The state of Michigan faces enormous challenges in balancing its budget in the coming year. Local governments do as well.

What we’re hearing far more of these days is an acknowledgment that these budget problems are structural, and the only way to solve them is for government to look and act differently than it does today.

We heard it from Ann Arbor City Administrator Roger Fraser earlier this month when he asked City Council members, “If we can’t afford to do everything we have been doing, what is it we’re willing to modify?’’

Gov. Rick Snyder sounded a similar note in his State of the State message last week, when he talked of government as an “unsustainable financial model’’ that must be reformed.

One of the obvious solutions, Snyder suggested, is more consolidation of services among local governments and school districts. To which we say: Amen.

City Administrator Roger Fraser has told Ann Arbor City Council members they may have to make politically unpopular decisions to address a $2.4 million deficit for 2011-12.

Ryan J. Stanton | AnnArbor.com

Over the past year or so, we have been advocating for more consolidation, and speaking out in support of such efforts when they have occurred. But examples of consolidation remain few and far between, when compared to the opportunities and the potential savings.

One recent example would be consolidation of bus services among school districts in Washtenaw County. Although the goal was for all 10 school districts to participate, only three signed up: Ann Arbor, Ypsilanti and Willow Run.

Between them, Ann Arbor and Ypsilanti had expected to save $3 million through the move. The savings for all districts could have been greater if more had participated. It was disappointing, but not surprising, that more didn’t sign up. Consolidation can be a difficult and controversial move. But it can also be a significant cost-saver.

In these hard financial times, if local governments and school districts still can’t see that, the time has come to prod them more forcefully into consolidation measures.

That is why we welcome the governor’s call on Wednesday night to reshape state revenue-sharing in ways that reward entities that “adopt best practices,’’ such as service consolidation. We look forward to more details from the governor on that, and hope to see them in the budget he presents in mid-February.

A restructuring of revenue-sharing was one of many concepts that Snyder offered during his first State of the State message. But there is still much in the way of specifics that he needs to provide, particularly in the broad areas of tax reform and education. Until the governor more fully lays out his new policies, we are reserving judgment.

But even at this point, we welcome his call for true fiscal reform for local government and schools. The need couldn’t be any more obvious or urgent.

At a budget retreat earlier this month, Ann Arbor City Council members discussed a variety of drastic measures that might be needed to eliminate a $2.4 million deficit projected for the 2011-12 fiscal year. The ideas range from selling a fire station to imposing a city income tax.

And yes, service consolidations are on the table as well. Given the direness of the city’s financial situation, council is being asked to consider a more regional approach to construction and rental housing inspections, and more regional cooperation on police and fire services. Police Chief Barnett Jones suggested to council that Washtenaw County could become a “leader in Michigan’’ by taking such an approach.

Two weeks later, the Washtenaw County Board of Commissioners listened as County Administrator Verna McDaniel told them that “we know we have a deep and structural deficit, which we know we must repair.’’

In the county’s case, the depth of that deficit has been estimated at $20.9 million over the next two years, which board Chairman Conan Smith, D-Ann Arbor, said “probably means elimination of departments.’’

These kinds of budget discussions are playing out across Michigan, and the deficits facing local governments and schools are deep. Years of “kicking the can down the road,’’ as Snyder described it during the campaign and again in his State of the State speech, have not solved the problem. Only fundamental, structural change in government will.

Service consolidations are not the only solution, and they are by no means a panacea. They must be done strategically, and their results must be measured to determine what the actual savings are. When the three local school districts entered into bus consolidation last fall, there were serious glitches. Bringing about this kind of systematic change is not easy.

But the time for such bold change is overdue, and the reluctance of local governments and schools to embrace it cannot continue. Gov. Snyder not only recognizes that, he appears ready to insist upon it. Now he needs to back it up with real dollars that reward those who take the leap and save money by sharing services that they are needlessly duplicating right now.

(This editorial was published in today's newspaper and reflects the opinion of the Editorial Board at AnnArbor.com.)