information the League is sharing about revenue sharing is a long-term look at the state’s disinvestment in communities. Our study of revenue sharing goes back to 2002 and we found that since 2002 the state has diverted from its communities more than $7.5 billion in statutory revenue sharing. And it’s just not us saying this – the House Fiscal Agency has also found that the state has fallen short of fully funding revenue sharing for years.”

Municipalities have seen increases in other sources of tax revenue, said Michael LaFaive, the director of the Morey Fiscal Policy Initiative for the Mackinac Center for Public Policy.

“Local units have been shouting about revenue sharing cuts for years,” LaFaive said in an email. “They already receive a constitutionally mandated share, which has gone up. Other revenue sources have as well. Municipalities can and should learn to thrive with less from the state.”