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Revenue Sharing in the Context ofState Budgetary Pressures
Presented byElizabeth Pratt
July 20, 2015Allegan, Michigan
# Revenue sharing in the FY 2015-16 budget
# Recent revenue sharing history
# State budget context
Overview
P Included in Public Act 84 of 2015 (SB 133).
PWithin Article VIII, General Government,Department of Treasury.< Revenue sharing unit (page 57)< Department of Treasury one-time items (pages
57-58)< Boilerplate Sections 950 to 957 (pages 99 - 100)
PFY 2015-16 revenue sharing looks much likeFY 2014-15.
FY 2015-16 Revenue Sharing Budget
PConstitutional Revenue Sharing< 15% of sales tax revenue at a sales tax rate of 4%< Distributed to cities, villages, and townships
(CVTs) on a per capita basis.< Michigan Constitution of 1963, Article IX, Sec. 10.
PNonconstitutional Revenue Sharing(Statutory)< Payments to eligible CVTs and counties.< Amounts and program requirements set annually
in the State budget.
Revenue Sharing
Two Types of Programs
PCities, Villages, and Townships< Constitutional Revenue Sharing (All CVTs)< City, Village, and Township Revenue Sharing
(587 eligible CVTs)< Financially Distressed Cities, Villages, and
Townships (Grants awarded by the Department ofTreasury)
PCounties< County Revenue Sharing < County Incentive Program
Revenue Sharing
Programs by Type of Local Unit
Enrolled Appropriations
Source: Senate Fiscal Agency
P2005: One-time acceleration of countyproperty tax collections created a revenuesharing reserve fund for each county.
PWithdrawals of allowed amounts from thereserve funds replaced State-paid countyrevenue sharing until the reserve funds weredepleted.
P2008 to 2016: 76 counties returned to State-paid revenue sharing.
County Revenue Sharing
Background
P Increases by $3.5 million to cover the cost ofcounties returning to State-paid revenuesharing for a full or partial year.
PTwo new counties, Kalkaska and Mason.
PCounty Incentive Program (CIP) and CountyRevenue Sharing total $214.7 million.
PCounties must comply with accountabilityand transparency requirements to receiveCIP.
County Revenue Sharing
FY 2015-16
$182
$0 $0 $0 $0 $3
$55
$113 $115
$131
$146
$211 $215
2003-04 2005-06 2007-08 2009-10 2011-12 2013-14 2015-16
0
$50
$100
$150
$200
$250
Revenue Sharing Payments to Counties
Revenue Sharing Payments to Counties
Most counties have returned to State-paid revenue sharing
PConstitutional - Estimated 3.1% increase to$783.9 million.
PNonconstitutional or Statutory - Same as FY2014-15, steady at $248.8 million.
PFinancially Distressed CVTs Grant Program -$5.0 million in FY 2015-16, a decrease of$3.0 million.
CVT Revenue Sharing FY 2015-16
PFY 2015-16 appropriation and formula arethe same as FY 2014-15.
PCVTs that were eligible in FY 2014-15 areeligible for the same amount in FY 2015-16.
CVT “Statutory” Revenue Sharing
A Short Story
PEligible CVTs: Were eligible in FY 2014-15< Received a payment >$4,500 in FY 2009-10 OR< Population over 7,500
PPayment Amount: Eligible for same amountas in FY 2014-15, which is the higher of:< 78.51044% of the FY 2009-10 payment OR< $2.64659 per capita
PMeet accountability and transparencyrequirements< Citizen’s guide to finances, performance dashboard, debt
service report, budget report, report unfunded liabilities
CVT Revenue SharingReview of Eligibility and Payment Amount
2009-10 2010-11 2011-12 2012-13 2013-14 Est. '15 Est. '16
0
$200
$400
$600
$800
$1,000
$1,200
CVT nonconst. Constitutional
CVT Revenue Sharing
Since FY 2009-10, Constitutional Up 25%, Statutory down 20%, Total up 10%
Source: Senate Fiscal Agency and May 2015 Consensus Revenue Estimates
PDebt service report must include a list ofpayment amounts until the maturity of thedebt.
P Include the location (either internet addressor physical location) of accountability andtransparency reports in any general interestmailing.
PRequirements apply to eligible CVTs andcounties.
Accountability and TransparencyRequirements
Changes for FY 2015-16
Sec. 957. It is the intent of the legislature thata legislative workgroup that includesrepresentatives from the executive office shallmeet to explore revisions to the distribution ofnonconstitutional revenue sharing paymentsfor cities, villages, and township.
Legislative Workgroup
New Language in the Budget
Enrolled Senate Bill 133, Article VIII, Sec. 957
Reforming Statutory State Revenue Sharing
By the Citizens Research Council of Michigan
February 2015
Available for download at www.crcmich.org
Recent Report on RevenueSharing
An Excellent Resource
Revenue Sharing Appropriations
CVTs, Counties, and Grant Programs, FY 2010 to FY 2016
2009-10 2010-11 2011-12 2012-13 2013-14 Est. '15 Est. '16
0
$200
$400
$600
$800
$1,000
$1,200
$1,400
Grant Programs County
CVT Statutory Constitutional
Source: Senate Fiscal Agency and May 2015 Consensus Revenue Estimates.
$562 $580$628 $643 $649 $660 $653 $669 $680 $666 $688
$649 $629$665
$708 $722 $739 $760 $784
$797
$600$620
$684 $651$589
$470 $443 $422$405 $388
$388
$310$314
$210$225 $236
$249 $249
1997-98 2000-01 2003-04 2006-07 2009-10 2012-13 Est. '16
0
$200
$400
$600
$800
$1,000
$1,200
$1,400
CVT Nonconst. Constitutional
CVT Revenue Sharing
Since FY 1997-98:Constitutional up 40%, Nonconstitutional down 69%
Source: Senate Fiscal Agency and May 2015 Consensus Revenue Estimates
P21.3% of sales tax revenue at a sales tax rate of4% to be distributed for revenue sharing.< 25.06% of that amount for counties< 74.94% for cities, villages, and townships.
PThis level of funding has not been appropriated.
PThere is no longer any statutory revenue sharingdistribution formula for CVTs.
PThe county distribution formula in statute is paid infull, but is still less than the earmarked revenue.
But What About the Sales Tax Earmark?
The sales tax earmark for statutory revenue sharing only is effectiveif the money is appropriated.
1997-98 2000-01 2003-04 2006-07 2009-10 2012-13 Est. '16
0
$500
$1,000
$1,500
$2,000
Earmarked Revenue Constitutional
Title of Chart
What Would Full Funding Look Like?
Constitutional Revenue Sharing Plus Earmarked Revenue
Source: Senate Fiscal Agency and May 2015 Consensus Revenue Estimates
2000-01 2003-04 2006-07 2009-10 2012-13 Est. '16
0
$200
$400
$600
$800
$1000
CVT Earmarked Rev CVT Appropriated
Earmarked Revenue vs. Appropriations
CVT “Statutory” Revenue Sharing
Source: Senate Fiscal Agency
Source: Senate Fiscal Agency
Community Health$18,035,285,800
34.7%
Human Services$5,700,295,800
11.0%
K-12 & Dept. of Education$13,977,458,800
26.9%
Community Colleges & Higher Education$1,881,221,200
3.6%
Transportation$3,721,275,700 7.2%
Corrections$2,022,496,700 3.9%
St. Police/Military/Veterans Affairs$790,852,400 1.5%
Judiciary$285,403,200 0.5%
General Government$2,694,304,300 5.2%
Revenue Sharing$1,232,694,000 2.4%
Lic.& Reg. Affairs/Ins. & Fin. Services$592,360,500 1.1%
Agri/Rural Dev. & Nat. Res. & Env. Quality$1,008,065,200 1.9%
Fiscal Year 2014-15 Year-to-Date Adjusted Gross Appropriations
Social Services 45.7%
Education 30.5%
Transportation 7.2%
Public Safety 6.0%
General Government 5.2%
Revenue Sharing 2.4%
Lic. & Reg. Affairs/Ins. 1.1%
Agriculture/DEQ/DNR 1.9%
Source: Senate Fiscal Agency - 3/20/2015
Where State of Michigan Tax Dollars Are Spent
FY 2014-15 Total Year-to-DateAdjusted Gross Appropriations
= $51,941,713,600
9,106.3 9,118.7 9,980.7 8,568.6 7,787.4 8,424.6 8,341.1 9,024.2 9,571.3 9,594.2 9,480.5
18,597.7 18,809.8 18,460.6 17,741.3 17,451.6 17,842.0 19,005.9 18,822.8 19,593.4 20,163.3 20,489.6
13,179.9 13,436.1 14,669.5 16,083.0 17,402.7 19,158.0 19,730.5 19,372.7 20,500.2 21,650.1 22,662.5
5,041.6 2,538.2
2,156.5
438.8 487.2505.8
507.4
476.7
508.5 520.6 538.8
534.7
534.1 401.2
FY 2005-06 FY 2006-07 FY 2007-08 FY 2008-09 FY 2009-10 FY 2010-11 FY 2011-12 FY 2012-13 FY 2013-14 FY 2014-15 FY 2015-16
LOCAL/PRIVATE ARRA FED FUNDS RESTRICTED GF/GP
Year-To-Date (Millions of Dollars)
State Of Michigan Appropriations by Fund Source
Fiscal Year1997-98
2001-022005-06
2009-102013-14
0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
Actual In 2010 Dollars
Nominal Revenue in FY 15 Below FY 98 Level; Adj. for Inflation, the FY 68 Level
Ongoing General Fund Revenue
Source: U.S. Dept. of Commerce, Michigan Dept. of Treasury, and May, 2015 Consensus Revenue Estimates
FY 2014-15,2015-16, and
2016-17estimated
Income Tax63.7%
$6,199.0
Tobacco taxes1.9%
$182.4Use Tax
9.7%$946.2
Michigan Business Tax/Corp. Income Tax2.7%
$258.6
Sales Tax12.1%
$1,181.3
Driver Responsibility Fee0.6%$61.4
Liquor Purch. Fund1.8%
$178.5
Insurance Taxes4.1%
$402.0
Alcoholic Bev. Taxes1.0%$92.5
Penalties/Interest1.4%
$138.0
Other Tax/Non-tax Revenue0.9%$85.0
(Millions of Dollars)
May 15, 2015 Consensus Revenue Estimates
Total (AllEarmarked Taxes):
$9,724.9
Non-Discretionary
$48,418,734,000
90.4%
Discretionary
$5,170,222,200
9.6%
How Much is Discretionary Spending?
State Appropriations From All Sources
Total Appropriations = $ 53,588,956,200
Senate Fiscal Agency - June 3, 2015
State Appropriations From All Sources: How Much Is Discretionary? (Actual Dollars)
FY 2015-16 Adjusted Gross Appropriation...............................$53,588,956,200(Conference Reports)
Constitutional/Statutory Earmarking Requirements: School Aid Fund (50% Constitutional)....................................($12,582,454,400)Transportation (87% Constitutional)...........................................(2,184,391,400)Regulatory Restricted Revenue (Statutory)................................(1,372,817,500)Constitutional Revenue Sharing....................................................(783,866,100)
Federal Funding Requirement...................................................(23,071,877,000)
Local and Private Revenue.............................................................(395,441,200)
Debt Service Payments...................................................................(422,919,600)
Caseload/Inmate Driven............................................................... (7,604,966,800)
Estimated Balance for Discretionary Spending.........................$5,170,222,200
Estimated Balance for Discretionary Spending Includes:
GF/GP Funding for Higher Education.....................................................$1,232,418,500
State Restricted and GF/GP Funding for State Police................................501,133,800
Nonconstitutional State Revenue Sharing Funding...................................468,540,000
GF/GP for Transportation.............................................................................400,000,000
Medicaid Programs-includes GME and MIChoice Waiver..........................400,000,000
Non-Medicaid Programs-includes CMH, Local Public Health, Aging........300,000,000
State Restricted and GF/GP Funding for Department of State..................203,796,600
GF/GP Funding for Judiciary........................................................................183,442,200
State Restricted Revenue for Various State Departments.........................331,622,200
GF/GP Funding for: Agriculture, Attorney General, Civil Rights, Education, DEQ, Executive, Insurance & Financial Services, Legislature, Licensing & Regulatory, Military & Veterans, DNR, Tech.,Mgt., & Budget, Treasury-Ops., and Talent and Econ. Dev....................1,149,268,900
TOTAL................................................................................................$5,170,222,200
P Revenue sharing funding for FY 2015-16 is stable in adifficult State budget environment. All currently eligible localunits remain eligible in FY 2015-16.
P Constitutional revenue sharing is estimated to grow 3.1%.
P A workgroup will discuss the CVT nonconst. distribution.
P There are many demands for limited State discretionaryrevenue.
Summary
Thank you!
For additional information, please contact:
Elizabeth Pratt, Fiscal AnalystMichigan Senate Fiscal Agency
(517) 373-2768lpratt@senate.michigan.gov
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