How state and federal action have helped curb COVID-19’s economic impact

This column originally appeared in Michigan Advance on January 19, 2021

While the deplorable attack on the U.S. Capitol has cast a long shadow over 2021, there is still a lot of hope on the horizon with regard to the other crisis facing our nation and of Michigan. Two iterations of the COVID-19 vaccine are being distributed to essential and frontline workers. The initial shock of COVID-19 has subsided and federal and state governments have had time to make public health and economic plans to ensure a swift recovery.

And just last week, President-elect Joe Biden unveiled his $1.9 trillion COVID-19 American Rescue Plan to fund vaccinations, provide immediate relief to families, and support struggling communities. The president-elect’s plan also includes $350 billion in emergency funding for state, local and territorial governments to continue providing crucial services like Medicaid, police and fire, education and more. Leadership changes in the U.S. Senate are also expected to reinvigorate negotiations on economic relief to families, businesses, and state and local governments that have all been harmed by the pandemic.

In the final days of 2020, two important stimulus bills were passed at the federal and state levels that would provide limited relief to families and businesses in Michigan. While these bills represent only a fraction of the relief needed to maintain fiscal and economic stability, the spending is notable and significant. At the state level, the Michigan Legislature passed a COVID-19 budget supplemental worth $340 million. Meanwhile, the federal government passed a COVID-19 relief package worth $908 billion.

Both sources of stimulus were written to provide critical COVID-19 funding as well as relief to working families. However, there are still outstanding issues that need to be addressed in future rounds of stimulus.

First, the federal COVID-19 relief package did not include any additional funding for states and local governments. The federal CARES Act of 2020 included some restricted funding for COVID-19, but as the pandemic progressed, it was clear that state and local governments would need more relief to avoid severe budget cuts and layoffs.

Second, the relief provided is limited in scope, with important provisions expiring as early as the end of January, while the COVID-19 pandemic rages on. Stimulus packages should be tied to the duration of the public health emergency so that families can be confident that their relief will be sustained.

Third, the federal government failed to extend emergency paid sick leave that was tied to the CARES Act. This provision was critical to ensuring that COVID-19 patients could securely take leave so that they did not spread the virus in their workplaces.

Fourth, Gov. Gretchen Whitmer line-item vetoed $220 million from the COVID supplemental, calling it a “giveaway of taxpayer money to the employer-owned Unemployment Insurance Trust Fund,” but the Legislature had tied this funding to a six-week extension of state unemployment benefits for anyone who begins to take unemployment benefits in 2021.

We hope the Legislature will renegotiate a new six-week unemployment extension — and ideally, make the six-week extension a permanent one.

Highlighted below are the provisions that are of particular note because they provide relief to working families.

Michigan COVID-19 Supplemental – $340 million, including:

• $55 million for small business grants for businesses affected by the COVID-19 pandemic. This will ensure continued operations for many small businesses that would otherwise have to shut down due to decreased revenues and the state lockdown.
• $45 million for payments of up to $1,650 in employee assistance grants for individuals who were furloughed, laid off, or had hours reduced due to the state lockdown. The application period for these grants opened today, January 15th, and will be available until January 25, 2021 at 5:00 p.m. The grants are not first come, first serve and the application will be open for submissions for the entirety of the 10 day period.
• $100 million in direct care worker hazard pay, providing a $2 raise for registered nurses, licensed practical nurses, nurses assistants, as well as first responders and educators.
• $57 million for vaccination operations.
• $22.5 million for the testing of vulnerable populations.

Federal COVID-19 relief package – $908 billion, including:

• The federal eviction moratorium was extended until January 31, 2021. This particular measure is critical to ensure that families who have been affected economically by the COVID-19 pandemic can remain in their homes. Unfortunately, this provision did not go far enough and only relates to certain renters; the eviction moratorium should be extended for the duration of the COVID-19 crisis until the economy recovers.
• Included in the package was a continuation of a 15% increase in SNAP food assistance benefits, set to expire in June. Again, it is important that this provision remains in place for the duration of the pandemic and will have to be negotiated in future relief packages.
• Of particular note, those that received the Earned Income Tax Credit in 2019 will be able to claim the greater of their 2019 or 2020 EITC. This is important because the Earned income Tax Credit is tied directly to income; as incomes fall below a certain threshold, so do EITC payments. With people receiving the EITC working less because of the pandemic, this provision will ensure that families can retain their benefits, which has been shown to lift families out of poverty.
• The package included an additional $600 direct payment for taxpayers making less than $75,000 and $600 per qualifying child. Though this falls short of what economists and advocates are calling for, it represents the second direct stimulus payment to families. These payments are critical to keeping the economy and families afloat and should be extended as long as the COVID-19 pandemic fallout affects the economy.
• The federal government extended the $300 increase in unemployment benefits for anyone who collects unemployment.

Friday’s state Consensus Revenue Estimating Conference, which sets the table for the governor’s budget proposal and the upcoming fiscal year, showed that our economic outlook has improved since August. While a variety of factors have impacted that, an array of economists and fiscal experts lifted up the state and federal efforts on relief funding in helping improve Michiganders’ personal finances and state revenues.

The multiple stimulus payments for individuals and parents, extended state and federal emergency unemployment benefits, grants and pay raises for certain workers, and the Paycheck Protection Program and small business grants have certainly helped workers, families and business owners weather this storm. We appreciate these efforts and urge residents to take advantage of these resources.

But additional federal relief funding is going to be needed, and Michigan’s state budget and the programs it supports are still in dire need of more and new revenue, and the Michigan League for Public Policy will be advocating for both in the coming months.