MPPS

Michigan local governments report first declines in fiscal health trend since 2010

August 2016

This report presents Michigan local government leaders’ assessments of their jurisdictions’ fiscal conditions and the actions they plan to take in the coming year given their financial situations. The findings are based on responses from eight statewide survey waves of the Michigan Public Policy Survey (MPPS) conducted annually each spring from 2009 through 2016.

Key findings

  • In 2016, for the first time since the Great Recession, the trend of year-over-year improvement in Michigan local governments’ reported fiscal health overall has declined. Fewer than a third (31%) of Michigan local governments report they are now better able to meet their fiscal needs, down from 38% in 2015. Conversely, 22% say they are less able to meet their needs this year, up from 20% in 2015. 
    • The reversal in the trends toward improving fiscal health includes jurisdictions of every size and type. 
  • Still, most Michigan local governments (64%) self-rate their current level of fiscal stress as relatively low, including 71% of townships and 49%-51% of villages, cities, and counties. However, local leaders in 8% of Michigan jurisdictions—approximately 148 local governments—say that they are currently  experiencing relatively high levels of fiscal stress.  
    • Nearly a fifth (19%) of county officials rate their fiscal stress as high, up sharply from 3% in 2015. 
    • Local governments with high and medium fiscal stress are struggling to improve, with 56% of high-stress and 37% of medium-stress jurisdictions reporting they are less able to meet financial needs this year compared to last. 
  • More local governments report their property tax revenues are increasing (42%) rather than decreasing (25%), but this is down from last year, when 45% reported such revenue growth. This is the first time since the end of the Great Recession that fewer jurisdictions report property tax growth compared to the prior year. 
    • In addition, more jurisdictions report decreasing state aid (20%) than increasing state aid (18%) this year compared to last year. 
  • While most local leaders (60%) say their jurisdictions’ general fund balances are at about the right levels, this is down from 64% last year. Meanwhile, the percentage saying they are “too low” increased from 20% last year to 23% this year. In addition, this year more officials (30%) predict they will be increasing their reliance on general fund balances to meet their jurisdictions’ fiscal needs than did so in 2015 (26%).
  • Although trends in continued fiscal health have reversed in 2016, local officials report plans to maintain overall service provision, with many continuing to increase spending on infrastructure (42%) and public safety (34%). 
  • Looking ahead, many officials (46%) continue to predict that their community will have good times financially in the coming year. However, when it comes their own jurisdiction’s fiscal health, their outlook is more pessimistic. Only 28% believe their jurisdiction will be better able to meet its fiscal needs next year (down from 36% in 2015).