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Blog: Governor Snyder on Solving Detroit's Fiscal Crisis

 

Solving Detroit's Fiscal Crisis
By Governor Rick Snyder
March 1, 2013

Detroit is in the midst of a fiscal crisis, and additional actions are needed to address the city's dire problems.

This isn't news to Detroiters who are suffering the effects of this crisis, and it's not news to those watching from afar. But last week, an independent financial review team issued a report that laid bare the facts behind Detroit's fiscal emergency.

I have reviewed that report and agree with the conclusion of the financial review team. Detroit is, in fact, in the midst of a fiscal emergency that will likely lead to the appointment of an emergency financial manager. It's not a decision I make lightly, and I'd like to take an opportunity to share with you how I arrived at it. Here are some of the facts that show why action is necessary:

  1. The city overestimated its revenues while spending well beyond its means. In 2011 to 2012, for example, the city initially budgeted $1.275 billion in revenue, amended its estimates to $1.56 billion, and wound up taking in only $1.1 billion -- nearly 30% less than they expected.

  2. The city borrowed massively to address its deficit and cash flow needs. Between 2005 and 2011, the city borrowed over $600 million to cover its short-term bills, all while leading to even more long-term problems.

  3. The city's long-term liabilities have ballooned out of control. As of June 30, 2012, the city's long-term debt exceeded $8.6 billion, not including pension liabilities and other post-employment benefits. If those obligations are added in, the city's total long-term debt is $14.99 billion, depending on whether certain pension system assets are added in.

  4. The city's current efforts and systems are not sufficient to address its short and long term challenges. Despite the city's efforts to make reforms, it is projected to have a cash deficit in excess of $100 million by June 30, 2013. The review team concluded that the city would need to increase revenue, or decrease expenditures, or both, by roughly $15 million per month from January to March 2013 to remain financially viable.

It's not just about numbers, though. The people of Detroit deserve to have someone respond when they call 911, to have the lights on in the streets, to feel safe when they send their kids off to school in the morning. With the trouble Detroit has had in balancing its budget, city services have fallen short, and the quality of life has suffered.

Working together in partnership, we can more quickly and efficiently reform the finances in the city and stop the cycle of overspending and one-time fixes.

We're seeing great things happen in Detroit with improved schools, a thriving Midtown, new businesses, and a revitalized riverfront. But we can't allow a continuing fiscal crisis to stand in the way of Detroit's reinvention. We need to solve the financial issues and set a solid foundation for the future so the city can continue to reinvest in its services and public safety, and begin to grow Detroit once again.


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