Ingham County government facing $12M General Fund shortfall shortfall

Thanks to significant pay bumps, Ingham County is facing a bigger-than-usual General Fund deficit as it begins planning for the next fiscal year, which begins Jan. 1.

Officials projected that the General Fund is going to be $12 million short, compared to $6 million to $7 million normally at this time in the process. The General Fund is largely a government’s operating fund.

This year’s General Fund is $95.2 million. Projections put it at $106 million next year, but projected revenues are just $97.6 million.

“We are not sure what the 2024 total budget looks like yet as we are focused on the General Fund shortfall at this point,” said County Controller Gregg Todd. “Departments have not submitted budgets yet.”

The 2023 budget was $311 million overall, nearly a 20% increase over the 2022 budget. 

Todd will begin the informal budget process for the 2024 budget 7:30 tonight (April 19) at the Board of Commissioner’s Finance Committee meeting in Conference Room A of the Human Services Building, 5303 S. Cedar St. in Lansing. It can also be viewed on Zoom. 

“County commissioners agreed to about a 7 or 8% increase for all of our staff,” Todd said. That was accomplished by reviewing the various pay scales, eliminating the lowest levels and creating a new, higher level at the top. Coming on top of the usual cost of living increase of 3%, county employees saw an overall increase of closer to 10%. 

Recent court rulings on proceeds of tax-foreclosed properties have put a hole in the budget as well.  A 2020 Michigan Supreme Court ruling found that counties could not keep the proceeds from the tax, fees and interest owed on a property sold in a tax foreclosure. That means if a property owner has a tax bill of $2,000 on a property sold at auction for $4,000, the county must pay the difference of $2,000 to the property owner. 

Ingham County Treasurer Alan Fox has been planning for those repayments for the “last couple of years.” The county’s delinquent tax rotating fund has previously provided between $1.5 million and $1.7 million to the county’s General Fund. But those payments have stopped in preparation to pay individuals who had a financial interest in a property that sold for more than the taxes, fees and interest owed. 

That Supreme Court ruling resulted in lawsuits in federal court by property owners seeking to recoup the excess funds generated when properties were sold at tax foreclosure auctions between 2013 and 2020. A federal judge in the Western District of Michigan is reviewing a settlement on that issue. 

“We’re holding onto anything that is related to prior year auctions or prior year delinquent tax payments as a way to pay those claims,” Fox said. “That has prevented the Treasurer’s Office from transferring anything to the General Fund. I am hoping it all gets resolved quickly.” 

On the upside, the county equalization office provided a new assessment of property values last week that exceeds previous years. In the past few years, Todd said, the property values in the county rose about 4% a year. This year, they will be 6.2% higher. A state constitutional amendment caps property tax increases to 5% a year, regardless of the increase of property value from year to year. But if a property has been sold in the previous year, the new value of the property becomes the basis for property taxes. So, a property that was previously valued at $150,000 but sold last year for $200,000 is taxed at the $200,000 level. 

“So that’s another one and a half, $2 million to the General Fund,” he said.

Ultimately, he said, the county will face about a $7 million deficit on paper that it will have to address. “That gets us a little bit closer, and I think we can work with that,” he said.

Another saving grace for the budget process for 2024 is that the county still has about $7 million left in American Rescue Plan Act dollars left that it can use to backfill budget shortfalls from the pandemic. 

“We’ve still got some flexibility there,” he said. “We could probably do another couple million in 2024 to help balance that out, but we don’t want to rely on ARPA. We want to kind of wean ourselves off that.”

Commission chair Ryan Sebolt and Todd said there is one revenue source still unaccounted for in the budget: state revenue sharing. That’s where the state provides a portion of local sales taxes to local governance units, including counties. Since the early 2000s, those dollars have been less than usual due to economic issues. Sebolt said he is expecting a change in that this year. 

Said Sebolt, “Revenue sharing will be done on a different calculation than in the past.”