Bringing Treasury into the 21st Century

From 1960 to today, Michigan has navigated major shifts. In the 1970s, the Taxpayer’s Revolt led to significant changes in Michigan’s Constitution. Local taxes could no longer be increased without voter approval. State spending was capped, and Lansing was barred from passing unfunded mandates onto local governments—strengthening local control over taxation and spending.

Proposal A

A major change came in 1994 with Proposal A, which shifted school funding away from local property taxes and toward state-managed revenue sources. This included a new state education tax, an increased sales tax (from 4% to 6%), and other taxes like the real estate transfer and cigarette taxes. Proposal A helped reduce disparities in school funding and stabilized how schools received money, even during economic downturns.

The Great Recession

The Great Recession hit Michigan early and hard. Unemployment surged to over 15%, property values dropped by 13%, and Michigan saw the highest property tax delinquency rate in the nation. Voters had already capped property taxes in the 1930s, limiting the state's ability to rely on them. To make up for falling revenue, Michigan adopted new taxes, cut more than $3 billion in spending between 2009 and 2011, and restructured the tax system.

The End of the Emergency Manager Role

Meanwhile, cities and schools struggling with long-term financial distress were placed under state appointed emergency managers. In the 2010s, places like Flint, Detroit, Pontiac, and several school districts came under state control. A 2011 law expanded emergency manager powers, but it drew controversy, especially after the Flint Water Crisis occurred under such oversight. By 2018, the state had stepped back, and for the first time in nearly two decades, no local government or school district was under emergency management.

Restructuring Financial Responsibilities

In 2008, the longstanding Single Business Tax (SBT) was replaced with the Michigan Business Tax (MBT). In 2012, the MBT was largely replaced by a flat Corporate Income Tax (CIT). This shift simplified the business tax structure and reduced the tax burden on many employers—but it also meant less revenue for the state’s General Fund, requiring Treasury and the other State departments to rethink how to maintain services with fewer resources. Today, Treasury continues to respond to shifting political landscapes, economic pressures, and evolving public needs —with a constant focus on balancing stability and fairness.