CHICAGO — Michigan Gov. Rick Snyder's proposed 2015 budget bodes well for the state's struggling local governments, Moody's Investors Service said Tuesday.
Snyder's $52 billion budget features a boost in state aid for local governments, especially those that are struggling.
The spending blueprint features a 15% increase in revenue sharing under a program called the Economic Vitality Incentive Program, one of the state's two revenue-sharing programs. For the first time, Snyder has proposed that communities that are distressed either with high unemployment or violent crime rates or with a state-approved deficit elimination plan should be in line for more funding.
"The proposals are credit positive for municipalities hit hardest by the economic downturn," Moody's analyst David Levett wrote in a comment in the firm's weekly credit outlook report.
Lawmakers still need to sign off on Snyder's proposals. They will debate the budget over the next few months, with a goal of passing it by June. The state's fiscal year begins Oct. 1.
The five cities most likely to benefit from Snyder's proposal are Flint, Saginaw, Benton Harbor, Detroit, and Fruitport, analysts said. Many other cities that are a state of fiscal emergency will benefit as well, according to the ratings firm.
Detroit would also benefit from Snyder's plan to provide $350 million over 20 years to help pay off the city's unfunded pension liability.
The executive budget also sets aside $10 million for distressed school districts. But that proposal, as well as modest increases in per-pupil spending, probably would do little to ease underlying challenges facing many local school districts, Moody's said.
The state's school districts are facing rising challenges amid property tax value declines and population losses. Moody's in 2013 downgraded 50 of the state's school districts, more than 20% of its portfolio, Levett said.
"Per-pupil funding, known as the foundation allowance, is critical for Michigan school districts because they have no ability to increase revenues for operations beyond what is allocated by the state," Levett wrote, noting that Snyder's budget increases the minimum foundation allowance by 1.6% and the basic foundation funding by 1%.
"While positive for districts," he wrote, "the increase still leaves the foundation allowance below that of fiscal 2010."
