by Laurie Cummings, Economist, and Robert Kleine, Vice President and Senior Economist
|This Advisor compares combined state‐local spending and revenue in Michigan with that of selected other states. The data show that Michigan is continuing to move away from high taxation and spending.|
The U.S. Bureau of Census recently released its preliminary data on federal, state, and local finances for FY 1991 – 92. This report uses the data to compare Michigan state‐local expenditures and revenues to those of 12 other large states and to the national average. The accompanying exhibits (1) display the data for Michigan and the 12 selected states and (2) indicate how Michigan and the highest and lowest of the 12 rank relative to all states and the District of Columbia. (The exception is the last four exhibits, which display only state data, not combined state‐local figures, and give each state’s percentage of the national average rather than rankings relative to the other states.)
The data show that Michigan is continuing to move away from high taxation and spending. Michigan began bringing its revenues and expenditures into line with the national average in the late 1980s, and the trend continues to be reflected in the FY 1991 – 92 data. The change has been particularly dramatic since FY 1985 – 86, Michigan’s peak tax‐and‐spend year in that decade.
As shown in the table, in FY 1991 – 92 Michigan’s own‐source revenues were 16.8 percent of the state’s total personal income, compared with 17.5 percent in FY 1985 – 86.1 Revenues have declined from 9.4 percent above the national average in FY 1985 – 86 and 2.9 percent above in FY 1990 – 91 to 2.4 percent above in FY 1991 – 92. In FY 1991 – 92, Michigan’s tax burden ranked 19th in the nation, down from 14th in FY 1985 – 86.
As we predicted last year, Michigan state‐local expenditures have fallen below the national average. In FY 1991 – 92, for the first time in recent memory, Michigan expenditures relative to personal income were lower than the national average. Expenditures were 23.1 percent of personal income, or 3 percent below the national average, down from 12.3 percent above the average in FY 1985 – 86 and 1.8 percent above it in FY 1990 – 91.
Unfortunately, the effects of Michigan’s recent school finance reforms will not be fully known until FY 1994 – 95, and the data needed for a nationwide state‐local comparison will not be available until 1997. However, it is certain that when the information is available, Michigan’s ranking in property tax collections will drop, and its ranking in sales tax collections will rise. While total state revenues and expenditures undoubtedly will increase because of the shift to state funding for K – 12 education, the state‐local total will decline slightly.
Combined State‐Local Government Expenditures
The first 12 exhibits below show in two ways (per capita and per $1,000 of personal income), state‐local expenditures for six types of spending: total, education (K – 12 and higher education combined), welfare, health and hospitals, highway, and interest on debt.
Using FY 1991 – 92 per capita spending as a measure, Michigan state and local governments together spent $4,282 per resident — $239 less than the national average. Although this is a slight improvement over the previous fiscal year, when Michigan spent $190 less than the national average, Michigan ranked 20th in per capita spending in both years. (See Exhibit 1.)
Using percentage of personal income as the measure, in FY 1991 – 92 Michigan total spending was $230.57 per $1,000 of income, $7.09 less than the national average. Michigan’s rank was 32d in the nation, down from 28th in the previous year. (See Exhibit 2.)
Michigan continues to rank high in education spending. In FY 1991 – 92 combined per capita state‐local spending on education in Michigan was $1,468. This is $184, or 14 percent, above the national average. Michigan ranked 10th in the nation, down slightly from 8th in the previous year. (See Exhibit 3.)
Per $1,000 of personal income, the Michigan figure was $79.07 in FY 1991 – 92, 16.2 percent above the national average. Using this measurement, Michigan was 12th, up from 18th in the previous year. (See Exhibit 4.)
Michigan traditionally has ranked high in welfare spending. Largely due to cutbacks in the general assistance program, however, in FY 1991 – 92 Michigan’s $597 per capita state‐local welfare spending was slightly under the national average, dropping the state from 13th to 18th in the nation. The spending was 1.5 percent under the national average, down from 8.5 percent above it the previous year. (See Exhibit 5.)
Per $1,000 of personal income, FY 1991 – 92 combined state‐local welfare spending in Michigan was equal to the national average, down from almost 50 percent above the average six years earlier. The figure was $32.15, 21st in the nation. (See Exhibit 6.)
Health and Hospitals
Like welfare spending, Michigan typically has ranked high in spending on health and hospitals, but, again, in comparison to other states, Michigan spending in this category has dropped. Per capita health and hospital spending was $381 in FY 1991 – 92 and ranked 13th in the nation. This spending was 10.1 percent above the national average, down from 15.2 percent above in the previous fiscal year. (See Exhibit 7.)
Per $1,000 of personal income, combined state‐local spending in this category was $20.51, ranking Michigan 16th in FY 1991 – 92, down from 14th the previous year. The Michigan figure was 14 percent above the national average, down considerably from 117 percent above in FY 1990 – 91. (See Exhibit 8.)
Michigan traditionally has spent less on highway construction and maintenance than other states, and this remained true in FY 1991 – 92. The per capita combined state‐local figure was $200, 48th in the nation and 23.7 percent less than the national average. This is a slight decline from FY 1990 – 91, when the Michigan amount was $207.65, 47th in the nation and 19.4 percent less than the national average. (See Exhibit 9.)
Per $1,000 of personal income, Michigan spending in FY 1991 – 92 was $10.78 in this category. Although the ranking, 47th nationally, was unchanged from the previous year, the amount was 21 percent below the national average, compared to 18 percent below the average the year before. (See Exhibit 10.)
Interest on Debt
Michigan state‐local spending for interest on debt typically is below the national average, and this remained true in FY 1991 – 92. Per capita, the state spent $143 on debt interest. The resultant ranking, 39th, was unchanged from the previous year. (See Exhibit 11.)
Per $1,000 of personal income, state‐local spending on interest in FY 1991 – 92 was $7.70 and ranked 47th nationally. This was 33 percent below the national average, down slightly from 30 percent the year before. (See Exhibit 12.)
Combined State‐Local Revenue
Michigan’s tax burden in FY 1991 – 92, as measured by own‐source revenue per capita, was only 0.3 percent above the national average but ranked 16th among the states. Per $1,000 of personal income, the ranking was 19th, and the figure was 2.4 percent above the national average; the percentage had dropped significantly, however, from 9.4 percent above the average in FY 1985 – 86. (See exhibits 13 and 14.)
While slightly above average overall, Michigan state‐local revenue from the different sources varies widely relative to the national average. (See exhibits 15 – 22). As in the past, property tax collections were well above the national average (per capita was 35.5 percent above; the personal income figure was 38 percent above). Income tax collections also were above the national average, but only slightly (per capita was 3.1 percent above; the personal income figure was 5.8 percent above).
The sales tax burden remained lower than the national average (per capita was 30.9 percent lower; the personal income figure was 29 percent lower).
State Only‐Expenditures and Revenue
When compared to the national averages, Michigan state spending and taxation typically is lower than combined state‐local spending and taxation. For example, per $1,000 of personal income in FY 1991 – 92, state revenues were 101 percent of the national average, compared with 102.4 percent for state‐local revenues.
Exhibits 23 – 26 present data on state expenditures and revenues per capita and per $1,000 of personal income. (State rankings are not available.) Compared to the national average, FY 1991 – 92 state spending was down from that in FY 1990 – 91. Per capita, the figure was 97.1 percent of the national average, down from 100.5 percent in the previous year. Per $1,000 of personal income, the figure was 99.4 percent of the national average, down from 101.7 percent in the previous year.
State own‐source revenues also fell in relation to the national average in FY 1991 – 92. Per capita, revenues were 96.2 percent of the national average, a decrease from 101.7 percent in the previous year. Per $1,000 of personal income, the FY 1991 – 92 figure was 101 percent of the average, down from 102.9 percent in the previous fiscal year.
|1Own‐source revenues exclude federal aid and include all taxes, user fees, and miscellaneous revenues (such as interest earnings). Personal income includes wages and salaries, dividends, interest, rental income, and transfer payments.|
A copy of the full report is available below.