Michigan policy strictly limits local governments’ revenue options by reducing the amount of state revenue shared with local governments and maintaining high public employee costs through pension and health-care obligations. Moreover, Michigan cities have faced the consequences of economic decline, including deindustrialization, population loss and sharp reductions in property values.
As a result, 18 Michigan jurisdictions — 11 cities, five school districts, one county and one village — have had state-designated financial emergencies since 1990. While economic devastation has challenged other Rust Belt states, Michigan has a high concentration of financial emergencies. Law professor Michelle Wilde Anderson identified 28 cities with more than 15,000 residents that entered bankruptcy or state receivership during the Great Recession from 2008 to 2013. Of these, six were in Michigan. Neighboring Ohio had only three, and Indiana and Illinois had one apiece. Only Pennsylvania had more than Michigan, with eight. But state receivership in Pennsylvania is widely lauded by local governments, since it expands their power to tax.
As our research shows, the combination of fiscal and economic pressures with emergency management governance in Flint and Detroit meant severe cuts in local government spending. For instance, from 2003 to 2016, Detroit lost about 29 percent of its residents and cut more than half of its city government workforce. Flint lost 22 percent of its population between 2000 and 2016 — and city government reduced its workforce by 56 percent. A 2015 Government Accountability Office report on municipalities in fiscal crisis links fewer government employees with the loss of federal revenue streams for housing, Head Start and other functions. Without the managers who can seek that funding or oversee its use, the report states, Detroit does not “have the capacity to improve its capacity.” To compensate, nonprofit groups in both cities have expanded services, including for water-crisis recovery in Flint and activities ranging from infrastructure to neighborhood development to social services in Detroit.
Private donations can fill gaps, but they cannot replace more reliable streams of funding for essential public services such as clean drinking water, fire and police protection, and public education. Donors might gain stature and gratitude for these contributions, but cities receive only a short-term reprieve from long-term challenges.
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