Column: State should change local govt. funding to improve racial equity

Michigan Capitol | Susan J. Demas

At the Michigan League for Public Policy, we are primarily focused on the state budget and state policy. We have a team of experts deployed to analyze budget issues and advocate for changes that will make sure Michigan residents of all races, places and income levels have the opportunity to thrive and find economic security

However, we are also well aware of how integral local units of government are in providing services that directly impact communities. An important piece of the puzzle of the state budget is ensuring that local governments have the resources that they need to provide programs and services directly to residents. 

And unfortunately, state funding for local governments has been in steady decline over the past two decades. In the League’s recent report, Building Equitable Communities: More Funding Needed for Local Governments, our research shows that local revenue sharing payments have declined 35.4% for cities, villages and townships and 25.4% for counties between 1997 and 2019. 

The report also outlines the ways in which the confluence of state tax law and the continuous underfunding of state payments to localities have led to cities, villages, townships and counties to either cut essential services or rely on inequitable ways of raising cash. As you have probably already guessed, the lack of local resources has major racial equity implications.

On the one hand, building power at a local level is much easier than at the state level due to the relative size of local communities and electoral districts. Local races cost less resources than state races. Additionally, local politicians and civil servants are more responsive to neighborhood needs. This means that Black, Brown and Indigenous communities can begin to build power and representation and achieve economic and social justice through programs and services administered at the local level.

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On the other hand, the ways in which local governments can raise revenue to compensate for their state revenue sharing losses and still fund community-driven services are often inequitable. In the report, we discuss how, in response to declining revenues from the state and from property taxes, local units of government have been more reliant on legal fines and fees, which are particularly harmful to communities of color. Additionally, property taxes are themselves regressive, meaning that they cost a higher proportion of income for residents with lower incomes than they do for residents with higher incomes.

Racial equity is an important concern in every policy decision, as they have both intended and unintended consequences, and revenue sharing is no different. The white supremacist system on which modern policing is built and longstanding racially biased policing in Michigan have created a system where Black and Brown people in Michigan are systematically targeted by police. As such, a heavy reliance on fines and fees is disproportionately affecting Black and Brown communities.

The continued fight against police brutality toward Black and Brown people has also raised important questions about local government spending, and with more resources from the state in revenue sharing, greater investments can be made in the areas that promote racial equity and economic security for all. In addition, the movement to defund police is pushing for the reinvestment of revenues from policing into racially equitable systems that target and preempt the root causes of crime. 

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To do this, local units of government are going to need funding to reinvigorate opportunities in communities of color to reduce income and wealth inequality. Funding a completely new vision of public safety will require injections of money from the state to help fund the mental health services, youth programs and social safety net that will achieve that vision.

To support efforts toward and investments in racial equity, local governments need more equitable funding from the state. A dedicated and unwavering commitment by the Legislature and governor to make payments to local units of government would go a long way in ensuring that people of color can thrive in healthy and vibrant communities. Our policymakers came together to adequately support our local governments in the Fiscal 2021 state budget and help them weather the COVID-19 crisis, and we want to see that same commitment in every budget year.

Revisiting the state’s revenue sharing formula and focusing those payments on communities with low housing wealth will mean that the payments are more equitably distributed. The Legislature already made a commitment to reasonable and equitable revenue sharing payments in 1998; all we’re asking for is for them to keep their promises to local governments.