Key trial court costs bill to become law

Legislation to extend the authority of trial courts to levy costs to defendants will soon be law, after the Senate this week approved House Bill 5488 and sent it to Gov. Gretchen Whitmer for her expected signature.

The bill, a major priority for MAC in 2020, extends cost authority to Oct. 1, 2022. Without the legislation, by Rep. Sarah Lightner (R-Jackson), county courts would have lost this source of funding for operational needs in a few weeks. The final Senate vote on HB 5488 was 29-8, with all “no” votes from Democratic senators. 

The state’s Trial Court Funding Commission has said court costs “directly account for as high as $291 million annually in support (most of the 26.2 percent generated). Additionally, approximately $127 million of the annual funds transferred from the State originate from court assessments at sentencing. When totaled, Michigan trial courts are supported, in significant part, by over $418 million assessed to criminal defendants.”

Of course, the work on this issue is far from over. The new deadline is just two years way, and the next phase will be to finally solve the long-standing problem of a stable court funding system. MAC stands ready to continue the work with the Legislature to help streamline and improve the overall system. While a variety of reforms are needed, a key one is to rebalance state and local funds in the court system, as reported by the Trial Court Funding Commission. 

For more information on this issue, contact Meghann Keit at keit@micounties.org.

 

By: Dan Papineau, Director of Tax Policy and Regulatory Affairs, Michigan Chamber of Commerce

(Editor’s note: This article originally appeared in the August edition of Michigan Counties, MAC’s bimonthly e-newsletter.)

Perhaps it was the recent remark I made about Michigan’s broken municipal finance system while testifying in front of a state legislative committee that prompted the invitation to contribute to this publication.

I agree with the nonpartisan Tax Foundation that all tax policy should be based on four cornerstone principles: simplicity, transparency, neutrality and stability. The revenue side of our municipal finance system fails in all four of these categories. This is not hard to believe since local government revenues are overwhelmingly made up of property taxes. County governments depend on property taxes for 60 percent of their revenues. The crux of the problem behind our state’s municipal finance system is the over-reliance on property taxes. When we think about property taxes through the lens of the four principles of sound tax policy, we see why.

Simplicity

Since 1893, Michigan has had an ad valorem property tax system that relies on the current value of a subject property. Assessing a value to every piece of real property and all nonresidential personal property is no easy (or simple) task.

While the practice of assessment and appraisal has evolved into a complex science over the last 127 years, it is still a relatively subjective process. This subjectivity erodes simplicity. Both taxpayers and local units of government see this problem play out far too frequently in the form of property tax disputes that end up in court wasting the time and resources of everyone involved.

Property taxes can be looked at as a fair way to spread the cost of local government services across varying portions of the population but, our system has become so complicated and hamstrung by a plethora of minor tweaks and/or major deviations that our property tax system is caving in on itself. The mechanism that brings in the most significant portion of revenues county governments need is about as simple as the internal workings of the human brain.

Transparency

With increased accessibility to BS&A and other technologies, the principle of transparency has been greatly bolstered but, the process of assessment to state equalization is anything but transparent.

While summary appraisal record cards are available online either through free access or paid access, the level of detail made available lacks full transparency. For example, the building valuation work up, land value tables, economic condition factor tables and supporting studies are not available unless a Freedom of Information Act request is filed. Even the body that audits the entire property tax system, the State Tax Commission, does not share the results of their audits with the public.

Neutrality

The principle of tax neutrality is summarized as follows: “Taxes should neither encourage nor discourage personal or business decisions”. The fact is the property tax system Michigan imposes today does the exact opposite. The property tax system is actually designed to influence the decisions businesses make and to a lesser degree, the ones individuals make.

Property taxes have been used to compete for investment across local units of government and between states. Much of the policy that promotes this behavior is not within the control of the governing body of the local unit.

Policy-makers at all levels use the property tax system to encourage or discourage different behaviors. Michigan has a few parameters to promote neutrality, but they are so ineffective they are practically nonexistent.

Stability

By nature of its design, the property tax is unstable.

First, the personal property tax is based on depreciating value. It is literally designed to go down and therefore be anything but stable. Real property tax revenues or the values of which they are based on, while not as heavily affected by depreciation, are constitutionally prohibited from increasing beyond a certain level after being allowed to decline without restriction. Stable on the way back up but not down.

Second, value itself is not stable. A property worth a certain amount one day could be worth half the next. Our economic cycle contains peaks and valleys not a flat line of prosperity.

Third, policy-makers are constantly rearranging the property tax system to address its numerous faults; however, the never-ending alterations result in instability and effect budgets of police departments, public works departments and general fund spending of county governments everywhere.

Fixing the revenue side of our municipal finance system is extremely difficult while decrying its faults is easy. I respect those who dedicate their careers to finding ways to improve the system we have. We really must look at local government revenue from a completely new perspective. I believe this starts with revamping the complete service delivery method our state is currently straddled with. My friends at MAC hear me say often that county government is the best form of government. Counties should be the ones administering practically all of the services a citizenry relies on. To transfer to this type of service delivery model we must also permanently address the compounding debt burden facing counties across Michigan. Lastly, we can discuss opportunities to reinvent the property tax system (or scrap it) and create a more diverse revenue stream for local units of government to depend on.

Revenue sharing replacement funds to hit accounts on Monday

Replacement dollars for the cancelled August revenue sharing payments will reach county accounts on Monday, Aug. 31 as scheduled, MAC was told this week by state officials. Although the amount listed on the SIGMA website is correct, the name of the municipality is wrong, and is a glitch that if fixed will cause more problems than it fixes.

For exact amount and accurate county name, please see this list from the Department of Treasury. 

Hazard pay premium payments are still being processed and will not be ready for another week. Additional staff has been assigned to this division of the Treasury Department to speed up the processing of applications. Those local units that have requested advanced payment of these funds before expending them should receive the funds within the next two weeks, long before the Sept. 20 deadline to make the payments to eligible employees.

As far as the payroll reimbursement program goes, those figures are still being calculated at Treasury. As reported last week, the number of applications received will greatly exceed the amount allocated for the program. The appropriation was for $200 million, but Treasury anticipates the requests will total about $350 million.

Therefore, each payment to locals for this program will be prorated based on the amount your locality requested as a percentage of the total amount requested. Those figures are not available yet. Once the hazard pay applications have been fully processed, department resources will be redirected to the payroll reimbursement program.

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

 

Izzo charms, inspires during conference keynote

“All of us are role models,” Michigan State University basketball coach Tom Izzo told county leaders gathered for a special session Thursday of MAC’s 2020 Virtual Annual Conference. “You gotta give back some things. I look back and I see I have a responsibility, which is a privilege, not a burden.”

Izzo’s keynote remarks were the highlight of week 1 of the virtual conference, which resumes next Tuesday and concludes next Thursday.

The Hall of Fame coach and national championship winner (2000) expanded on the leadership theme by saying, “Greatest feeling – being a difference-maker in someone’s life.”

During a wide-ranging Q&A after his remarks, led by MAC Executive Director Stephan Currie, Izzo fielded queries on everything from the “side” of Iron Mountain he grew up on to how to bring cohesion to a group of wildly different people to the recent trend in changing team mascots. At one point, the coach seemed to be wistful as he related how, in his young adult days in the Upper Peninsula, his first big investments were trailers, culminating in a “double-wide” unit.

Izzo also engaged in some good-natured ribbing with Currie over the high expectations Spartan fans have for him and his team each year.

“Coach never fails to deliver,” Currie said after the session. “We at MAC are so appreciative of coach Izzo’s time and the kind words he had for the work of county leaders in Michigan.”

The keynote event was the final one of a week that began with a workshop on managing public facilities in a COVID-19 world and the first plenary session, which included the semi-annual “State of MAC” report from Currie and a “Legislative Update” from Governmental Affairs Director Deena Bosworth.

To keep track of conference events, visit the conferences page on the MAC website, where you can find a link to the conference program. Access to conference events is limited to registered attendees, but MAC will be posting slide decks from workshops and, in September, video files of the major sessions.

 

Virtual Annual Conference begins on Tuesday

The first events of MAC’s two-week Virtual Annual Conference are set for Tuesday, Aug. 18, including a Plenary Session of special reports from MAC personnel.

Week one of the conference, which runs Aug. 18-27, also will include the President’s Gathering with conference keynoter Tom Izzo of the MSU Spartans (Aug. 20).

Registered attendees will be receiving emails today (Aug. 14) with their access credentials for all of the digital events, including the regional caucuses to elect Board members and the Annual Business Meeting to approve policy platforms. Just a reminder: Only county commissioners may participate in the regional caucuses and Annual Business Meeting.

The conference program will be posted to MAC’s conferences website page for reference during the event. Recordings of the conference workshops and special sessions will be posted to the website, too, but not until September.