It Could Have Been Avoided

June 13, 2008
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GRAND RAPIDS — When city commissioners recently adopted the $123 million general operating budget for the new fiscal year that starts in two weeks, their action ended three-months’ worth of scrutiny, angst and intense discussion with city administrators.

The untold story is that much of the discussion and scrutiny, and likely all of the angst, could have been bypassed had the state fully met the revenue-sharing promise it made to the city about six years ago.

State revenue-sharing payments to the city for FY09 are expected to be $22.8 million, or 19 percent of the city’s total revenue to the general operating budget. But that figure is still millions less than what the city should be getting.

“It’s up to about $9 million a year now, and think what we could do with $9 million. It (the budget process) would have (been easier),” said City Manager Kurt Kimball.

The public safety, fiscal services, planning and economic development, human resources, internal services and general administration departments all are expected to operate with less revenue in the coming year.

“I mean, the economy is bad enough, but we’d probably be managing to get through the economic circumstance if the state was providing us all that they had promised they would in previous legislation and funding formula,” Kimball added.

Another $9 million would have made spending cuts and fee increases moot actions, and would have relieved some of the negotiating tensions that the administrative staff and the 13 bargaining units are going through.

The incentives Lansing is offering film producers may put a further strain on the revenue-sharing stream.

If the tax credits to movie-makers, more commonly called rebate checks by many, push the state budget deeper into a shortfall, pressured lawmakers may feel the need to hold back revenue-sharing payments again to balance their budget.

“For every dollar of pressure on the state’s budget, experience has proven that revenue sharing is a common target,” said Kimball, calmly but emphatically.

The pressure Kimball referred to seemingly bubbles to the surface quite regularly — like every time lawmakers get together for a revenue-estimating conference.

“It seems like every time they have one of these — and they have one at least two times a year — we learn that less money is coming in than they’ve estimated, and then they’ve got a problem,” he said.

The last estimate suggested revenue to the state would be about $300 million short of what lawmakers and Gov. Jennifer Granholm had expected, or three times the estimated cost of the film-industry tax credit to the state’s revenue coffer.

So for Kimball, the movie credits just get a spot on the already crowded “why there isn’t enough money to completely meet revenue sharing” list the state has put out for years.

“There are 20 reasons that revenue sharing is at risk,” he said.

“But it does seem like, at least recently, the continued reduction in revenue sharing has been halted. The governor’s budget proposes an additional 4 percent, which is good. We’ve got 96 percent more to go to get it back to where it should be, but it’s better than continuing to go downward.

“I think as the pressure mounts on local government, including ours, the translation of revenue sharing is going into positions that provide vital services, like police and fire. People are better at understanding that revenue sharing really means basic services in our cities. The lobbying on the part of municipalities generally, as their finances have gotten worse, has been increasingly effective.”   

In The Black

It’s not a large margin, but it’s better than being in the red again.

For the first time in three fiscal years, the city’s general operating fund may show a surplus. Expenditures from the fund, which covers many of the city’s services, have exceeded revenues by roughly $6.5 million over the past two fiscal years.

Here is a snapshot of the operating fund’s revenues and expenses. 



Total Revenues
Total Expenses
Margin (Deficit)

FY 2007 Actual

$116,763,684

$119,240,631

($2,476,947)

FY 2008 Estimate

$120,433,012

$124,558,536

($4,125,524)

FY 2009 Projection

$123,083,525

$123,020,953

$62,572

Source: City of Grand Rapids, General Operating Fund — Statement of Operations, June 2008

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