Under current law, the Michigan Department of
Treasury is required to wait until units of local government show signs of
severe fiscal stress before being able to directly address the local government
issues. Rather than take this reactive approach, the Michigan Department of
Treasury has developed a process to review certain fiscal indicators that
encourage sound fiscal health for all of Michigan's 1,858 units of local
government. The Department of Treasury's process also provides for guidance,
upon request, for those units of local government needing it.
The fiscal indicator scores are intended to
provide State officials, local officials, and the general public with objective,
measurable, and straightforward information concerning the degree of, or absence
of, fiscal health in units of local government. This information provides the
public with information that may not be publicly displayed from their local
officials. The most cost-effective way to accomplish this goal is to publish the
fiscal indicator scores on the Michigan Department of Treasury web site. It is
similar to the school district report cards available for all Michigan school
districts.
The Michigan Department of Treasury commissioned
the Institute for Public Policy and Social Research at Michigan State University
to evaluate local government fiscal indicators included in existing state law.
As the Institute completed its evaluation of existing fiscal indicators it was
asked to propose more effective fiscal indictors.
To view study click here.
Key factors from nine categories are analyzed
and assigned points. They include, but are not limited to:
- Population growth
- Real taxable valuation growth
- Large real taxable value decrease
- General fund expenditures as a percent of taxable valuation
- General fund operating deficits
- Prior general fund operating deficits
- Size of general fund balance
- Fund deficits in current or previous years
- General long-term debt as a percent of taxable value
Once the data has been collected and each
local units score is calculated, a letter will be sent with the local unit's
fiscal indicator score along with the criteria used to arrive at the score to all
of the following offices: The Chief Elected Official, the City Manager, and the
Finance Director or equivalent position. The local unit will then have 60 days
to respond or comment on the score to Department of Treasury and address any
factual errors they believe are present. Any substantiated factual errors will
be used by the Department of Treasury to recalculate the local unit's fiscal
indicator score. At the conclusion of the 60 day period, Treasury will
electronically send the final fiscal indicator score report to all of above
mentioned offices, plus the entire legislative body of the local unit, as well
as the local unit Clerk and Treasurer. At the same time the fiscal indicator
score of the local unit will be posted on the Michigan Department of Treasury
website.
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Where the Numbers Come From |
Population Growth: Information provided
from the
Population Estimates - U.S. Census Bureau (Note: With each new issue of July
1 estimates by the Census Bureau, the population estimates program revises
estimates for years back to the last census. Previously released estimates are
superseded. The scores will not be updated to reflect the revised estimates).
Real Taxable Value: Assessing Officers
Report of the local unit of government filed with the Department of Treasury
(includes real property only.) As this is a measure of a two year period, the
most recent year is deflated using data from the
US Bureau of Economic Analysis (BEA) (Note: The annual or 4th quarter gross
domestic product is used to calculate the deflator. The BEA revises this figure
on a regular basis and previously released data is superseded. The scores will
not be updated to reflect the revised number.)
General Fund Revenue and Expenditures:
Annual or biennial audit report of the local unit of government filed with the
Department of Treasury (the general fund operating revenues and expenditures do
not include other financing sources/uses such as operating transfers in or out.)
Fund Deficit: Annual or biennial audit
report of the local unit of government filed with the Department of Treasury
(includes a deficit in a major fund in current year and prior year. Major fund
is defined as those funds with revenues, expenditures, assets or liabilities
that make up at least ten percent of the total for the fund category or type
(governmental or business-type) and at least five percent of the aggregate
amount of all governmental and enterprise funds. Internal service funds are
excluded from the major fund reporting requirements. The general fund is always
a major fund. A local unit official may make any fund major.)
General Long Term Debt: Annual or
biennial audit report of the local unit of government filed with the Department
of Treasury (includes long-term debt for governmental activities.)
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Fiscal Health Score Significance |
| Points from Scale |
Category |
State Action |
| 0-4 |
Fiscally Neutral |
No State action needed. |
| 5-7 |
Fiscal Watch |
Unit of local government is notified of its
relatively high score and is placed on a watch list for the current and
following year. |
| 8-10 |
Fiscal Stress |
Unit of local government is notified of its
high score, is placed on a watch list for the current year and following
year, and receives consideration for review. |
Fiscally Neutral - Local Units that score in this category are
deemed to be managing its financial circumstances appropriately, but local units
should not interpret a score in this category as an indicator that they are in
anyway insulated from financial concerns. It is a snap shot of a local unit's
financial condition. It is not an indicator of ability to pay. Local decisions
that impact a local unit's finances or deviations from its current financial
strategies may result in changes to future fiscal health scores.
Watch List - Local Units that score in this category are
considered to be in a financial circumstance that is cause for concern, but that
can still be addressed by the local unit. Governing bodies of local units on the
watch list should exercise added care when making financial decisions, and
formulate a financial strategy to return to the local unit to a fiscally neutral
score. Local units may request assistance from the Department of Treasury in
developing financial strategies that will assist in returning its score to
fiscally neutral.
Fiscal Stress - Local Units that score in this category are
considered to be in poor financial condition. Governing bodies of local units
that score in this category should take immediate corrective actions to improve
the financial health of the local unit. Assistance and potentially intervention
by the Department of Treasury is expected for local units scoring in this
category.
In our capacity as fiscal watchdog for
Michigan Units of Local Government, the Department of Treasury has provided an
objectively measurable process that calculates fiscal indicator scores for
Michigan's 1,858 units of local government. By creating this process we are able
to identify the fiscal health of Michigan's local units. By posting the fiscal
indicator scores on our website we are discharging our duty of public disclosure
to the citizens of Michigan relative to the fiscal health of their unit.
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To View Scoring Summary by Local
Unit Type Select Year |
|
To View Score Select Year |
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