GVMC Gov Snyder budget plan is fair

March 13, 2011
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Members of the Grand Valley Metro Council, a coalition of 35 governmental units, agreed that Gov. Rick Snyder tried to distribute the financial pain in his proposed budget on a fairly equal basis. That’s not to say, however, that local public officials are giving his spending plan a standing ovation.

“With the exception of some people in the business community, the pain is felt across the board,” said GVMC Executive Director Don Stypula of the fairness aspect. “But for local units of government, and for counties, there are just an enormous number of challenges.”

Stypula said the biggest of those challenges is the governor’s budget eliminates the statutory portion of revenue sharing for cities, townships and villages, while reducing the share counties receive. The city of Grand Rapids stands to lose more than $6 million per year if lawmakers give their approval to that request, while Kent County will lose between $4 million and $4.5 million.

“Currently, there is a pot of about $307 million that many communities in the state can tap into because there was a formula that was specified in law. That is completely wiped out as of Oct. 1, if this passes. And it was replaced by a $200 million pot of money that cities, villages and townships, and probably counties as well, will be able to tap into if they demonstrate to the state treasurer that they have adopted what the governor is going to call ‘best practices,’” said Stypula.

Kentwood Mayor Richard Root, who chairs the council’s Legislative Committee, said, “Now it’s being offered to us as a prize to use for what we’ve been doing for years.” He added that “consolidation” and “collaboration” have become buzzwords. The state revenue-sharing statute lets Michigan municipalities and counties share in 21.3 percent of the total receipts from the state’s sales tax.

State Budget Director John Nixon said the governor wants to use some of those cancelled-out revenue-sharing dollars to reward governments that go from an employee defined-benefit retirement plan, such as a pension, to a defined-contribution plan, like the 401(k) programs that dominate the private sector. Stypula said most of the larger cities and counties in the region offer their workers pensions, which were either totally funded or overfunded until the near collapse of the nation’s financial market.

“I think, overall, there is concern. But I also think there is resolve,” he said. “We’re problem solvers. There are problem solvers around this table in these communities and counties. If you give them a challenge, they’re going to meet the challenge one way or another.” But he also said the governor’s spending plan will have a negative effect on the services that council members offer, especially when the revenue-sharing loss is tacked on to their already lower property-tax receipts.

Stypula said he has spoken with every local member of the state Legislature to get each one’s feeling about the governor’s budget. He found, for the most part, that Republicans support it — with GOP senators having more questions about it than the party’s representatives had.

As for Democrats, he said most appreciated the governor’s position and gave him high marks for his non-combative style — a reaction that Stypula noted was in direct contrast to the response Democrats had to the approach used by the last Republican governor, John Engler. But he added that Democrats have concerns, and the strongest one was Snyder’s call to abolish the Earned Income Tax Credit, which goes to the lowest wage earners.

“That’s a burning issue with the Democrats. But as far as the issues that impact us in local and county government, they’re just simply saying, as the governor has said, these are different times and we are going to reinvent Michigan. That means we’re also going to attempt, to the maximum extent we can at the local and county level, to reinvent processes and service delivery, things that we do,” said Stypula, who added that he doesn’t envy the task state lawmakers are facing and that the council would work with them as much as it could.

Root said “all the freshmen legislators who thought they had the world figured out” were beginning to understand the magnitude of the problems that units are facing. He credited local public officials with bringing them to that realization.

One bright spot for local goverments, though it might only be temporary, is that Snyder has asked legislators to set aside the thought of eliminating the personal property tax, at least for this year. But State Sen. Mike Nofs, R-Battle Creek, introduced Senate Bill 34 last month and it would eradicate the tax. Stypula felt its passage would be a disaster for local governments, but he indicated Nofs was willing to listen to counter arguments.

“We have argued vociferously that the personal-property tax is a necessary and very important part of a revenue stream for local governments. It’s cops. It’s firefighters. It’s pothole repair. It’s all of those things that the government that is the closest to the people in this region relies on to a great extent — the counties, cities, townships and even school districts,” said Stypula.

“So if we’re going to eliminate the personal-property tax, either over a period of time or in just one move, there has to be a reasonable way to provide replacement revenue.”

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