Revenue Sharing
Governmental Advisor, Summer 2008  

The Governor released her proposal of the State’s fiscal year 2009 budget (for the year ended September 30, 2009) originally in February 2008. Over the course of budget deliberations in the spring and early summer, the legislature further debated the level of the revenue sharing funding, resulting in a compromise by the Senate and House to fund revenue sharing equal to the projected fiscal year 2008 (fiscal year ending September 30, 2008) amounts, plus provide an increase of 2 percent of the statutory portion of revenue sharing received in FY 2007. This proposal was presented to the Governor on July 25, and is awaiting her signature.

Here is a summary (in thousands of dollars) of the revenue sharing budget submitted to the Governor:  

	FY 2007 Actual	FY 2008 Projected	FY 2009 Projected	Percent Change
Cities, villages, and townships:
Constitutional	$665,980	$682,780	$675,992	–0.99
Statutory	404,920	392,050	406,933	3.80
Total to CVT's	1,070,900	1,074,830	1,082,925	0.75
Counties (statutory)	–	–	2,394	n/a
Total revenue sharing	$1,070,900	$1,074,830	$1,085,319	0.98

While the projection is for an overall increase of 0.75 percent (for cities, villages, and townships), the impact will not be evenly distributed between all local units. Remember, the 2 percent increase is for the statutory portion only — not the constitutional portion. The intent is for the total revenue sharing (constitutional plus statutory) in FY 2009 to equal the total of constitutional and statutory revenue sharing received in FY 2008, plus an additional payment equal to 2 percent of the FY 2007 statutory revenue sharing received by the local unit. That may mean that for those units (primarily townships) that now receive no statutory revenue sharing, total revenue sharing projected for FY 2009 will be identical to the amounts received in FY 2008. We are awaiting a final distribution table from the Michigan Department of Treasury.  

The Governor’s proposed budget also included $2.4 million to restore state revenue sharing payments for the six qualifying counties that will exhaust their revenue sharing reserve funds in fiscal year 2008/2009. As you may remember, a reserve fund was created for each county in 2005 when the State eliminated counties from the revenue sharing program (remember, counties only receive statutory revenue sharing, not constitutional). In 2005, counties were required to phase in the early collection of winter property tax payments and to create a reserve fund with a portion of these monies. Counties have been drawing on their reserve funds to replace lost statutory revenue sharing. When the reserve fund is depleted, counties will then look to the State to re-enter the statutory portion of the revenue sharing program. Prior to their elimination from the revenue sharing program in 2005, counties statewide received approximately $182 million annually.  

It is encouraging that this budget funds revenue sharing at a higher level than last year. As counties have started to come back into the formula, the legislature has budgeted this as an additional payment, rather than one that reduces distributions to the other local units of government. To a great extent, however, actual revenue sharing distributions will depend on the stability of the State’s budget, as well as the actual level of state tax collections. In addition, we need to remember that the statutory formula expired in 2007 and a new, permanent formula has not been enacted — please remember to remind your state representatives of the importance of extending this legislation.  

Detailed revenue sharing projections by community (when they become available) can be found at: http://www.michigan.gov/treasury/0,1607,7-121-1751_2197---,00.html.