The Fiscal Health of Michigan Local Governments 2021 - 2022
Following local government’s unprecedented responsibilities as first responders to the COVID-19 pandemic and their subsequent infusions of aid from the federal government, it is essential to check in on the fiscal health of Michigan’s local governments. This report analyzes local government financial data reported to the State of Michigan in 2021 and 2022 to develop a set of indicators to capture various aspects of local fiscal health. It finds that for short-term measures related to healthy reserves, adequate cash, and balanced budgets, most communities are doing well. However, when it comes to measures of long-term ability to meet financial and service obligations, there is more variability. Some communities struggle with high liability burdens from debt, pensions, and retiree healthcare benefits. There are also fairly wide ranges in the amounts of spending per capita and the share of budgets spent on public safety, suggesting that communities vary in their ability and/or desire to provide local services. Part of this variation may be driven by local governments’ lack of autonomy over revenue policy. They have very limited ability to alter revenues either from property taxes - on which counties and cities are more heavily reliant - or from revenue sharing - on which villages and townships are more heavily reliant. Looking forward, it will be important to monitor local finances not only to ensure that short-term indicators remain strong, but also to proactively respond to any looming warning signs associated with long-term liabilities and inadequate service delivery.
Key findings
- For short-term measures related to healthy reserves, adequate cash, and balanced budgets, most communities are doing well. However, when it comes to measures of long-term ability to meet financial and service obligations, there is more variability.
- Some communities struggle with high liability burdens from debt, pensions, and retiree healthcare benefits. There are also fairly wide ranges in the amounts of spending per capita and the share of budgets spent on public safety, suggesting that communities vary in their ability and/or desire to provide local services.
- Local governments’ lack of autonomy over revenue policy can be a challenge. They have very limited ability to alter revenues either from property taxes - on which counties and cities are more heavily reliant - or from revenue sharing - on which villages and townships are more heavily reliant.
- Looking forward, it will be important to monitor local finances not only to ensure that short-term indicators remain strong, but also to proactively respond to any looming warning signs associated with long-term liabilities and inadequate service delivery.