Changes in State Revenue Sharing Create Budget Uncertainty

State revenue sharing has been declining for years, but now it's an even bigger question mark because of Gov. Rick Snyder's potential cut to it in his proposed budget.

In 2008, state revenue sharing to Ferndale was $3.2 million. By 2010, it had dropped to $2.6 million. State revenue sharing is about 15 percent of Ferndale's general fund revenue. It has two components.

Constitutional revenue sharing, which was about $1.4 million in 2010, is required by Michigan's constitution to be paid to the city, while the remaining $1.2 million is statutory revenue sharing.

"Statutory revenue sharing once helped level the playing field between wealthy and poor communities.  For example, Birmingham receives less than $300,000 and Ferndale receives more than $1 million annually although they are of similar population and size," former Ferndale City Manager and current Birmingham City Manager Bob Bruner told Ferndale Patch in February. "Further reductions in statutory revenue sharing will cut the legs out from under the poorest communities in the state at the time they can least afford it."

Under the statutory revenue sharing plan, the state will distribute $200 million to cities, villages and townships. Counties will receive $100 million. This is down from $292 million for cities and $150 million for counties.

Ferndale Interim City Manager Mark Wollenweber said the city has not been budgeting for statutory revenue sharing because it just doesn't know what it will end up being under the proposed cuts. "We don't feel we can budget that number because we don't know," he said. "It would be inappropriate to budget for what it might be."

If Snyder's budget proposal passes, and Wollenweber said it most likely will because both houses of the Legislature are controlled by Republicans, the most the city could get, if it qualified under the rules, would be 62 percent of what it got last year, or about $744,000. "That's the most we could get if we did everything they want," he said. "We'd have to qualify in all areas."

The idea of incentives for shared services won't apply to past efforts, he said. For example, Ferndale already shares fire services with Pleasant Ridge and Royal Oak Township. The city is also a member of OAKWAY, which is a mutual aid agreement with various Oakland County fire departments.

Wollenweber said it would be fiscally irresponsible to budget for money the city is unsure of. "To be safe, and most communities do this, cities overestimate expenses and budget conservatively their revenue," he said. "That's responsible."