COVID-19 pandemic sparks Michigan local leaders’ concerns for fiscal health

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 12 statewide survey waves of the Michigan Public Policy Survey (MPPS) conducted annually each spring from 2009 through 2020. The Spring 2020 wave of the Michigan Public Policy Survey (MPPS) was conducted between March 30 and June 1, 2020.

Key findings

• Amid the first wave of the COVID-19 pandemic in spring 2020, Michigan local governments reported declining year-over-year fiscal health, with 34% of local governments saying they are less able to meet their fiscal needs today compared with last year, while just 15% say they are better able to do so.
  • Fiscal concerns increased rapidly over the course of the survey field period as the pandemic spread, and by the end of May, 61% said they were less able and only 6% said they were better able to meet fiscal needs this year compared with last.
  • The biggest declines in this measure of fiscal health are among the state’s larger jurisdictions. When looking at net fiscal health (the number of jurisdictions with improving health minus those with declining health), places with more than 30,000 residents report sharp drops, from 31% net improvement in 2019 to 38% net decline in 2020.
• However, another summary indicator shows a much smaller immediate decline in fiscal health. As of Spring 2020, 64% of Michigan local leaders rate the current level of their government’s fiscal stress as relatively low (4 or lower on a 10-point scale), which is down just slightly from 69% in 2019. Meanwhile, local leaders in 8% of Michigan jurisdictions—essentially unchanged over the last few years, and representing approximately 149 local governments—say they are currently experiencing relatively high levels of fiscal stress.
• Reflecting declining health, this year fewer governments report increasing revenue from property taxes and state aid compared to prior years, and more report decreasing revenue from these sources. In particular, 30% of local governments report declines in revenue from state aid.
• Local officials’ assessments of their jurisdiction’s general fund balance remain largely positive and unchanged since 2019. On the other hand, cash flow is becoming more of a problem. For instance, 18% of counties say cash flow is somewhat of a problem or a significant problem in 2020, up from 12% in 2019.
•  The percentages of jurisdictions reporting increased public safety (25%) and infrastructure (35%) needs are the lowest they have been since the MPPS began in 2009. Meanwhile, just 10% of jurisdictions plan to increase overall service provision in the next year while 12% plan to cut services.
• Looking ahead, local officials express widespread concern about local economic conditions for the upcoming year, with just 13% of jurisdictions anticipating “good times” in their local economy, while 50% expect “bad times.” They are also concerned about their ability to meet their jurisdiction’s fiscal needs in the next year, with 38% predicting they will be less able to do so, and just 11% saying they will be better able.
• Looking farther ahead to fiscal stress five years down the road, local officials expect higher levels of fiscal stress than they are currently experiencing. However, the percentage predicting particularly high levels of stress five years down the road (12%) is essentially unchanged compared to last year (11%).

• Better/less able fiscal needs
• fiscal health
• Fiscal health/stress
• COVID-19
• General fund balance
• Annual Fiscal Health Tracking
• Spring 2020 MPPS