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Michigan’s Path to A Prosperous Future: Final Paper Highlights Public Sector Challenges and Opportunities

New research reveals challenges and opportunities for Michigan’s public sector to address problems related to making the state a destination for people and businesses.

Michigan’s Path to a Prosperous Future: Challenges and Opportunities

A new five-part research series, supported by several CMF members and managed by the Governor's Office of Foundation Liaison (OFL), presents a data-informed vision of Michigan’s future based on current trends and trajectories across our state’s demographics, economy, workforce, infrastructure, environment and public services.

The fifth and final paper in the series was released last week and focuses on Michigan’s challenges and opportunities for the public sector.

The Citizens Research Council (CRC) of Michigan and Altarum published the report, Michigan’s Path to a Prosperous Future: Challenges and Opportunities, supported by CMF members Charles Stewart Mott Foundation, The Kresge Foundation, Ralph C. Wilson, Jr. Foundation, Hudson-Webber Foundation, Grand Rapids Community Foundation, W.K. Kellogg Foundation, Max M. & Marjorie S. Fisher Foundation, Michigan Health Endowment Fund, The Joyce Foundation, The Skillman Foundation and the Ballmer Group.

The new paper in the research series explored the public sector’s ability to address the state’s challenges, such as household income, K-12 educational outcomes, health outcomes, electric service reliability and road conditions.

It also examines the sufficiency of Michigan’s ability to invest in education, infrastructure and public health, and the state’s ability to drive the economy and create places where people want to live.

According to this new research, while state and local government are not responsible for solving all of Michigan’s challenges, it notes that the public sector’s ability to respond to problems worsened between 2000-2010 when economic decline and scarce public resources constrained government funding, workforce and investments to make the state a destination for people and businesses.

The report outlines key priority areas for public investment to address Michigan’s challenges related to an aging population, talent attraction and retention, public infrastructure and the state’s education system. Including:

  • Higher Education: Currently, state funding for Michigan’s public universities is 34% below the level of two decades ago.
  • Safety-Net: Between Fiscal Year (FY) 2000 and FY 2020, families who earn a lower income and receive cash assistance fell by 94%, the fourth-highest decline in the nation.
  • Road Funding: The state faces challenges in funding the infrastructure to keep drivers and passengers safe.
  • Revenue Sharing: Reductions in state revenue sharing to municipalities and counties have created significant financial strain on local governments.

The report highlights recommendations for Michigan to market its natural resources, moderate climate and lakeshore and rural areas to attract residents who can work remotely, only if people find the services and quality of life they seek.

The report also explores the impact of the economic decline on two major funds that the state relies on to support much of its state-financed public programs. The School Aid Fund (SAF) supports public K-12 education and preschool programs, as well as a portion of the operating cost of public postsecondary institutions and the discretionary General Fund/General Purpose (GF/GP) budget supports much of the remaining state budget.

Key takeaways on the state’s revenue include:

State Government

  • Efforts to be competitive have caused Michigan’s state and local governments to make difficult decisions, often reducing funding for key services. They are smaller and less capable of providing services than they were 20 years ago.
  • Communities with growing populations and available land to develop, mainly exurbs and rural areas within commuting distance of a central city, can grow their tax bases, while communities like urban and suburban areas have increased tax rates to keep tax revenue growing.
  • The federally administered Supplemental Nutrition Assistance Program (SNAP) and Medicaid spending have increased significantly while funding for the Family Independence Program and Child Development and Care Program has declined.
  • Appropriations for health and human services have nearly tripled between FY 2001 and FY 2024 and have grown by 76.1%. However, spending within this budget has moved in different directions.

Local Government

  • Michigan local governments are more constrained in their tax options than those in many other states.
  • Local government organization has changed little since Michigan’s statehood in the 1800s, with 83 counties, 533 cities and villages, and 1,240 townships that provide a broad, and somewhat overlapping, range of services.
  • Local governments are dependent on the economic and financial health of the state, presenting challenges for them as the state is operating without a comprehensive, long-term economic plan or strategic direction.
  • The current 19th-century governance model cannot meet the needs of 21st-century Michigan. The outdated hyper-local governance discourages regional cooperation among cities, townships, and counties.
  • Michigan’s property tax limitations create incentives to develop land, encouraging urban sprawl, and increase tax rates. Property tax limitations constrain local governments’ ability to keep up with the needs of residents.
  • Advances in communication, technology and transportation can enable a new model of regional governance that would be more efficient and effective than thousands of small local governments doing things alone. Greater regionalism will allow for a broader and more diverse tax base to fund public services across all communities.

According to the report, Michigan’s economic struggles throughout the 2000s highlighted the need to create a different model for state and local governments. To grow the population, Michigan needs to fund state and local governments so they can provide public services, updated infrastructure, good school systems and an environment for producing job opportunities.

The report suggests that using state revenue to invest in Michigan’s education, infrastructure and public health while creating sustainable models of funding local and regional governments will provide desired services and a standard of living across regions.

As CMF reported, the executive summary and the first two papers in the five-part research series were released in May and focus on Michigan’s population, economy, workforce and talent. The third paper was released in August and focused on Michigan’s health. The fourth paper on infrastructure was released in September.

Want more?

Read more about the fourth paper focused on Michigan’s environment and infrastructure.

Read more about the third paper focused on the health of Michigan’s population.

Learn more about the executive summary and the first two papers in the five-part series of research that focuses on Michigan’s population, economy, workforce and talent.