Promise Breakers

February 10, 2006
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GRAND RAPIDS — City commissioners are hoping they can teach state lawmakers and Gov. Jennifer Granholm the true meaning of sharing.

Commissioners ratified a resolution last week that calls for Lansing to begin reallocating the full amount of sales tax revenue to the city via the revenue-sharing program. The city is sending a copy of the resolution to legislators and the governor.

"After only one year of complying with their agreement, the state broke their pledge to return sales taxes to local governments per the revenue-sharing formula," wrote 1st Ward City Commissioner Roy Schmidt in a memo attached to the resolution.

"I request that the state fulfill their promise to distribute sales taxes per the original revenue-sharing formula," added Schmidt, the commission's longest serving commissioner and the catalyst behind the resolution.

The city has had to cut $50 million from the past five fiscal-year budgets and is staring at another cut of $8.5 million for the next fiscal year, and up to $80 million over the next five years.

In his State of the City address last month, Mayor George Heartwell pointed out that more than 60 percent of the budget cuts the city made for this fiscal year were due to the state not keeping its end of the revenue-sharing bargain. And that deficit source will jump to 98 percent for the city's upcoming 2007 budget.

"We're struggling in large measure because the state has breached its promise to cities," said Heartwell last week.

The Michigan Constitution and a 1998 state law requires that Lansing return 24.2 percent of all sales taxes generated in a region to local governments within that region.

According to the city's resolution, more than $423 million in sales tax was generated in KentCounty for fiscal year 2004, but only $63.4 million was sent back by the state to local units for a return rate of 15 percent.

"It's an actual theft of our revenue," said 1st Ward Commissioner James Jendrasiak.

The city's resolution also takes the state to task for its spending priorities — choosing to "fund prisons, while starving cities and schools" — and its inability to stop cutting taxes.

"The state seems undeterred with the structural deficit they created when they cut taxes. New legislation to cut state taxes by over $1 billion is being touted as balanced, when in fact, it anticipates future revenue growth," reads the resolution.

In addition to the tens of millions of dollars cut from its budgets since 2001, the city has also cut 214 positions funded by the general fund or 17 percent of its total work force over those years. From 2002 to 2005, the city said it lost $14 million in revenue-sharing funds. This year it expects to lose $7 million, and next year that number should reach $9 million.

"They're subsidizing tax cuts with our money," said 2nd Ward Commissioner Rick Tormala of the state's fiscal policy. "This is a failed urban policy that is sticking a knife into us."

The resolution states that if the state doesn't take corrective action regarding revenue sharing by 2010, then the city will only be able to afford to fund police and fire departments.

"The state needs to stop cutting taxes without also cutting state expenditures or without adding new revenue sources to replace lost revenues," said Schmidt.

"Without these measures, and if the state fails to correct its financial structural imbalance, the city of Grand Rapids will be greatly challenged to financially sustain itself."    

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