Revenue Sharing

Michigan’s revenue sharing program distributes sales tax revenues collected by the state to local units of government, allowing communities to determine how best to fund local services. A constitutionally-dedicated portion of sales tax revenues is distributed to cities, villages, and townships; the remainder is subject to annual appropriation. Funding for fiscal year 2016 is recommended at $1.3 billion, which includes $788.5 million for constitutionally-required revenue sharing payments; $243 million for City, Village, and Township Revenue Sharing; $171.8 million for County Revenue Sharing; $42.9 million for the County Incentive Program; and $5 million for Financially Distressed Cities, Villages, and Townships. Anticipated funding for fiscal year 2017 is recommended at $1.3 billion, which includes $816.1 million for constitutionally-required revenue sharing payments.

Highlights of Governor’s Budget Recommendation

• Constitutional revenue sharing payments for cities, villages, and townships are increased by $23.8 million (3.1 percent) to $788.5 million, based on estimated sales tax collections.

• City, Village, and Township Revenue Sharing provides $243 million for qualified cities, villages, and townships that adopt best practices. In order to receive payment, otherwise eligible units are required to meet “Accountability and Transparency” provisions including a citizen’s guide to local finances with disclosure of unfunded liabilities, performance dashboard, debt service report, and two-year budget projection.

• Eligible counties will receive a combination of revenue sharing payments and incentive based payments, provided they meet criteria consistent with requirements under City, Village, and Township Revenue Sharing. The fiscal year 2016 Executive Budget recommends $214.7 million, providing maximum funding allowed under statutory provisions to 76 eligible counties, up from 74 counties in fiscal year 2015.

• The fiscal year 2016 Executive Budget recommends $5 million for financially distressed cities, villages, and townships. This program provides grants for local units that have one or more conditions that indicate probable financial distress. Grants are available to reduce unfunded accrued liabilities, repair publicly-owned critical infrastructure, reduce general fund debt, and transition to shared services. Grants to any city, village, or township cannot exceed $2.0 million.