Fines and fees should not be a substitute for tax revenue

A version of this column originally appeared in The Alpena News.

Long days and warm weekends are upon us, and there’s nothing I love more during the summer than getting outside. I feel lucky to be a Michigan transplant this time of year, because I know the parks here are some of the best. With over 300,000 acres spread across 103 state parks and recreation areas, there’s a lot to explore.

So I joined millions of other Michiganders across the state and paid just $12 for my “Recreation Passport.” While this may be a small price to pay for access to the outdoors, a growing number of state and local government departments, including the Department of Natural Resources (DNR), are relying on fees to maintain public goods. In 2021, only about 10% of the DNR budget came from state tax revenue while over two-thirds was from license and permit fees.

Parks aren’t the only area where fees or fines are an essential revenue source expected to make up for insufficient tax revenues. Penal fines are an important revenue-raiser for libraries, with smaller and more rural counties relying most on fines to fund library operations and programming. The five Michigan counties with the highest penal fines per person in 2021 were all in counties classified as mostly rural or completely rural.

In 2019, public libraries collected nearly $25 million in penal fine revenue, twice the $12 million appropriated from the state general fund. 

Insufficient revenues make it difficult to keep libraries open even as they play a vital role as community centers by providing public space for meetings, free internet for job-seekers and after-school or summer programming for children. In Detroit, where 12% of the 2020 revenue from its library millage was captured by the city to provide economic development incentives, the cost of reopening the library branches closed during the pandemic exceeds estimated revenues by over $1 million. 

Research shows fines and fees fail to efficiently generate revenue for essential state services. Collection and enforcement costs are higher for fines and fees compared to taxes, which are often collected automatically such as in the case of sales taxes or payroll withholding. 

In addition to being less efficient, fines and fees are substantially less equitable. Unlike taxes, fines and fees do not take into account ability to pay and therefore fall more heavily on individuals with low incomes. Research has shown cities with larger Black and Asian populations are more reliant on fines, raising racial equity concerns about using fines and fees to pay for essential government services.

What we choose to pay for says a lot about our priorities as a state. When we can find $2 billion (17%) in the general fund to pay for corrections but only $48 million (1%) for the Department of Natural Resources, we are saying that we value prisons over parks. Fines and fees are not a solution for insufficient tax revenues. This funding model for state goods and services that should benefit everyone is inherently unfair. 

As policymakers debate the extent of tax cuts—should it be $1 billion or $2 billion?—we must ask ourselves how we plan to make up the difference.