Michigan Communities:

Services Cut in Response to Fiscal Distress

HRD-92-142: Published: Sep 29, 1992. Publicly Released: Oct 19, 1992.

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Pursuant to a congressional request, GAO examined the fiscal conditions and effects of declining revenues on local Michigan governments.

GAO found that: (1) the Michigan economy grew steadily each year through the economic recovery from 1982 through 1989; (2) despite the economic growth, the state was not able to offset growing fiscal pressures at the local level, including the loss of about $200 million in federal general revenue sharing (GRS) funds beginning in fiscal year 1987; (3) when the national and state economies weakened in 1990, Michigan faced a $310-million deficit and began making broad budget cuts; (4) Michigan reduced aid to local governments in fiscal year 1992; (5) local communities faced a state-mandated freeze on property tax valuations for 1992; (6) the communities GAO studied used four strategies as fiscal coping mechanisms, including improved administration, increased tax revenues, reductions in program spending, and postponement of capital investments; and (7) the more fiscally distressed communities had fewer options in response to lost revenues, weakened economies, and increased demands for public services.

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