How Michigan Lawmakers Bankrupted Their Own Cities

VintageFlint

Cities in the state of Michigan, especially likes of Detroit and Flint, are typically held up as beacons of mismanagement or corruption, but they didn’t arrive at their current predicament on their own according to a new report from the Michigan Municipal League.

According to the Municipal League, cities in the state have been denied $6.2 billion in revenue sharing over the past decade which state lawmakers used to plug holes in the state budget. And, in some cases, the money that has been withheld would have made up for current shortfalls had it not been withheld.

via Michigan Live

Detroit, the state’s largest city, lost out on $732 million in revenue sharing between 2003 and 2013, according to the report. Twenty two other cities — from Grand Rapids to Wyandotte — saw the state divert at least $10 million in sales tax revenue that local leaders believe they should have been entitled to. [...]

“You can look at pretty much any Michigan community and see where they might be today if the statutory revenue sharing had been fully funded,” Samantha Harkins of the Municipal League said in a statement.

“For example, look at Flint, which is now under an emergency manager. Flint will have lost $54.9 million dollars by the end of 2014. The deficit in its 2012 financial statements is $19.2 million. Flint could eliminate the deficit and pay off all $30 million of bonded indebtedness and still have over $5 million in surplus. In Detroit, a city facing the largest municipal bankruptcy in history, the state took over $700 million to balance the state’s books.”

The Michigan Constitution apparently requires that a portion of sales tax be redistributed to cities based on a standard formula, but according to the Municipal League state lawmakers have not done so.

This may not come as a shock to locals in Michigan or the above mentioned cities, but as an outside I was certainly shocked when I read it.

The idea that this emergency manager business could have been avoided if state lawmakers weren’t effectively looting their own cities to make their own jobs easier in the state capital is gobsmacking.

How many special tax breaks have been funded by looting cities that are now under the rule of an emergency manager?

(h/t Price Benowitz LLP)
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  • http://cendax.wordpress.com/ Norbrook

    It’s particularly noteworthy for Michigan, in that the same cities ended up being taken over by the state, because they weren’t “fiscally responsible.” On the other hand, tactics like this aren’t uncommon in states, particularly when budget times are tough or a governor wants to balance a budget without any pesky new taxes or make choices. Here in NY, governors Pataki and Paterson were notorious for their willingness to unlock “locked box” funding or sweep “extra” money out of dedicated funds.

  • muselet

    Let me see if I have this straight. If Michigan cities can’t find the money to balance their budgets, the state needs to step in with an Emergency Financial Manager. However, if the Michigan legislature takes money from those cities to balance the state budget, that’s just fine and dandy, nothing to see here, move along.

    I think the labels “mismanaged” and “corrupt” are being applied to the wrong level of government.

    –alopecia

  • Christopher Foxx

    So… if the money hadn’t been used by the state, but had been passed along to the various cities, then what state would the state be in?

    I’m not saying the money shouldn’t have been passed along as, apparently, the state constitution requires. But if the money had been passed along, what state spending and/or services would not have been funded?

    • http://drangedinaz.wordpress.com/ IrishGrrrl

      Well the cities would have expected that money and budgeted with it in mind. The state should not have expected that money and budgeted accordingly. State officials simply avoided making hard choices (which sometimes have to be made) and screwed the communities. In the end, the downfall and bankruptcy of a city is incredibly damaging in very concrete ways to families and the economy of the state and region. A state that has to limit services for a while is a much lower price to pay in the end.

  • Sabyen91

    Walker has used Milwaukee as his personal budget buffer as well. All of these assholes have to go.