Michigan County government revenues and spending since the Great Recession
In response to financial challenges, county governments have adjusted spending and tried to maintain both critical public services and a reasonable level of reserves.
Since the early 2000s, county governments in Michigan have faced an ongoing level of fiscal stress. Stress factors include cuts in state revenue sharing as well as the impact of the housing and financial crisis and a major reduction in local property taxes across many counties in the state. With such fiscal stress, public leaders are facing great challenges to maintain publically-demanded services especially public safety, whilst doing so with far fewer resources. For county governments, they also face the prospect of providing state-mandated services such as the county jail, county courts, prosecutors and a health department.
Let us examine the state of fiscal affairs in Michigan county government from 2008 through 2012. There are 83 counties in Michigan. In total, these counties collected $2.8 billion in fiscal year 2012. This was down almost 7 percent or $200 million from fiscal year 2008. The reductions were not evenly spread out across the state as the impact on large urban counties was much greater such as Wayne, Oakland, Macomb, Genesee and Saginaw as opposed to smaller rural counties in the northern part of the state. The revenue reductions came because of significant reductions in state revenue sharing and a fall in county property taxes due to the housing crisis.
Given these revenue shortfalls, how did county governments respond? Local governments are required under Michigan law to have a balanced budget. County governments did reduce overall spending during this same time period. County spending was reduced by 7.5 percent. Spending reductions came in certain specific categories. The majority of the cuts were in what is known as transfers to other funds. These transfers are generally from the County General Fund (where tax monies are deposited) to funds such as mental health, health department, roads, juvenile justice and other smaller categories. This means that major cuts in funding were sustained in these types of county service areas. Some areas of county government, especially mandated services in public safety, did not experience cuts and in fact their funding levels have risen slightly over the past five years. Other areas of funding such as County Clerk, County Treasurer and County Board funding have been flat over the time period. The amount and level would vary greatly by county and in some places cuts may have been nonexistent.
Because county government cut spending more than revenues fell, they were able to build up their “rainy day funds” or reserves. This is important as it means county governments have generally been fiscally responsible and will be to potentially withstand another recession and revenue shortfall. On the other side however, it means that critical public services have seen significant funding reductions such as juvenile justice and health departments. According to Michigan State University Extension, as revenues begin to recover, county government officials will need to weigh the need for spending boosts in certain areas to make up for cuts versus tax relief for citizens or further buildup in reserve funds.