State Closer to Cutting or Ending Revenue Sharing

By: Associated Press
By: Associated Press

Michigan lawmakers scrambling to deal with a projected $1.8 billion state budget shortfall could cut tax revenue sharing payments made to local governments for public safety and other services, Republican legislative leaders said Thursday.
The Republicans, who control the Michigan Legislature, say they plan to balance the state budget for the fiscal year starting in October without tax increases, which means spending cuts in several areas of state government would be required.
That will include seeking concessions from state employees as the government seeks to lower costs.
"I've been clear: There's going to be pain," incoming Senate Majority Leader Randy Richardville, R-Monroe, said during a taping of Michigan public television's "Off the Record" program. "There are going to be difficult decisions. And for all of us to come through in the long run, all of us are going to have to sacrifice in the short run."
Richardville appeared on the program that will air this weekend with incoming Republican House Speaker Jase Bolger and new Democratic leaders Gretchen Whitmer of the Senate and Richard Hammel of the House.
Republicans will hold a 26-12 majority in the Senate and a 63-47 edge in the House when the 2011-12 Legislature convenes next week. Lawmakers will be acting on a budget proposal expected next month from new Republican Gov. Rick Snyder.
Tax revenue sharing payments from the state to local governments have been cut or frozen in recent years, forcing cities and townships to cut back on police and other services. The payments, along with local property taxes, are a key part of a typical city's budget.
Local government officials say further revenue sharing cuts would cause more police and fire layoffs, push some communities into bankruptcy and reduce money available for roads, parks, water systems and other services.
Hammel, who lives in Genesee County, noted that a spaghetti dinner was held in Genesee County's Flushing Township last year to raise money for police uniforms.
"If that's the budget that's being proposed, it's going to be a tough one for us to live with," Hammel told reporters after the program. "I just think there's a lot of trouble at the local level right now that will be created and compounded if revenue sharing is cut in a dramatic way."
Whitmer, D-East Lansing, also is opposed to revenue sharing cuts.
Specifics of the concessions that will be sought from state employee unions haven't been determined. Democrats will push to make sure that any concessions or changes come through the state's labor union contract negotiating process.
Whitmer said any attempts to force concessions by action in the Legislature could raise legal questions over authority.
It's possible lawmakers would shy away from across-the-board cuts related to pay or benefits, and instead look at specific classifications or jobs.
"However, I do think overall there are significant dollars that need to be saved through our compensation models," said Bolger, R-Marshall. "That's the entire compensation -- not just the salary."
State workers have made concessions in previous budget cycles. Lawmakers may ask for more, noting that they and many of Michigan's statewide elected officials are taking 10 percent pay cuts effective this year as the state continues to have budget problems.
Opponents of further concessions promote studies that say public sector workers are not over compensated when compared to private sector workers in jobs with comparable education qualifications.
Lawmakers might consider scaling back Michigan's generous film incentives package and other tax credit or exemption programs in an effort to preserve revenue. They'll also debate whether to allow the state's income tax rate to drop from 4.35 percent to 4.25 percent as scheduled later this year.
The rate drop could lower state revenue by more than $160 million. The rate drop was included in the legislation that increased the state's income tax rate in 2007.


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