By the Numbers: Michigan has some of the Lowest Governmental Administrative Costs in the Nation

“By the Numbers” is a series of short articles evaluating the finances of Michigan local governments, primarily through the use of U.S. Census reports on Local Government Revenues and Expenditures by Type of Government, and State and Local Government Revenues and Expenditures. These articles look at how Michigan compares over time to the rest of the nation.

Several articles have benchmarked changes in revenues for local governments comparing the years 2002, 2007, and 2012. Changes in revenue collections, as well as transfers from the State and Federal governments, have been evaluated for each type of local government in Michigan – municipalities, counties, townships, and school districts. Another installment looked at two distinct types of own source revenues: taxes and fees.

Later articles benchmark Michigan’s state and local expenditures on various categories of services on a per capita basis as compared to other states, using information from 1992, 1997, 2002, 2007, and 2012. The first expense category analyzed was payroll.

Finally, overall results will be evaluated with a critical look at Michigan’s current system of funding local governments and the services they provide.

When looking to control government costs, people often look at the administrative expenditure lines to create efficiencies. In Michigan, expenditures on general administrative costs are extremely low, compared to the rest of the nation.

The U.S. Census looks at administrative costs from three perspectives:

Financial Administration includes activities involving finance and taxation, accounting, auditing, and budgeting. It also includes tax administration, collection, custody and disbursement of funds, as well as administration of employee retirement and debt and investment.

General Public Buildings includes provision and maintenance of all buildings not allocated to a particular source.

Other Governmental Administration includes the activities of the governing body, the office of the chief executive, central staff services, and agencies concerned with personnel administration, recording, planning, zoning, and other similar activities.

In 2012, Michigan was 44th in the nation in per capita expenditures for Financial Administration, 45th in expenditures on General Public Buildings, and 42nd on Other Governmental Administration when looking a the combined state and local figures.

Michigan has traditionally controlled its Financial Administration costs. In 1992, the state ranked 33rd nationally in this category but was ranked in the 40s in 1997, 2002, and 2007. Michigan ran in the middle of the pack on cost General Public Buildings, ranking between 23rd and 29th in the nation between 1992 and 2007, but the Great Recession had a significant impact on this budget item. The cost of governance in Michigan has had a long downward trend. Michigan ranked 16th and 19th in 1992 and 1997, respectively, in the per capita cost of Other Governmental Administration, but by 2007 had dipped to 39th which reflects the significant efforts to reduce government operational costs, especially at the local levels. The further decline, to 42nd in the nation in 2012, reflected the continued financial problems throughout the state.

The Census numbers give clear insight that governments and, particularly local governments, responded to the challenges of a poor economy by significantly scaling back the cost of governance. At present time, only a handful of states can claim that they have lower administrative costs than Michigan.