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LANSING - Michigan township officials are wondering about state revenue-sharing funds as local governments struggle to cover services and meet their budgets.
The Michigan Townships Association supports legislation to establish a revenue-sharing trust fund and provide more consistent state money to townships, cities and villages.
Revenue sharing occurs when the state allocates a share of its tax income to local governments to assist in funding services and programs.
One of the biggest sources of money for townships to pay for services is from revenue sharing, said Tom Hickson, the executive director of the association.
"Revenue sharing and property taxes are the two main ways townships are funded, and revenue sharing, since the year 2002, has decreased for cities, villages and townships by 51%," Hickson said.
Hickson said inflation also adds financial pressure on local governments.
"Inflation has gone up in that time 76%," he said. "So that illustrates the pressure right there."
Tom Lenard, the treasurer of Delhi Township, a suburb of Lansing, said the financial uncertainty makes it more difficult for his township to plan for projects and services.
"Every budget season, we would like to build and repair more amenities within Delhi Township, but since state revenue sharing impacts our entire budget, we are limited on planning due to the uncertainty of funding," Lenard said.
The problem affects other townships as well.
For example, Tim Dempsey, the manager of Meridian Township near Lansing, agreed that unstable revenue sources make it difficult to plan for future projects.
"Fluctuating revenue streams often require us to be more conservative in our budgeting than is otherwise necessary. This can result in delaying or dropping certain capital investment projects," Dempsey said.
He noted that revenue sharing accounts for 15% of Meridian Township's General Fund revenue. Secure funding would allow the township to plan better for policing, firefighting, planning and zoning, elections, and parks and recreation.
"Stable revenue could also help us with more accurate long-term forecasts," Dempsey said.
Delhi Township should expect about $3.09 million in revenue sharing in fiscal year 2026, while approximately $3.16 million was actually paid in fiscal year 2025, according to Department of Treasury figures.
That is a decrease of about $60,000, or 1.9%.
It's not just a single project that causes all of this uncertainty, Lenard said.
"Any reduction or uncertainty about state support impacts every funding decision we make because we are also grappling with the same economic challenges facing all households across the state: inflation, higher healthcare costs and energy price spikes," Lenard said.
The Townships Association backs House bills that would establish a revenue-sharing trust fund.
The 8.62% of revenue from the first four cents of the sales tax would go into the trust fund, Hickson said. That would then be allocated by the state treasurer proportionately to townships, cities and villages.
The proposal has been pending for more than a year in the House Government Operations Committee, which is not required to take action on it.
However, the plan has received criticism from the nonpartisan Citizens Research Council of Michigan, which claims that using sales tax from the state for revenue sharing would reduce the flexibility of the Legislature in its yearly budget-making process.
It has suggested that policymakers consider other revenue sources for local municipalities.
"The Michigan Department of Treasury has not taken a position," said Ron Leix, the deputy public information officer for the department.
Hickson from the Townships Association, said the plan would allow more flexibility in local governments' use of local money.
"We want to make sure townships have more options," Hickson said. "We don't want to dictate what they should be doing, what they shouldn't be doing. They're the ones that know their community better, and they know what they need."
Lenard said Delhi Township received less funding from the state in the past year, which made it difficult to invest in many programs and projects the township has.
"We need a reliable partner in the state to invest in the quality infrastructure and programming that makes our community such a great place to live. Without a strong commitment and consistency from the state, more pressure is placed on local governments to come up with adequate resources," Lenard said.
Revenue-sharing payments to townships are expected to fall from an estimated $557.2 million in fiscal 2025 to an estimated $546.4 million in fiscal 2026, based on figures from the Michigan Treasury.
The proposed trust fund would give local governments increased certainty in their budgeting process, Hickson said.
"We ultimately want townships to have the most choices possible," he said.