Memo - July 20, 2015 - Revenue Sharing in the Context of ... · Fiscal Year 2014-15 Year-to-Date Adjusted Gross Appropriations Social Services 45.7% Education 30.5% Transportation

Revenue Sharing in the Context ofState Budgetary Pressures

Presented byElizabeth Pratt

July 20, 2015Allegan, Michigan

# Revenue sharing in the FY 2015-16 budget

# Recent revenue sharing history

# State budget context

Overview

P Included in Public Act 84 of 2015 (SB 133).

PWithin Article VIII, General Government,Department of Treasury.< Revenue sharing unit (page 57)< Department of Treasury one-time items (pages

57-58)< Boilerplate Sections 950 to 957 (pages 99 - 100)

PFY 2015-16 revenue sharing looks much likeFY 2014-15.

FY 2015-16 Revenue Sharing Budget

PConstitutional Revenue Sharing< 15% of sales tax revenue at a sales tax rate of 4%< Distributed to cities, villages, and townships

(CVTs) on a per capita basis.< Michigan Constitution of 1963, Article IX, Sec. 10.

PNonconstitutional Revenue Sharing(Statutory)< Payments to eligible CVTs and counties.< Amounts and program requirements set annually

in the State budget.

Revenue Sharing

Two Types of Programs

PCities, Villages, and Townships< Constitutional Revenue Sharing (All CVTs)< City, Village, and Township Revenue Sharing

(587 eligible CVTs)< Financially Distressed Cities, Villages, and

Townships (Grants awarded by the Department ofTreasury)

PCounties< County Revenue Sharing < County Incentive Program

Revenue Sharing

Programs by Type of Local Unit

Enrolled Appropriations

Source: Senate Fiscal Agency

P2005: One-time acceleration of countyproperty tax collections created a revenuesharing reserve fund for each county.

PWithdrawals of allowed amounts from thereserve funds replaced State-paid countyrevenue sharing until the reserve funds weredepleted.

P2008 to 2016: 76 counties returned to State-paid revenue sharing.

County Revenue Sharing

Background

P Increases by $3.5 million to cover the cost ofcounties returning to State-paid revenuesharing for a full or partial year.

PTwo new counties, Kalkaska and Mason.

PCounty Incentive Program (CIP) and CountyRevenue Sharing total $214.7 million.

PCounties must comply with accountabilityand transparency requirements to receiveCIP.

County Revenue Sharing

FY 2015-16

$182

$0 $0 $0 $0 $3

$55

$113 $115

$131

$146

$211 $215

2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16

0

$50

$100

$150

$200

$250

Revenue Sharing Payments to Counties

Revenue Sharing Payments to Counties

Most counties have returned to State-paid revenue sharing

PConstitutional - Estimated 3.1% increase to$783.9 million.

PNonconstitutional or Statutory - Same as FY2014-15, steady at $248.8 million.

PFinancially Distressed CVTs Grant Program -$5.0 million in FY 2015-16, a decrease of$3.0 million.

CVT Revenue Sharing FY 2015-16

PFY 2015-16 appropriation and formula arethe same as FY 2014-15.

PCVTs that were eligible in FY 2014-15 areeligible for the same amount in FY 2015-16.

CVT “Statutory” Revenue Sharing

A Short Story

PEligible CVTs: Were eligible in FY 2014-15< Received a payment >$4,500 in FY 2009-10 OR< Population over 7,500

PPayment Amount: Eligible for same amountas in FY 2014-15, which is the higher of:< 78.51044% of the FY 2009-10 payment OR< $2.64659 per capita

PMeet accountability and transparencyrequirements< Citizen’s guide to finances, performance dashboard, debt

service report, budget report, report unfunded liabilities

CVT Revenue SharingReview of Eligibility and Payment Amount

2009-10 2010-11 2011-12 2012-13 2013-14 Est. '15 Est. '16

0

$200

$400

$600

$800

$1,000

$1,200

CVT nonconst. Constitutional

CVT Revenue Sharing

Since FY 2009-10, Constitutional Up 25%, Statutory down 20%, Total up 10%

Source: Senate Fiscal Agency and May 2015 Consensus Revenue Estimates

PDebt service report must include a list ofpayment amounts until the maturity of thedebt.

P Include the location (either internet addressor physical location) of accountability andtransparency reports in any general interestmailing.

PRequirements apply to eligible CVTs andcounties.

Accountability and TransparencyRequirements

Changes for FY 2015-16

Sec. 957. It is the intent of the legislature thata legislative workgroup that includesrepresentatives from the executive office shallmeet to explore revisions to the distribution ofnonconstitutional revenue sharing paymentsfor cities, villages, and township.

Legislative Workgroup

New Language in the Budget

Enrolled Senate Bill 133, Article VIII, Sec. 957

Reforming Statutory State Revenue Sharing

By the Citizens Research Council of Michigan

February 2015

Available for download at www.crcmich.org

Recent Report on RevenueSharing

An Excellent Resource

Revenue Sharing Appropriations

CVTs, Counties, and Grant Programs, FY 2010 to FY 2016

2009-10 2010-11 2011-12 2012-13 2013-14 Est. '15 Est. '16

0

$200

$400

$600

$800

$1,000

$1,200

$1,400

Grant Programs County

CVT Statutory Constitutional

Source: Senate Fiscal Agency and May 2015 Consensus Revenue Estimates.

$562 $580$628 $643 $649 $660 $653 $669 $680 $666 $688

$649 $629$665

$708 $722 $739 $760 $784

$797

$600$620

$684 $651$589

$470 $443 $422$405 $388

$388

$310$314

$210$225 $236

$249 $249

1997-98 2000-01 2003-04 2006-07 2009-10 2012-13 Est. '16

0

$200

$400

$600

$800

$1,000

$1,200

$1,400

CVT Nonconst. Constitutional

CVT Revenue Sharing

Since FY 1997-98:Constitutional up 40%, Nonconstitutional down 69%


P21.3% of sales tax revenue at a sales tax rate of4% to be distributed for revenue sharing.< 25.06% of that amount for counties< 74.94% for cities, villages, and townships.

PThis level of funding has not been appropriated.

PThere is no longer any statutory revenue sharingdistribution formula for CVTs.

PThe county distribution formula in statute is paid infull, but is still less than the earmarked revenue.

But What About the Sales Tax Earmark?

The sales tax earmark for statutory revenue sharing only is effectiveif the money is appropriated.

1997-98 2000-01 2003-04 2006-07 2009-10 2012-13 Est. '16

0

$500

$1,000

$1,500

$2,000

Earmarked Revenue Constitutional

Title of Chart

What Would Full Funding Look Like?

Constitutional Revenue Sharing Plus Earmarked Revenue


2000-01 2003-04 2006-07 2009-10 2012-13 Est. '16

0

$200

$400

$600

$800

$1000

CVT Earmarked Rev CVT Appropriated

Earmarked Revenue vs. Appropriations

CVT “Statutory” Revenue Sharing



Community Health$18,035,285,800

34.7%

Human Services$5,700,295,800

11.0%

K-12 & Dept. of Education$13,977,458,800

26.9%

Community Colleges & Higher Education$1,881,221,200

3.6%

Transportation$3,721,275,700 7.2%

Corrections$2,022,496,700 3.9%

St. Police/Military/Veterans Affairs$790,852,400 1.5%

Judiciary$285,403,200 0.5%

General Government$2,694,304,300 5.2%

Revenue Sharing$1,232,694,000 2.4%

Lic.& Reg. Affairs/Ins. & Fin. Services$592,360,500 1.1%

Agri/Rural Dev. & Nat. Res. & Env. Quality$1,008,065,200 1.9%

Fiscal Year 2014-15 Year-to-Date Adjusted Gross Appropriations

Social Services 45.7%

Education 30.5%

Transportation 7.2%

Public Safety 6.0%

General Government 5.2%

Revenue Sharing 2.4%

Lic. & Reg. Affairs/Ins. 1.1%

Agriculture/DEQ/DNR 1.9%

Source: Senate Fiscal Agency - 3/20/2015

Where State of Michigan Tax Dollars Are Spent

FY 2014-15 Total Year-to-DateAdjusted Gross Appropriations

= $51,941,713,600

9,106.3 9,118.7 9,980.7 8,568.6 7,787.4 8,424.6 8,341.1 9,024.2 9,571.3 9,594.2 9,480.5

18,597.7 18,809.8 18,460.6 17,741.3 17,451.6 17,842.0 19,005.9 18,822.8 19,593.4 20,163.3 20,489.6

13,179.9 13,436.1 14,669.5 16,083.0 17,402.7 19,158.0 19,730.5 19,372.7 20,500.2 21,650.1 22,662.5

5,041.6 2,538.2

2,156.5

438.8 487.2505.8

507.4

476.7

508.5 520.6 538.8

534.7

534.1 401.2

FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16

LOCAL/PRIVATE ARRA FED FUNDS RESTRICTED GF/GP

Year-To-Date (Millions of Dollars)

State Of Michigan Appropriations by Fund Source

Fiscal Year1997-98

2001-022005-06

2009-102013-14

0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

$14,000

$16,000

Actual In 2010 Dollars

Nominal Revenue in FY 15 Below FY 98 Level; Adj. for Inflation, the FY 68 Level

Ongoing General Fund Revenue

Source: U.S. Dept. of Commerce, Michigan Dept. of Treasury, and May, 2015 Consensus Revenue Estimates

FY 2014-15,2015-16, and

2016-17estimated

Income Tax63.7%

$6,199.0

Tobacco taxes1.9%

$182.4Use Tax

9.7%$946.2

Michigan Business Tax/Corp. Income Tax2.7%

$258.6

Sales Tax12.1%

$1,181.3

Driver Responsibility Fee0.6%$61.4

Liquor Purch. Fund1.8%

$178.5

Insurance Taxes4.1%

$402.0

Alcoholic Bev. Taxes1.0%$92.5

Penalties/Interest1.4%

$138.0

Other Tax/Non-tax Revenue0.9%$85.0

(Millions of Dollars)

May 15, 2015 Consensus Revenue Estimates

Total (AllEarmarked Taxes):

$9,724.9

Non-Discretionary

$48,418,734,000

90.4%

Discretionary

$5,170,222,200

9.6%

How Much is Discretionary Spending?

State Appropriations From All Sources

Total Appropriations = $ 53,588,956,200

Senate Fiscal Agency - June 3, 2015

State Appropriations From All Sources: How Much Is Discretionary? (Actual Dollars)

FY 2015-16 Adjusted Gross Appropriation...............................$53,588,956,200(Conference Reports)

Constitutional/Statutory Earmarking Requirements: School Aid Fund (50% Constitutional)....................................($12,582,454,400)Transportation (87% Constitutional)...........................................(2,184,391,400)Regulatory Restricted Revenue (Statutory)................................(1,372,817,500)Constitutional Revenue Sharing....................................................(783,866,100)

Federal Funding Requirement...................................................(23,071,877,000)

Local and Private Revenue.............................................................(395,441,200)

Debt Service Payments...................................................................(422,919,600)

Caseload/Inmate Driven............................................................... (7,604,966,800)

Estimated Balance for Discretionary Spending.........................$5,170,222,200

Estimated Balance for Discretionary Spending Includes:

GF/GP Funding for Higher Education.....................................................$1,232,418,500

State Restricted and GF/GP Funding for State Police................................501,133,800

Nonconstitutional State Revenue Sharing Funding...................................468,540,000

GF/GP for Transportation.............................................................................400,000,000

Medicaid Programs-includes GME and MIChoice Waiver..........................400,000,000

Non-Medicaid Programs-includes CMH, Local Public Health, Aging........300,000,000

State Restricted and GF/GP Funding for Department of State..................203,796,600

GF/GP Funding for Judiciary........................................................................183,442,200

State Restricted Revenue for Various State Departments.........................331,622,200

GF/GP Funding for: Agriculture, Attorney General, Civil Rights, Education, DEQ, Executive, Insurance & Financial Services, Legislature, Licensing & Regulatory, Military & Veterans, DNR, Tech.,Mgt., & Budget, Treasury-Ops., and Talent and Econ. Dev....................1,149,268,900

TOTAL................................................................................................$5,170,222,200

P Revenue sharing funding for FY 2015-16 is stable in adifficult State budget environment. All currently eligible localunits remain eligible in FY 2015-16.

P Constitutional revenue sharing is estimated to grow 3.1%.

P A workgroup will discuss the CVT nonconst. distribution.

P There are many demands for limited State discretionaryrevenue.

Summary

Thank you!

For additional information, please contact:

Elizabeth Pratt, Fiscal AnalystMichigan Senate Fiscal Agency

(517) [email protected]

Memo - July 20, 2015 - Revenue Sharing in the Context of ... · Fiscal Year 2014-15 Year-to-Date Adjusted Gross Appropriations Social Services 45.7% Education 30.5% Transportation

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