The Snyder Budget I: Impact on city governments

I literally can not keep up with all of the commentary and analysis coming at me about the darn state budget.  I am drinking from a freaking firehose.  HUGE backlog.  So I’ll likely do a series of posts on different aspects of the Snyder proposal.

I’ll begin, then, by limiting this post’s focus to what’s closest to home:  What’s the local impact?

For Michigan’s larger and older central cities, the conventional wisdom is: negative.  For one there’s the elimination of brownfield and historic preservation tax credits, which as Mark Maynard argues is going to be especially bad for older communities.  (I have heard the same thing from other leaders of older urban communities, including Mayor Bing). The Center for Michigan points out the contrast between these items and ‘the governor’s campaign themes of attractive local communities and taking care of Detroit.’

Locally, Ryan Stanton of AnnArbor.com reports

Essentially, Snyder’s proposal equates to a $92.1 million — or nearly a one-third — reduction in statutory revenue sharing funding… (which) could mean a cut of more than $600,000 in annual funding the city receives from the state.

The governor indicates local governments would have to compete for some of that funding by taking steps to shear costs and consolidate services with their neighbors.  Stanton quotes Ann Arbor City Administrator Roger Fraser’s response:

“I don’t have any idea what that means or how they’re going to take into consideration those of us who’ve been doing that sort of thing for some time. Somebody could say, ‘As of this day forward, anything you do will get you a higher score for revenue sharing.’ And I see one potential risk: What if you’ve done it already?”

Tom Crawford, Ann Arbor’s chief financial officer… said it appears Snyder is proposing to take the nearly $300 million pot of money that currently goes to urban communities and reduce it to a $200 million pot of money that communities all across the state… would compete for.

If that’s the case, he said, urban communities like Ann Arbor stand to lose even more money than just a simple one-third reduction.

“It sounds like each community is going to be affected differently,” he said. “For Ann Arbor, it looks like it’s going to be a minimum of $500,000…”

(I)n an earlier story the day the plan was announced, Crawford noted the cut comes ‘on top of the $5 million the city already has lost over the last decade':

Even without additional revenue sharing cuts, Ann Arbor already is facing a $2.4 million deficit for the fiscal year starting July 1. Deep cuts are expected in police and fire

Dave Askins’ coverage of the February 14 city council meeting features early reactions on the budget from Ann Arbor’s police and fire chiefs, including potential impacts to local public safety.

And there’s more to come:

(L)ocal governments face further threats from business tax proposals coming out of Lansing. The Senate Finance Committee is debating legislation that would eliminate the personal property tax that businesses pay on equipment.

Snyder’s budget is not expected to deal with that issue, but his administration has said the tax needs to be repealed because it makes the state less competitive. It’s estimated that local governments could lose as much as $800 million if that happens.

In Washtenaw County alone, it could mean the loss of $45 million to $50 million, including $6 million used to run county government, said Raman Patel, the county’s equalization director.

I’m not thrilled about a lot of elements in the budget (really, with the exception of business interests, who is?), but let’s bear in mind a couple of things.  First is the argument that a lot of local public employee jobs could be saved if unions are willing to negotiate. The the Detroit News argues:

Schools and local governments can absorb the cuts they’ll suffer by undertaking such necessary reforms as modified employee benefits, shared services and consolidated programs.

For example, K-12 school districts can offset much of their losses, $470 per pupil, with savings gained from simply asking school employees to pay 20 percent of their own health care costs, according to Nixon. It’s common for private workers to contribute that share or more, but still relatively unusual in the public sector.

Notice they didn’t suggest abolishing collective bargaining or even automatic deduction of union dues.  The key word is ‘ask.’

Another thing to consider is that things could easily have been a lot worse.  Snyder is considerably friendlier (in tone at least) to cities than were any other of his rivals for the Republican nomination.  Lessenbury notes the statutory revenue cuts  ‘actually came as a relief to some city officials… many of them feared it might be zeroed out entirely.’

Suppose the opposite:  that there were no cuts at all to revenue sharing.  What was he going to cut — Medicaid?  More cuts to education?  Reduce the share of human services and health care for the poor to the even lower levels of the Engler era?

Paula Gardner cites “Rigidity” as one of her “Top 5 most unproductive reactions” to this budget:

I’ll be devastated if my child’s elementary school closes, disappointed if city services are further cut and concerned if my library limits acquisitions. But nothing should be left “off the table.” Michigan can’t prioritize every funding category. It needs to choose the most meaningful among many important categories; but while facing $1.5 billion in cuts, not all programs will survive. My firm stance on my priority means I’m willing to sacrifice someone else’s priority. That’s not productive.

This is the kind of logical and reasonable response you would expect from a nice, cooperative, logical and reasonable person.  Except, of course, that’s not how interest group lobbying works.  Your willingness to be publicly flexible about your priority is a signal to lawmakers that they can go ahead and cut it.  Nobody ever kept their state funding by telling a reporter or a legislator, ‘Well, revenue sharing is important, but I’m not going to die if you decide some of that money is better spent on Medicaid services for kids.’

Local governments are just one of many constituencies howling about cuts right now.  But let’s distinguish between the theatrics and the constructive work. None of this will get get reported in any news story, but here’s what’s going to happen:  Local governments will lobby for the inevitable tailoring the Governor’s budget will undergo as it proceeds through the legislature just like everyone else, and like any good lobbyist, they will use the opportunity to negotiate behind the scenes rather than burning bridges.

They should choose carefully the rhetorical devices they employ in their public relations strategy, avoiding another of Garder’s “top 5″:

Partisanship. The elected officials who immediately start to point fingers and denigrate the opposite party are sending voters a clear message. It’s saying: I’m here to ride the party lines and won’t be evaluating the needs of the state or solutions to them on their own merit…

See UM President Mary Sue Coleman’s pitch-perfect response to the budget.  In public, her reaction is stoic, calm, and poised.  Now behind the scenes, I’m sure she has UM’s lobbyists working around the clock pushing for every last dime the university can get its hands on.  (It’s no accident that UM’s Vice President of Governmental Relations, Cynthia Wilbanks, worked as the chief of staff to a Republican congressman before she came to her current role.)

As they go hat in hand to Lansing, central city officials have to accept their powerlessness.  Ann Arbor, Ypsilanti, Detroit, Flint, Lansing:  all are represented by legislators in the Democratic minority.  The Governor is one of the few friends they have in the majority party right now.   Indeed, compared to his colleagues in the Wisconsin and Ohio governors’ offices, he is downright conciliatory to the public employee unions who payroll constitutes so much of local government budgets.

If they are smart, local governments will ally with the many other parties aggrieved by this budget to demand cost-saving reforms to the corrections system, which many observers (The Center for Michigan and the Free Press editorial board, to name two) have said could be implemented to free up funds for other priorities.  (Of course that would put them at odds with local prosecutors.)  Or they could propose a slightly higher business tax.  The key is pointing out where the money is supposed to come from, and, in cooperation with others lobbying for more revenue, hammering that argument over and over.

Furthermore, Snyder appears to be well aware of the consequences of his proposal for local governments, and is actually taking proactive steps to prepare for what is going to come next.  Tim Skubick writes,

Faced with the high probability that some cities could end up in bankruptcy on his watch, Gov. Rick Snyder has ordered his team to hop to it to prevent it. The new administration is moving on two fronts: 1) It is training new Emergency Financial Managers to run financially challenged cities; and 2) it has asked lawmakers to revamp the Emergency Financial Manager law, which has opened up a new can of worms pitting labor unions against the new governator.

When the word went out that the state needed help, 200 applicants applied for the chance to become a bureaucratic czar. The state couldn’t handle them all in one batch, so the other day about 65 showed up eager to learn the ins and outs of running a city in a financial mess.

But in addition to sending these emergency managers in early, lawmakers are considering beefing up their powers to avert a financial meltdown — and this is where the fun begins.

Under the proposal pending in the Michigan House, the emergency manager would have the authority to, get this, void current contracts with government employees, revamp their pensions, force the consolidation of services and, if a city owns a utility, the money-czar could sell it.

Does this remind you of a dictator?…

(DPS manager) Robert Bobb… warns that cities better act now before the state takes them over.

Similarly, the Free Press reports, ‘SEMCOG is urging local governments to poll citizens on what municipal services they most value…’

(By the way, I know folks are all upset about this budget, but let’s acknowledge there is a more pressing issue in Michigan politics:  Tim Skubick’s mustache.  Come on Tim, it’s 20102011.  How has there not been a Facebook petition organized to get him to shave it?  Maybe we could even organize a fundraiser to benefit schools, municipalities, others etc. impacted by the budget cuts.  “If we can raise $100 million, Tim will shave his mustache!”)

One thing I have not addressed in this post is the tax situation — ‘if we just raised taxes these cuts wouldn’t be necessary, etc.’  Well, I have plenty to say about that too — primarily, that the Democrats had a chance to try to raise taxes when they controlled the Governor’s office and the House.  They didn’t.  I’m still trimming that post so it doesn’t look like I’m quoting Lessenbury verbatim the entire time.  Stay tuned.

Oh, and I have a feeling things could get very nasty in the comments section, since people are pretty worked up about this budget right now.  So feel free to argue with me, but please try to be a respectful, intelligent commenter; don’t be that random name-calling troll.

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One response to “The Snyder Budget I: Impact on city governments

  1. Pingback: Michigan’s film subsidies: Why I’m glad to see them gone | Motown To Tree Town

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