Michigan at a Crossroads

Michigan state and local governments and their various public components (counties, cities, townships, school districts, public colleges and universities, special districts, development authorities and so on) spent about $6.6 billion on capital outlay (or infrastructure) in fiscal year 2016 (as measured by the U.S. Census Bureau). Capital expenditure by state and local government is important for a number of reasons. The benefits include the direct effects for public services to individuals and businesses (transportation, education, and recreation for example), and the implications for public safety and environmental degradation from declining quality of public infrastructure (regarding congestion, water, and sanitation for instance). There also is a potentially beneficial relationship between public capital and long-run economic growth, although there has been some ambiguity in the research results regarding this last issue.

As defined by the Governments Division of the Census Bureau, state and local government capital expenditure includes expenditure for construction of buildings and improvements, for purchase of land, equipment, and structures, and for capital leases. The capital spending data collected and reported by the U.S. Census Bureau allow consistent comparisons among the states, although these data may differ from similar information reported in a state or city government’s budget. The Census applies a consistent definition of capital spending, even though individual states may label capital spending differently, and the data are adjusted for differences in the way states report spending—including different fiscal years and different financial accounting practices. Importantly, the Census reports aggregate data for state government, local governments, and other governmental entities such as public universities and special districts, permitting an examination of overall public capital investment in a state regardless of the institutional structure.