Politics & Government

Local Leaders Call Budget "Grim," Say These Are "Dark Days"

The Saline school district is looking at a $3.5 million revenue hole, and cities face cuts on top of dwindling property tax revenues.

Local leaders got their first look at Gov. Rick Snyder’s plans to “reinvent” Michigan last week when the governor unveiled his proposed budget.

City and school officials said the picture looked “grim” and that these are “dark days.”

Although the , Snyder dealt out tough medicine to struggling school districts, even as he proposed $1.8 billion in tax cuts for businesses.

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School districts, already facing a $170-per-pupil shortfall because the federal money that masked last year’s shortfall is gone, will see funding slashed by another $300 per student.

Cities will see the end of statutory revenue sharing, which was enacted to compensate when Lansing took away local government’s ability to generate revenue.

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Saline Area Schools Superintendent Scot Graden said the numbers looked grim.

“Between the federal dollars going away, the new revenue shortfall that would be created by this budget and the additional burden that’s being placed on districts with retirement funding, we’re looking at about a $3.7 million revenue hole we would need to fill. That’s really a significant hole for us. We would more than burn through our fund balance and essentially be in a deficit situation next year if we were not to make any other changes,” Graden said. “It’s kind of even hard to fathom what this means.”

Graden estimated that the revenue reduction would cost the district about $2.5 million. The additional pension obligation will require the district to pay an additional $1.2 million annually, he estimated. Saline Area Schools has chopped its budget by $2.2 million, from $53.3 million to $51.1 million, since 2008-09 by closing and selling school buildings, reducing the teaching staff by not replacing retirees, increasing energy efficiency and reducing the salaries and health care costs of administrative and support staff. Graden said managing another $3.5 million hole will be difficult, especially when nearly 80 percent of the district’s budget is salary and benefit costs that are determined by the contract with teachers.

“We’ve been fighting this fight for a few years. It feels like we’ve been tightening down and tightening down. The low-hanging fruit was picked several years ago,” he said. “It’s going to be difficult to manage.”

He said he was anxious to see what kind of tools the state planned to give districts to meet the budget demands.

Municipalities are going to lose statutory revenue sharing. For the city of Milan, that means about $57,834 annually. The constitutional revenue sharing, which provided Milan with $310,000 for the current fiscal year, will not be touched.

“Any loss of revenue for the city of Milan will have a large effect on us,” said City Administrator Ben Swayze. “We are expecting to see another drop in taxable value this year, which means our revenues will be down again.”

Swayze noted that tax revenues have declined from $3.8 million to $2.7 million since 2007.

“We are expecting revenues to drop at least another 5 percent this year, so in that aspect, the loss of statutory revenue sharing will just exacerbate the revenue issues we are already having.”

Swayze said Milan was ahead of the curve and hasn’t budgeted for statutory revenue since 2008. When the unexpected money did come in, the city used the funds to top off a fund balance which had been “dangerously low” as late as 2007, Swayze said.

“While the money will be sorely missed, as it could have helped offset cost decreases elsewhere, we will not have to ‘cut’ it out of our budget because we did not include it to begin with,” Swayze said.

The city is also anxiously waiting for more details on Snyder’s announcement that he was creating a $200 million pool of revenue sharing dollars that cities can “compete” for by implementing certain practices. It’s been pegged as an opportunity to get some of that revenue-sharing money back.

“The city has already implemented many of the things Gov. Snyder has hinted at, and we hope we won’t be penalized for having already accomplished what he would like to see,” Swayze said.

Like Milan, the city of Saline is struggling with massive reductions in property tax revenue. Mayor Gretchen Driskell is urging state legislators not to add to the hardship with revenue cuts.

“This movement by the governor to delete revenue could not come at a worse time. Local government revenue has been cut over and over the past decade, and now with the combination of property value decreases (our only other major source of revenue) in the magnitude of over 30 percent, we are all reeling,” said Driskell. “Combine that with the inability to increase revenue, when property is sold, beyond inflation and the Headlee limitations, and these are very dark days.”

Driskell said it will be very difficult for local government to be able to provide the services and quality of life residents and entrepreneurs expect.

Despite the difficult situation, Graden said he was somewhat heartened to see that Snyder was asking Michiganians to share in the sacrifice.

“On a positive note, I will say that I do not feel as if schools were singled out. The governor has looked at various aspects of the public sector and cut across the board,” Graden said. “This is a bleak and, perhaps, for the first time in some time, a realistic look at where revenues are at. As a state, we’re going to have to make tough decisions about the services we want, as well as what types of taxes we are willing to pay for those services.”


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