March 30, 2020

Actions taken so far:

At the state level, Gov. Gretchen Whitmer has issued a number of executive orders and directives in response to the COVID-19 crisis—orders that are needed to protect Michigan residents, but that come at an economic cost in terms of lost state revenue. The state’s $1.2 billion Budget Stabilization Fund, or Rainy Day Fund, is a potential source of one-time revenue to help address increasing need and falling revenues during the coronavirus crisis.

 

At the federal level, the Senate’s coronavirus relief bill includes a $150 billion coronavirus relief fund, of which $139 billion is reserved for payments to the states. Michigan will receive an estimated $3.1 billion in federal funds under the bill, with funds earmarked specifically for necessary expenditures incurred during this public health emergency. Also, local units of government representing more than 500,000 people are expected to receive $792 million in federal relief.


Our recommendations:

  • Quickly enact legislation to spend the $3.1 billion received from the federal government. The federal funds given to Michigan will need to be appropriated by the Legislature. The Legislature should act swiftly to ensure that those funds are distributed to the programs that are essential to protecting families during the COVID-19 and ensuing economic crises.
  • Ensure that the federal funds are spent on supporting those most affected by the downturn. The Legislature should ensure that the funds are spent judiciously on the families and individuals of Michigan, especially those with lower incomes or who have lost their jobs in the midst of this crisis. These groups are much more vulnerable to the effects of the economic downturn and COVID-19 crisis. Federal funds should be spent to assist food programs and utility and housing protections.
  • Utilize the state’s Budget Stabilization Fund to supplement federal relief funds. Michigan is now in the midst of a recession combined with a pandemic. It is time for the Legislature to vote to utilize Michigan’s Budget Stabilization Fund to support affected workers and families.

 


Why Michigan must act now: 

Economists predict that by summer, Michigan will lose more than 1 in 10 private-sector jobs as a result of the coronavirus emergency. The leisure, hospitality, and retail sectors will take the biggest hit, with a loss of 23.5% of private-sector jobs. Most of those job losses will be recorded in April. Additionally, economists are estimating that our nation’s production will drop by 14% in the second quarter of 2020

This recession is expected to come in two phases. The first phase of economic stress in Michigan will affect many low-wage workers who may face significant job losses in the coming months. Secondly, with those job losses come declines in income and sales tax revenues as incomes drop and fewer goods are purchased. 

Though federal relief is coming, that relief is limited in scope and time. The recession in Michigan is likely to be both larger than the COVID-19 crisis and longer in duration. Michigan needs to prepare its state finances to make sure families have the resources they need. 

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