GRAND RAPIDS – Governor Rick Snyder’s sweeping proposals in how the state funds local government, and how local government must operate, avoid instantly overhauling cities, villages and townships, but sets the stage for major changes in the coming years.
Snyder delivered a special message Monday to the Legislature outlining eight significant proposals in key laws governing local governments as well as what local governments must do to obtain their maximum possible share of what was statutory revenue sharing. Besides a dramatic overhaul in how revenue sharing is allocated, Snyder also proposes wholesale change to the statute governing municipal mergers, requiring a new collective bargaining agreement when municipalities agree to share services, changing binding arbitration and banning future minimum staffing requirements, among other changes.
Notably, many of the governor’s proposals are prospective, affecting only new hires, new collective bargaining agreements and any new attempts by local governments to place minimum staffing requirements, as some have for police and fire, into their charters.
“Some of it could take some time,” Snyder said of how soon savings would show up as a result of his proposals. “The main thing is, we’re starting on that process. And communities that really feel strongly about it can be more aggressive and move faster.”
The governor announced his plan at Grand Rapids City Hall with Mayor George Heartwell, as well as officials from local government associations, on hand.
Democrats immediately criticized the proposal.
“I think Governor Snyder needs to first look at the taxpayer-funded raises he gave to certain Cabinet members before telling local governments how to cut costs, because otherwise it seems painfully obvious that today’s ‘special message’ was simply another anti-worker attack by this administration,” Senate Minority Leader Gretchen Whitmer (D-East Lansing) said in a statement. “We’re all for reforms, but they must be about providing more efficient services for citizens, not wiping them out.”
Whitmer spokesperson Katie Carey said Democrats see the proposal as slashing funding to local government services, while also undermining collective bargaining with the proposal to require new collective bargaining agreements once local governments decide to merge a function.
House Minority Leader Richard Hammel (D-Mount Morris Township) sounded a similar theme.
“Governor Snyder’s plan for ‘streamlining’ government is an attack on local municipalities, forcing local municipalities to sacrifice both safety and services provided to their communities,” he said in a statement. “By cutting revenue sharing, the governor may force cities across Michigan into a corner. This could result in laying off more police officers and firefighters. The governor says he doesn’t oppose collective bargaining; however, this is an attempt to eliminate it. I support the governor’s goal of promoting cooperation, but this plan pits communities against each other.”
Larry Merrill, executive director of the Michigan Townships Association, called Snyder’s proposal on revenue sharing reasonable and praised the proposed changes on service sharing, unfunded mandates and binding arbitration.
“While the Michigan Townships Association remains concerned about the one-third cut of statutory revenue sharing, we are encouraged by the realistic and reasonable incentives for communities to maintain the two-thirds portion of state funds for local governments,” he said in a statement.
Similar sentiment came from the Michigan Municipal League.
“The League continues to oppose pieces of the governor’s budget plan, particularly significant reduction in funding to communities and the inability of all cities and villages to obtain additional dollars in the governor’s incentive plan. However, overall we are pleased with the governor’s efforts to give local governments the tools they need to reduce costs and share services,” said League Board President Carol Shafto, the Alpena mayor, in a statement.
Doug Rothwell, president and CEO of Business Leaders for Michigan, lauded the proposals to smooth service consolidation.
“Service sharing will not only save money, but reduce the divisiveness that has plagued Michigan from acting in a unified manner in the past,” he said in a statement.
REVENUE SHARING: Snyder’s plan reshapes how the $200 million in revenue sharing money not distributed under the Constitution would be disbursed. It would be broken into thirds.
Communities would receive the first third if they prepare a citizen’s guide to their finances and produce a performance dashboard, much as Mr. Snyder did for the state, by October 1. They could receive the second third if they develop plans to consolidate services with other communities or show how they already have done so by January 1.
“All we’re asking is for them to do a good faith effort and put together a plan or communicate what they’ve already achieved,” Snyder said.
But the final third would be more complex. For any new, modified or extended contract, all new public employee hires would have to be placed in a defined contribution plan or a hybrid retirement plan that caps annual employer contributions at 10 percent of base salary. Additionally, there should be a 1.5 percent multiplier when determining employee pensions, 2 percent for those not eligible for Social Security. Controls to prevent pension spiking, like a three-year salary average, would be required. And all new hires must pay at least 20 percent of the cost of their health insurance.
Municipalities would have to certify their compliance with the state, although the state would essentially put them on the honor system. No department would be charged with verifying the accuracy of the certifications.
“The compliance here is going to be self-compliance,” Snyder said. “And we’re going to take them at their word. We have a much bigger problem if your local government official is lying. This isn’t about creating bureaucracy. This is about encouraging people to do best practices.”
Failing to complete one or more of the three categories would result in a reduction of funding.
Already local governments would get considerably less under the new system with the pool of funds going from $292 million to $195 million (another $5 million would be reserved to help reimburse communities for the one-time costs of mergers). Snyder aide Bill Rustem said if a local government fulfills all three categories, the amount it would receive would be between 33 percent and 40 percent less than what it gets in the current fiscal year.
For example, Snyder said Detroit, which in the current year gets by far the most money at $178 million, would get a maximum of $119 million under the changes. Snyder said he believed enough cuts could be found in city government to achieve the needed $69 million in savings.
Heartwell said Grand Rapids estimates going from $6.6 million to $3.5 million in statutory revenue sharing.
Snyder’s proposals will allow cities to move ahead aggressively with changes they have needed to make, but might not have been able to do under existing law, he said. Currently, all non-represented employees in Grand Rapids pay 20 percent of their health insurance. Union-represented workers pay 10 percent. The city’s collective bargaining agreement expires July 1, and the administration is seeking to increase the union-represented employees to 20 percent.
Grand Rapids also provides a pension multiplier of 2.7 percent for those in the defined benefit system, 2.8 percent for those ineligible for Social Security.
“The governor is providing some good tools, I think, to use at the bargaining table,” he said. “It’s going to be that mix of fixes – I don’t think we should focus too much on any one – that … bring the state through this economic cr
