Group sues state for allegedly withholding billions from local communities

By: Bria Brown | Roseville - Eastpointe Eastsider | Published September 9, 2016

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EASTPOINTE — Taxpayers for Michigan Constitutional Government, a group founded by Eastpointe City Manager Steve Duchane and Wayne State University School of Law professor John Mogk, filed a lawsuit Sept. 7 against the state of Michigan for allegedly withholding billions of dollars from local governments, according to a press release from TMCG President Mogk.

The lawsuit focuses on the requirements of the Headlee Amendment, according to the release. The amendment requires the state to pay 48.97 percent of revenues to local governments.

“The purpose of the Headlee Amendment was to establish a balanced fiscal policy framework for local governments, limiting their ability to increase revenues from local property taxes on one hand, but protecting local governments from state actions that would undermine their fiscal integrity, on the other,” TMCG attorney John Philo stated in the release.

Mogk believes the state has withheld billions from local governments. Local governments that belong to Taxpayers for Michigan Constitutional Government include Eastpointe, Roseville, Warren, Center Line, Mount Clemens, Clinton Township, Utica, Hazel Park, Harper Woods, Grosse Pointe Woods and the Village of Grosse Pointe Shores.

“We’re estimating the state has shorted all local governments up to $4 billion. If the court agrees, the court will require the state (to provide) increased revenue to all local governments and it will be up to the Legislature to decide how to divide the new money up,” said Mogk.

According to Mogk, every year, the state reports that a range of 53 to 55 percent is being shared with local governments.

“We conclude, depending upon the year, that they’re sharing around 40 percent or less. That’s what we’re trying to correct,” said Mogk.

Since 2002, Eastpointe has lost an estimated $13,688,000 cumulatively, according to Duchane.

“We’ve (Eastpointe) just come through financial distress and we fixed it ourselves with (the South Macomb Oakland Regional Services Authority). Had we not done that, we’d be in emergency management right now. Part of it would’ve been the contribution of the state not following its obligations. That’s our most directed, immediate impact when you look at a city, for example,” said Duchane.

According to the release, miscalculation from the Michigan Department of Technology, Management and Budget has hurt municipalities and allowed the state to keep constitutional payments and redirect them for other purposes. The DTMB calculates the constitutional payments made to local governments.

There are four types of prohibited payments that DTMB included in the calculation for minimum percentage requirements, according to the TMCG.

• Payments made to local units of government to maintain major trunk lines, which the TMCG says is prohibited from inclusion under Article 9, Section 30, which prohibits payments made to local units of government to perform obligations belonging to the state.

• Payments resulting from Proposal A, which the TMCG says is prohibited from inclusion under Article 9, Section 25, which prohibits a tax shift putting a tax burden on local governments.

• Payments made to public school academies, which the TMCG says is prohibited from inclusion under Article 9, Section 33, which prohibits payments to agencies that are not political subdivisions of the state.

• Payments made to local units of government to fund obligations that the state imposed upon them.

“The lawsuit seeks a declaration that the use of funds raised through Proposal A, spending on public school academies, spending on the maintenance of major trunk lines and payments to fund state obligations cannot be included in the calculation of the minimum mandatory payment; an injunction barring the state from including funds from these areas in the minimum percentage payment calculation; and monetary relief to local governments to recover shortfalls in state spending,” according to the release.

According to State Budget Office spokesperson Kurt Weiss in an email response, the State Budget Office and the Office of Financial Management are responsible for determining expenditures that are counted as aid to locals.

“The Office of Financial Management within the State Budget Office works hard each year to properly identify expenditures to determine the amount of state spending that goes to the aid of local governments.  Those expenditures are in turn submitted to the Office of Auditor General for validation to ensure the calculations are accurate. This is a methodology that has been applied consistently since the passage of Proposal A. The State Budget Office will take time to further review the complaint, but it’s important to note that these calculations have been consistently applied over time,” stated Weiss.

A message seeking comment from the Michigan Attorney General’s Office was not returned by press time.

For more information on TMCG, visit www.michcongov.org.

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