GRAND RAPIDS — The Kent County Finance Committee received some expected, but still jolting, news last week.
Committee members heard that the last deposit into the county’s revenue sharing reserve fund was made recently, as roughly $25 million collected from the December tax billing was placed into the account.
So for the next four years the only revenue that will go into the fund will come from the interest the county earns from the account’s balance. The balance stood at $47.9 million at the end of last year. But it will shrink to a projected $4.6 million in 2011, the year the state is scheduled to resume making revenue sharing payments to the county.
“I don’t think in any way, shape or form that you’ll come back in a full manner,” said Robert White, county fiscal services director.
White told committee members the county is on the books to get $8.4 million in revenue sharing from the state four years from now, which they could add to the expected reserve of $4.6 million. But based on the state’s current financial situation, coupled with the fact that Lansing owes the state’s counties $182 million in revenue sharing payments over the next 20 years, White doesn’t believe the county will get its full share.
“This is our money,” said Commissioner Harold Mast. “We stepped forward to help the state out.”
Years ago, counties and other municipalities agreed not to introduce income-raising tax measures in return for revenue sharing payments that originate from the state sales tax. Mast said Gov. Jennifer Granholm realizes how important the payments are to local governments, but he said he doesn’t get the same sense of urgency from state lawmakers.
Deputy City Manager Eric DeLong added some legislators don’t have much knowledge of the issue because their positions are term limited and both chambers experience regular turnovers that bring new faces to the House and Senate. And those elected officials haven’t expressed a desire to restore the payments.
DeLong said the city has lost about $9 million in revenue sharing each year since 2004 and may be in danger of losing its remaining $9 million in coming years. Cities, townships and villages are supposed to get two types of payments — statutory and constitutional — while counties only receive the former.
Kent transfers money from the reserve account into its general fund, which supports almost every service the county offers. But the interest deposits that the county has to rely on as its only revenue source for the reserve have been projected to fall from $1.8 million this year to less than $218,000 in 2010.
“When the money runs out, you’ll have to cut programs and personnel,” White told the committee.
Commissioner Carol Hennessy asked White if the county could stretch the reserve out for a few more years. White said that wouldn’t be a good thing to do because commissioners would have to make cuts to the general fund over those years, and if the state thought the county could get along without the revenue-sharing dollars, then the county wouldn’t get its payments reinstated in 2011.
Some county officials attended a rally last week that was put together by six of the nine cities in the county. Its purpose was to call upon state leaders to start Michigan “on a path to prosperity” and to “avoid catastrophic consequences” that are hanging over municipalities.
DeLong told the Business Journal that Michigan will have a difficult time attracting new businesses if the quality of life in the state gets reduced any further. He also said Michigan has cut taxes over 30 times in the last dozen years and those moves haven’t built up the state’s economy, which remains the worst in the nation.
The Grand Valley Metro Council is holding a forum Wednesday on the state’s taxing policy. Former state budget director Tom Clay is the featured speaker. The discussion is not only likely to include the revenue-sharing dilemma but also the Business and Economic Stimulus Tax, proposed by Senate Republicans to replace the outgoing Single Business Tax.
The best guess is BEST will leave the state hundreds of millions of dollars shy of the revenue the SBT brought to the state budget, and the 32 municipalities of the council are concerned with what cuts will have to be made in Lansing and how those slashes will affect them.
The forum runs from 8 a.m. until noon at the Cascade Township offices, 2685 Thornhills Ave. SE, and a big turnout of local public officials is expected.