Despite sustained economic growth, Michigan local government fiscal health still lags

November 2018

This report presents Michigan local government leaders’ assessments of their jurisdictions’ fiscal conditions and the actions they plan to take in the coming year given their financial situations. The findings are based on responses from ten statewide survey waves of the Michigan Public Policy Survey (MPPS) conducted annually each spring from 2009 through 2018.

Key findings

  • Statewide, Michigan local governments report continued marginal improvement in year-over-year fiscal health, with 37% of local governments saying they are better able to meet their fiscal needs today than they were last year. This is up slightly from 35% that said the same in 2017. Meanwhile, 16% say they are less able to meet their needs this year, the lowest percentage since MPPS tracking began in 2009.
    • The greatest overall improvement this year is found among the state’s larger jurisdictions. When looking at the number of jurisdictions better able to meet their needs minus those less able, jurisdictions with more than 30,000 residents report sharp gains, from 20% net improvement in 2017 to 45% in 2018. 
  • However, another summary indicator shows fiscal decline among some jurisdictions. While 72% of Michigan local governments self-rated their level of fiscal stress as relatively low in 2014, this has declined to 62% today. Meanwhile, local leaders in 8% of Michigan jurisdictions—approximately 149 local governments—say they are currently experiencing relatively high levels of fiscal stress, essentially unchanged over the last few years. 
    • Among jurisdictions with 10,001-30,000 residents, the percentage reporting low stress increased from 58% in 2017 to 68% in 2018, while the largest jurisdictions (with over 30,000 residents) improved from 56% to 63%.
    • Meanwhile, the smallest jurisdictions—as well as those that consider themselves mostly rural, and townships in general—report higher levels of fiscal stress overall this year.
  • Jurisdictions of all sizes report continued gains compared with last year in both property tax revenues and state aid. In addition, local officials’ concerns regarding their current levels of general fund balances and cash flow remain relatively low. On the other hand, one in three (30%) predict they will have to increase their reliance on their general fund balance next year in order to meet needs.
  • When it comes to expenditures, 61% statewide plan to increase employee pay next year (including 90% of the state’s largest jurisdictions). And while just 21% plan to increase overall service provision, this is the largest such percentage since MPPS tracking began. In another change from last year, local officials predict that increased needs in infrastructure and public safety should not outpace projected spending increases overall; however, some jurisdictions with significant needs may only increase spending “somewhat.”
  • Looking ahead, optimism about general local economic conditions continues to increase: 55% of local officials expect “good times” next year, compared with 51% who said the same in 2017. But in other continuing trends, fewer (34%) believe this will translate to improved fiscal health for their local governments, and more expect their levels of fiscal stress will worsen over the next five years.