Letter: The serious financial crisis our cities face
Re: Our May 29 editorial “Get Michigan cities back on their feet”: The Headlee Amendment was designed to establish a balanced fiscal framework for local governments. It limited the ability of local governments to raise taxes on the one hand, while on the other, in Article IX, Section 25 of the constitution, it protected local governments by prohibiting the state from requiring any new or expanded activities without full state financing, from reducing the proportion of state spending in the form of aid, or from shifting the tax burden to them.
In 1993 the state legislature withdrew the ability of local school districts to levy a property tax to support school operations and shortly thereafter placed Proposal A on the ballot to raise the state’s sales tax from 4 percent to 6 percent and to require that the increased 2 percent of the sales tax be returned to school districts as a substitute for lost local property tax revenues. This action constituted a tax shift, requiring the taxpayers of Michigan to pay a sales tax to support local school operations, rather than a local property tax. The intent of Proposal A was to allow the state to collect the substitute sales tax so it could more equitably distribute school funding between rich and poor districts.
What the taxpayers of Michigan were not told, however — and which violates Article IX, Section 25 of the constitution — was that their sales tax payments returned by the state to local schools districts would be used by the Department of Technology Management and Budget to reduce other state revenues previously paid to their local governments.
Local governments are entitled to receive 48.97 percent of state spending in the form of aid under the constitution. State spending resulting from a tax shift is not eligible to be counted in arriving at this required percentage. By including Proposal A funding in the count, the shortfall in constitutional revenue sharing with local governments in some years has been in the billions.
This accounting scheme allows the state to capture local revenue sharing and budget for additional state programming in the good years or to balance the state’s budget in the lean years.
John Mogk, professor
Wayne State University Law School