House passes huge budget bill with revenue sharing, indigent defense dollars

The House worked late into Thursday evening this week to move bipartisan budget bills, in hopes the Senate approves them to meet the Legislature’s statutory July 1 deadline to send a state budget to the governor.

Gov. Gretchen Whitmer expressed support for the House actions, which include “the governor’s proposal to make the largest investment in K-12 public schools in our state’s history to close the gap between the lowest- and highest-funded school districts for the first time since the goal was introduced in 1994.”

House Bill 4410 largely maintains baseline spending from the current fiscal year (2021) for the next one (2022), with a few new investments. If the Senate does concur with the House approach, the state would still retain $3.1 billion in its General Fund, $880 million in the School Aid Fund and the first half of the $6.5 billion in American Rescue Plan (ARP) funds.

The bill includes a 2 percent increase (1% as ongoing and 1% as one-time) for county revenue sharing. MAC had asked legislators to end the County Incentive Program, which forces counties to do unnecessary paperwork to get their full revenue sharing allotment each year, but those requirements would remain in place under HB 4410.

An increase of $29.1 million is designated for the first year of phased-in funding of the Raise the Age program that moves 17-year-old offenders into the juvenile justice system. A nd Michigan Indigent Defense Grants would be fully funded, as the House agreed with the governor’s recommendation for about $149 million in General Fund spending for them.

Other items of note include:

• $26.5 million to establish 14 integrated behavioral and physical health clinics
• $51.4 million for Essential Local Public Health Services
• $13 million for Secondary Road Patrol (plus an additional $2.7 million from an FY21 supplemental budget bill)
• $13 million for Community Corrections plans and services
• $4 million for the County Veteran Service Fund

Not making it through the House, however, was a spend of $5 million of the federal Coronavirus State Fiscal Recovery Funds to reimburse county jails for housing offenders at county jails who otherwise would have been held in state prisons.

For a full breakdown of the House plan, click here. The Michigan Senate’s next schedule session is on Wednesday, June 30.

For more information on state budget matters, contact Deena Bosworth at bosworth@micounties.org.

 

ARP revenue calculator released; consulting contracts now available

Counties now can download their own copies of a calculator sheet on revenue losses for purposes of the American Rescue Plan (ARP), the National Association of Counties announced this week.

Developed by the Government Finance Officers Association, the calculator can be found here.

MAC also is pleased to announce that four consulting firms, operating under pre-vetted contracts that comply with all requirements of Michigan law, are now available to assist counties that need advice and guidance on spending and tracking ARP payments.

“The vendors chosen through this process are prequalified to assist counties in managing the COVID-19 relief funds allocated through the American Rescue Plan Act of 2021,” explains MAC’s subsidiary, CoProPlus, which worked with Livingston County on the RFP to identify consulting firms. “The contracts offer a means for counties to receive financial accounting, oversight monitoring, auditing and/or reporting services as required for each individual project.”

During a call this week, NACo staffers reviewed the latest information from the U.S. Treasury on rules, deadlines and details about the use of federal relief funds. They encouraged counties to regularly visit the NACo analysis page on revenue issues.

In other ARP news, local governments can now visit the Michigan Department of Treasury American Rescue Plan Act (ARPA) webpage to view information and updates regarding the Coronavirus Local Fiscal Recovery Fund.

As always, be sure to check MAC’s COVID Resources Page for the latest developments in responding to the COVID-19 crisis.

 

MAC continues to gather answers, devise strategies on ARP spending

With the release of a new U.S. Treasury FAQ sheet and aggregated language on interim spending rules, Michigan counties now have substantial guidance on how they can use the $1.9 billion in direct investments via the American Rescue Plan.

Meanwhile, MAC is working with state and local officials on a strategy to help magnify the impact of the billions of dollars coming to all levels of government in our state.

Among key elements in the new Treasury FAQ are: 

• Costs of consultants: Recovery Funds CAN be used to cover the costs of consultants to assist with managing and administering the funds.
• Public jobs programs: Recovery Funds CAN be used to establish public jobs programs (I.e. subsidized employment, combined education an on-the-job training, job training to accelerate rehiring or address negative economic impacts, childcare assistance or assistance with transportation to and from a jobsite or interview).
• Revenue loss and audited financial data: If a county does not have audited data readily available when calculating its revenue loss, it is not required to obtain audited data. 
• Revenue loss and Census data: When calculating general revenue, counties should use their own data sources and do NOT need to rely on published revenue data from the Census Bureau.
• Revenue loss on cash basis/accrual basis: When determining revenue loss, counties may provide data on a cash, accrual or modified accrual basis, so long as the county is consistent in their choice of methodology throughout the covered period and until reporting is no longer required.

For more context and guidance, counties also can consult documents created by MAC and by NACo that highlight critical issues and concepts.

And MAC continues to work on a plan to earmark close to $4 billion in state ARP funds as matching funds to enhance local efforts. For this plan, the Whitmer administration and legislative leaders have asked for ideas that:

• will be transformational in nature;
• do not create new programs; and
• strategically invest the one-time dollars in areas of greatest need for improvement.

MAC has been having multiple conversations each week with the administration, legislative leaders, business and community leaders and other stakeholders on this idea. Our hope is to create a groundswell of support that bridges the political gap in Lansing and truly provides the resources and value needed for strategic investments in Michigan. As part of that effort, MAC has created a resolution template that counties can use to express support for the matching funds concept.

For questions on this issue, contact Deena Bosworth at bosworth@micounties.org.

 

Huge Senate majority approves 4-year terms for commissioners

By a vote of 32-4, the Michigan Senate approved Senate Bills 242, by Sen. Ed McBroom (R-Dickinson), and SB 245, by Sen. Jeremy Moss (D-Oakland), which would bring four-year terms for county commissioners to Michigan in the 2024 presidential election cycle.

The roles of a county commissioner and the level of expertise necessary to oversee county government functions have increased substantially since the Legislature abolished the board of county supervisors in 1966 and created the county board of commissioners.

The bills will be referred to the House Committee on Local Government and Municipal Finance on Tuesday.  

MAC continues to encourage commissioners to add their voices to the four-year term effort. As of Friday morning, 73 county leaders had responded. Please add your voice to this effort today by clicking here.

MAC also requests that counties adopt official resolutions of support for the legislation. To download a template for this purpose, click here. If you pass such a resolution, please send a copy to Hannah Sweeney at sweeney@micounties.org.

As of Thursday, the following counties had advised MAC of passage of such resolutions: Allegan, Alpena, Bay, Cheboygan, Clinton, Crawford, Dickinson, Emmet, Genesee, Houghton, Huron, Ionia, Isabella, Lenawee, Manistee, Marquette, Mecosta, Newaygo, Oceana, Ogemaw, Ontonagon, Oscoda, Sanilac, Van Buren, Washtenaw and Wexford.

For more information on this issue, contact Deena Bosworth at bosworth@micounties.org.

 

By Stephan Currie, Executive Director, Michigan Association of Counties

The citizens now serving in the Michigan Legislature did not create the fiscal crisis that now grips our 83 counties and other local governments.

The crisis is so large, so complex, it took decades to create — decades of poor choices, often made with good, or at least not malicious, intentions.

Nevertheless, time after time, legislators eased their own financial challenges by deepening the hole that our 83 county governments are trapped in. Revenue-sharing cuts. Unfunded mandates. Restrictions on raising and using revenue. The encroachments are many, the effects enormous.

Today, we are urging them to take the first step to better fiscal health: Stop making it worse.

Four years ago, state leaders briefly noticed the problem around them and convened a task force to study the pension and retiree health care pressures squeezing local governments. I was proud to sit on that panel, which produced a series of limited but practical recommendations to ease the strain.

All the Legislature managed to do, unfortunately, was to require locals to generate more reports (i.e., more work for locals) for the state to look at.

And if you look at those reports, you will see an unsurprising fact: Counties are still squeezed. In fiscal 2019, for example, county governments had at least $3.5 billion in unfunded liabilities for retiree pensions and health care coverage.

And what has the Legislature been doing in the meantime? Not helping.

In 2013, it enacted an exemption on property taxes to help Michigan veterans — a laudable goal. But they did it without compensating local governments. That exemption has carved $1.7 billion in taxable value off local accounts.

In the last three legislative sessions, 2015-2020, legislators filed no fewer than 140 separate bills involving exemptions to the property tax, the central revenue source for Michigan counties.

Many of these bills were motivated by noble purposes (job creation) or targeted for worthy groups (disabled veterans, charitable groups), but what they all lacked was any recognition of, or response for, the resulting cuts to local resources and local services.

And consider, a recent analysis by the nonpartisan Lincoln Institute of Land Policy found that not only is Michigan “unique in the restrictiveness of the state’s property tax limits,” but “the property tax is particularly important for local governments’ fiscal health in Michigan because they have little access to other types of taxes to raise revenue.”

Our crisis only worsened in the aftermath of the Great Recession a decade ago. As the state’s economy and resources bounced back, Michigan’s local governments, trapped underneath two interlocking state restrictions on property taxes (Proposal A and the Headlee Amendment), saw their resources plunge and never really return.

It took 11 years for nominal property tax collections to recover to their 2008 level. Worse, adjusting for inflation, counties are now collecting almost $1 billion less than they did in 2008.

Then, of course, COVID hits.

Across the state, county leaders worked to ensure the continued delivery of public services while doing their best to protect the health of residents and county employees. The strains have been severe, but counties have met the challenge – so far.

But we’ve all seen what COVID has done to local economies, with empty storefronts and unutilized office buildings a common sight. Those images will, at some point, translate into lower property values and lower property taxes (used to pay for those local services and cover those local liabilities to public servants).

Despite this, some legislators are backing more ideas that will create more problems.

They are pointing to the historic investment to counties in the American Rescue Plan as proof the state can further reduce its commitment — even though the ARP funds cannot, by law, be used to address pension or retiree health care needs.

And they continue to file and tout property tax exemptions (10 bills so far in 2021).

With each of these special breaks, more of the burden for public services shifts to everyone else, the small businesses and households that constitute the majority of the state’s taxpayers.

So, until the Legislature can engage in a good-faith discussion on how to address the local government fiscal crisis, we have one simple request to lawmakers: Stop making it worse.

NOTE: This commentary originally appeared in Crain’s Detroit Business on May 23.