Michigan counties will receive $221.4 million in revenue sharing payments from the state via a fiscal 2019 budget bill approved by a legislative conference committee this week. The full Legislature is expected to approve the plan next week and send to Gov. Rick Snyder.

The fiscal 2019 figure will be $1.3 million higher than the FY18 number.

“These figures have been unsettled for weeks,” said Deena Bosworth, MAC’s director of governmental affairs. “It’s important to remember the debate started in Lansing this year with the governor proposing a 1 percent cut from FY18 levels. We are now leaving the Legislature with a 0.5 percent increase, relative to FY18.

“On behalf of our members, we extend our appreciation to the members of the Appropriations Committees in both chambers for making this the fourth consecutive budget year with an increase in revenue sharing payments,” Bpsworth added.

Built into the revenue sharing figures is a $1 million in one-time appropriation that counties are directed to use toward pension or OPEB obligations or debt.

See county-by-county estimates for fiscal 2019.

Antrim, Keweenaw and Mackinac counties return to the formula in FY19 with partial-year payments. That leaves only Emmet and Leelanau still drawing from their Revenue Sharing Reserve Funds that began in 2004 as counties pulled ahead local property tax revenue in an agreement with the state to provide significant state budget relief by temporarily ending revenue sharing payments.

“We are pleased, obviously, that the Legislature has again increased the amount,” said Stephan Currie, MAC’s executive director. “However, as our members know all too well, the money committed is not nearly enough to cover the mandates the state has placed on counties for local public services. MAC will continue to educate legislators on that point and build on the momentum we have gained in recent years.”

In additional budget news:

Health, Human Services, Courts

• County hold harmless on foster care agency per diem is retained, which is an $8 million savings for counties. The budget implementation bill (SB 988) that is likely to pass next week will eliminate the sunset on the county hold harmless.
• $5.5 million for administrative rate payments and $9.9 million in per diem payments for unlicensed relative foster care providers per the Glisson federal court decision.
• Boilerplate language to require the Department of Health and Human Services (DHHS) to maintain the federal foster care appeals process in place as of Sept. 30, 2017, rather than the DHHS proposed policy to remove ability for locals to formally appeal.
• $4.5 million General Fund (GF) increase for essential local public health services and $4.4 million from the General Fund for emerging public health threats.
• $5.5 million GFT for non-Medicaid mental health services to hold harmless Community Mental Health agencies (CMHs) that may be hurt by the new FY19 GF funding formula.
• $11 million GF increase for growth in caseload for Healthy Michigan plan mental health services and substance use disorder services.
• Section 298 language was removed that would have allowed Medicaid Health Plans in the pilot regions to receive all the Medicaid funds without contracting with the CMH in that pilot community.
• $750,000 in a one-time increase specialty court grants.
• $700,000 retained to comply with the juvenile lifer without parole court decision. The executive budget removed this, which would have shifted cost to counties. Legislators later revised the recommendation to include the funds.

Transportation

• Additional $121.3 million to local road agencies, bringing total local road agency funding to $1.37 billion for fiscal 2019. County road agencies will receive $77.9 million of the increase.
• $300 million in one-time GF distributions to road agencies, of which counties will receive $117.3 million. This yields a combined increase of $195.2 million year-over-year for county roads.
• Additional $2.5 million for local transit operating costs to the 81 local public transit agencies.

Agriculture

• Additional $525,700 for grants to eligible county fairs, shows and expositions.

In an effort to address the more than $11 billion in unfunded accrued OPEB (Other Post-Employment Benefits) liabilities for local governments across Michigan, the House is reviewing a package of bills aimed at changing the insurance benefits for government retirees. The 13-bill package, put forth by Speaker Kevin Cotter (R-Isabella), creates the Local Government Retirement Act and amends all the relevant statutes to require compliance with the main bill, House Bill 6074.

Of Michigan’s 83 counties, 26 do not offer OPEB, while another six are currently at least 80 percent funded in the benefits, which would make them exempt from some of the requirements in the act. The remaining 51 counties have an accumulated unfunded liability of approximately $3 billion.

Breakdown of counties by OPEB commitments
(Updated 1/3/17 with corrected figures for Livingston County)

The six counties above the 80 percent mark — Barry, Cass, Clinton, Macomb, Oakland, Ottawa — would be exempt from the changes to current employee and current retiree OPEB benefits, regardless of whether or not the employees are currently vested in the benefit. These counties, however, would still be subject to the provisions for Medicare eligible retirees, Medicare supplemental policy contributions and for all new hires as detailed below.

The main provisions of the package include:

• Requires an “unvested” retiree to contribute a minimum of 20 percent toward the cost for post-employment insurance and caps a local government’s contribution to a maximum of 80 percent.
• Limits local governments’ contributions toward OPEB benefits for all new hires to a maximum of 2 percent of the employee’s base pay.
• Requires all retirees to be on Medicare when eligible.
• Caps local government contributions to Medicare supplemental policies to 80 percent of the cost of the policy.
• Prohibits a local government, regardless of whether or not it meets the 80 percent funded threshold, from providing insurance benefits to retirees who are eligible to participate in a medical benefit plan or retirement health benefit plan offered or provided by an employer other than the local government.
• Directs that “vested” employees will be exempt from changes in the act. To determine whether or not an employee is vested/exempt, the package states that if a collective bargaining agreement entered into before act’s adoption clearly and expressly confers a fixed, unalterable right to a vested retirement health benefit for an unambiguous duration, then the act does not impair that vested retirement health benefit for that duration.

After consulting with the Executive Committee of MAC’s Board of Directors and several county administrators, MAC took the position of “support in concept” and testified before the House Local Government Committee on that theme on Dec. 1. MAC noted in its testimony our appreciation for providing local governments with some assistance in tackling this looming obligation by taking this issue off of the bargaining table and for the state diverting legal challenges to the proposed law from the local governments that seek to amend the benefits for unvested employees and retirees.

MAC also conveyed concerns with the approach, including:

• Many Michigan counties already have acted to change these benefits for current employees and for new hires. This should be recognized by the state.
• Local control has been, and continues to be, a vital component of good governance, but the state needs to “untie the hands of the county so they have the tools necessary to address the issues.”
• This approach focuses only on fixing local government budgetary issues by going after the costs associated with the employees that provide the public services we all rely upon. MAC would like to see the Legislature actually address the revenue side of the equation.

In addition to the concerns outlined above, MAC will be working with the Legislature on language changes and certain provisions that need to be addressed for specific counties. We anticipate additional hearings next week. For more information, contact Deena Bosworth at Bosworth@micounties.org

Projected revenues for FY 2014 – 2015 are anticipated to be $253.2 million less revenue than originally anticipated.  This projection is what the legislature and administration will use to determine target numbers for the various budgets for the coming year.  As most of you are aware, the governor, along with the House and Senate have recommended full funding for county revenue sharing.  It is critical that you contact your representative and senators and ask them to keep full funding for counties when determining appropriation line items for the upcoming budget.  Attached are talking points for your use.  Please contact MAC is you have any questions and if you are successful in contacting your legislators.

Revenue Sharing TP.FY15 [pdf]

You can also find these on the MAC website: micounties.org

LANSING, Mich. –With nearly a 1 billion dollar surplus projected, counties see this as the perfect time for the state to make good on its promise to pay back local units of government for their sacrifices to the state’s budget over the last decade. The state has balanced the budget on the backs of local government by siphoning off more than $6 billion from revenue sharing to local units over the last decade. Counties in particular, have been a selfless partner, saving the state more than a billion dollars since 2005. This budgetary concession was made in an effort to help the state with its budget problems, with the understanding that the state would honor their funding obligations in the future. This promise has not been fully honored and the state continues to short counties by more than 20% each year. Ignoring the statutory commitment to fund counties at the level required has become a habitual practice for the state. Counties are already stretched to their financial limit, making it difficult for them to pay for the multitude of state mandated services. County services may not be flashy, but they are critical for safe and functional communities. These state mandated services include courts, jails, 911, foster care, sheriffs, elections and the public health system. “The tide has turned for state revenues and we are thrilled Michigan is turning around,” said the Michigan Association of Counties (M.A.C.) Board of Directors President Shelley Pinkelman. “Unfortunately, local governments are at a disadvantage. Our ability to recover from the recent recession is disproportionately slower than it is for state government and without the state honoring their financial obligations to local units, we will continue to struggle to provide the most basic of local services. It is critical that the legislature recognizes this and honors their statutory obligation to fund local government services.” The legislature could allocate a mere $40 million to make counties whole in FY 2014. The current model of mandating counties to deliver services on behalf of the state government without paying for those services is unsustainable. After nearly a decade of the state shirking their financial responsibility to local governments, the time to repay is now.