By Deena Bosworth/Director of Governmental Affairs
Nearly 50 years ago, Michigan voters adopted the Headlee Amendment and enshrined an important principle in our state Constitution: If the state requires local governments to provide a new activity or service, or increases an existing requirement, the state has a responsibility to pay the necessary increased costs.
The legal application of Headlee can be complicated. The principle behind it is not.
When Lansing makes the rules, it also needs to consider who will pay the bill.
That question is particularly relevant today as lawmakers consider proposals affecting court funding, dam safety and property taxes. In each case, the policy discussion may be very different, but the fiscal question is remarkably similar.
Recently, the Senate Committee on Civil Rights, Judiciary and Public Safety approved Senate Bills 1089-91, establishing a standardized statewide process for determining indigency. The bills would also prohibit courts from imposing certain costs, fees and assessments on individuals determined to be indigent.
There is a legitimate policy discussion about how Michigan treats individuals who cannot afford to pay court costs.
But Michigan’s trial courts are substantially funded locally. Court operations, employees, security, technology and facilities must be paid for, regardless of how much revenue is collected. Yet the legislation currently provides no replacement funding source if collections decline.
MAC testified in opposition to the bills as drafted, asking lawmakers to address that fiscal reality.
Dam safety presents the issue from another direction.
Michigan learned a painful lesson from the 2020 failures of the Edenville and Sanford dams. Strengthening dam safety is an important public policy objective.
But stronger inspection, engineering, maintenance and planning requirements come with significant costs. Of Michigan’s 357 county-owned dams, 113 could be affected by proposed new requirements. The state has committed an initial $20 million toward dam safety efforts but estimates of Michigan’s overall dam infrastructure needs approach $1 billion.
We can support safer dams while still asking the obvious question: If the state requires a higher standard, how will local governments afford to meet it?
Then there are policies where Lansing doesn’t impose a new expense but instead removes revenue from local budgets.
Michigan’s Disabled Veterans Property Tax Exemption is perhaps the clearest example.
Since 2013, Michigan has exempted qualifying disabled veterans from property taxes on their homesteads. It is a benefit MAC supports.
But while the state created the exemption, local governments pay for it.
Michigan law specifically requires each local taxing unit to bear its portion of the lost revenue. Over time, those losses have grown to tens of millions of dollars annually.
Now lawmakers are considering further expansions of the exemption. Why is a benefit created by the state of Michigan financed through reduced revenue to local governments?
That same concern is magnified by the property tax package passed by the House earlier this year.
The package proposes approximately $5 billion in tax reductions through elimination of the 6-mill State Education Tax, State Real Estate Transfer Tax, Personal Property Tax and the property tax “pop-up” that occurs when property changes ownership.
The House passed the tax-cut bills ― but not the companion reimbursement legislation.
Property tax relief is a legitimate policy goal, but reducing property taxes does not reduce the cost of sheriff patrols, elections, courts, public health or the many other services local governments are required to provide.
State government has every right — and often an obligation — to establish statewide policy. But the fiscal consequences of those decisions should not be treated as somebody else’s problem.
Headlee recognized that principle nearly five decades ago.
It’s long past time to follow it.