University of Michigan Gateway Ford School

Funding Local Governments in Michigan

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April 2017

Carson Smith

Abstract

The state of Michigan faces a unique set of issues in its municipal finance system. Since Michigan’s “Lost Decade,” local governments have seen state obligations to provide revenue go unmet. This decrease in funding has exacerbated issues faced by Michigan’s post-industrial cities. Compared to the rest of the country, Michigan local governments are severely restricted in how they accommodate revenue loss from the state. In order to address the needs of specific local governments and create strong tax bases for economic growth, Michigan should implement regional revenue sharing in a manner similar to Minnesota. Although updating the current system may provide returns in the short-run, regional revenue sharing can help ameliorate inequality and promote economic growth in the long term.

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