EAST LANSING, Mich. — From 2006 to 2010, I was the treasurer of Michigan. I oversaw the emergency manager program, which has been blamed for causing the Flint water crisis under a different administration. In my view, Gov. Rick Snyder misused the program in an attempt to achieve an impossible goal for post-industrial Flint: financial self-sufficiency. Not only did the people of Flint suffer because of Snyder’s cost cutting, they suffered for a futile cause and at the hands of a state government that has made deep cuts to the revenue sharing their struggling city needs to function.
That said, what’s happening in Flint cannot simply be blamed on a hard-hearted governor nickel-and-diming a poor city into a public health disaster that will taint its reputation for years. This crisis was decades in the making. Michigan’s combination of deindustrialization and lack of public support for cities created the conditions that allowed Snyder’s poor decisions to have such a terrible outcome.
There is no question that Michigan has the some of the poorest, most decrepit cities in the United States. Flint regularly has among the highest homicide rates in the nation. Detroit, which has lost two-thirds of its population since the 1950s, is an international symbol of decay. This is not simply a matter of neglect; it’s a matter of policy.
Time and again, Michiganders have said no to measures that could have put their cities in a state of financial solvency. In 1958, Flint suburbanites voted against joining the city, even though General Motors favored the plan. In the 1970s, legislators voted down Gov. William Milliken’s bill to distribute industrial and commercial taxes equally among cities in metro Detroit. In the 1990s, Detroit cut its income tax rate from 3.5 percent to 2.4 percent in exchange for a promise by the state not to cut revenue sharing. The state broke its end of the deal, and the combined loss of $200 million in state funding and $110 million in lost tax collections pushed the city into bankruptcy. According to a study by Michigan State University, constitutional amendments passed in 1978 and 1994 imposed the second-tightest local taxation limits in the nation.
“Michigan incubates financial stress among its local governments,” the study concluded. “Michigan’s particular mix of stringent limitations on local revenue and its relatively low level of financial assistance to cities, coupled with spending pressures stemming from spiking local service burdens and increased labor costs, creates conditions that drive up the potential for local fiscal distress.”
Much of Michigan’s hostility toward sharing revenue with cities results from the antagonism between Detroit and its suburbs, which dates back to the 1967 riot and the white flight that followed. Metro Detroit dominates the state’s politics, but Flint also pays the price for this rivalry (and for statewide budget cuts and a prevailing recent philosophy of limiting government). Allowing suburbanites to say “not my responsibility anymore” to the cities they’ve left behind is a nationwide issue, but nowhere have the consequences been more severe than in Michigan. Since 2001, over $6 billion earmarked for cities has been diverted to cover state budget shortfalls. Between 2003 and 2014, Flint lost a total of $54 million.
Any city with a per capita tax base below $20,000 will struggle financially and be forced to levy higher than average property tax rates or income taxes. (The per capita tax base is the taxable value of all property divided by the population.) Flint has a per capita tax base of $7,785: the local economy has been destroyed by the loss of over 70,000 well-paying automaking jobs since the 1970s; as a result, the median home listing price is around $50,000.
Cities with low tax bases are faced with a Hobson’s choice: If they set taxes high enough to provide decent services, residents and businesses move out; if they keep tax rates low, poor municipal services drive residents and businesses out. A strong regional revenue sharing program would allow communities with low tax bases, such as Flint, to maintain a reasonable level of services while avoiding uncompetitive taxes. Without revenue sharing, cities are caught in a vicious cycle that results in ongoing financial problems. This is demonstrated by the fact that Michigan has had more communities under an emergency manager’s control than any other state.
When I was state treasurer, we never forced an emergency manager on an unwilling municipality. We appointed a total of five, and only when a local official, such as a mayor, a city manager or a county treasurer, asked us to conduct a fiscal review, and when the review concluded that the financial problems had been caused by mismanagement or corruption.
That’s because an emergency manager can’t solve a financial crisis created by a low tax base and a lack of revenue sharing. The forced austerity that resulted in Flint switching its water source from Lake Huron to the Flint River had no chance of improving the city’s financial condition. The only realistic long-term solution is increased revenue sharing and consolidating Flint into a metropolitan government with the rest of Genesee County. The water crisis makes state aid even more urgent, because it’s going to drive down Flint’s already bargain-basement property values. Who’s going to buy a house in a city with lead-tainted water? Flint may never suffer another water crisis, but without structural changes to state and local government, its financial crises will never end.