Lansing Local leaders still stressed Budget balancing harder in '11 in many local governments

By Kathy Barks Hoffman

Associated Press

LANSING, Mich. (AP) -- Leaders of nearly half of Michigan's local governments are having a harder time balancing their budgets this year than last, and even more are worried that they will be worse off in 2012, according to a survey released Wednesday by the University of Michigan.

The report found that 48 percent reported being less able this year than in 2010 to meet the financial needs of their cities, towns, counties, villages and townships. The results are better than last year, when 61 percent reported such difficulties, but the financial stresses continue.

Many of the mayors, county managers and other local leaders said balancing their budgets is being hindered by falling revenue from property taxes, shrinking state aid and a rising number of home foreclosures and tax delinquencies, according to an advance copy of the survey obtained by The Associated Press.

Their budget duties could become even more difficult under a Republican-backed plan to eliminate or phase out a tax that generates more than $1 billion, mostly for local governments and schools, each year. Businesses pay the personal property tax on computers and other equipment, and some local governments get half their annual revenue from the tax.

"For those places, there probably is a great deal of anxiety about the future," said Thomas Ivacko, administrator of the university's Center for Local, State and Urban Policy, which conducted the survey.

But many jurisdictions are already struggling to pay for public services such as police departments and infrastructure projects. A handful are being run by state-appointed financial managers.

To cope, 23 percent of local governments have cut staff since last year, while 21 percent decreased services. A third are reducing or eliminating training for workers, a quarter are paying less to new hires and a fifth are charging higher fees, according to the report. Eight percent plan more layoffs.

About 18 percent are making public employees pay more toward their health care costs and 14 percent are requiring workers to chip in more toward their retirement funds. However, half of the jurisdictions -- mainly small townships and villages -- don't offer pensions or health care benefits, so they can't trim such costs.

In addition, 40 percent have plans to increase cooperative efforts with their neighbors this fiscal year, a move being pushed by Republican Gov. Rick Snyder. But such arrangements are generally easier for counties and large cities, Ivacko said.

"For a lot of places, especially the smaller places that don't provide a lot of services or are geographically remote, they don't have a lot of choices" when it comes to sharing or even privatizing public services, he said.

Still, some local leaders are breathing easier than in 2009 or 2010. Although half of those surveyed predicted they would be less able in 2012 to meet their jurisdictions' financial needs than they were this year, 65 percent made the same next-year prediction in 2010.

"Clearly for most jurisdictions, the worst is not over," Ivacko said. "But for others, it looks like fiscal health is stabilizing or even improving."

Future revenue largely depends on how soon local and the U.S. economies recover and housing prices stop falling. But there's a catch: Property tax increases are capped annually, so cities may not quickly see significant revenue increases even if property values climb.

Growth in property tax revenues was reported, but it wasn't evenly spread around the state. In the Upper Peninsula, 30 percent of jurisdictions reported somewhat increased property tax revenues this year, compared to only 3 percent in southeast Michigan.

The survey also showed that increasing home foreclosures is most widespread in Michigan's southwest and northern Lower Peninsula regions, where 62 percent of local governments reported the problem this year.

Despite the uncertainty, Ivacko said he saw optimism from some survey respondents.

"We may look back and see that the worst was over at this point," Ivacko said. "For citizens out there, it really depends on where they're located."

The biannual survey, taken between April 18 to June 10, got responses from 1,272 local governments in Michigan, 69 percent of the total. Its margin of sampling error was plus or minus 1.5 percentage points.

Published: Thu, Oct 20, 2011

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