State economy in better shape than expected thanks to federal aid

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Economists on Monday painted a rosier than expected forecast on the state economy during the state Consensus Revenue Estimating Conference. 

“We’ve had a stronger than anticipated recovery,” said David Zin of the nonpartisan Michigan Senate Fiscal Agency.

Federal COVID-19 recovery aid, consumer spending and manufacturing and auto economies have helped Michigan’s economy, experts said at a special conference on state finances as the Legislature and Gov. Gretchen Whitmer prepare to negotiate next year’s budget amid the pandemic.

In May, the second revenue conference of the year, the state was facing a $6.3 billion revenue loss over the current 2020 Fiscal Year and the upcoming FY 2021.

The shortfall, as of today, is expected to be in the neighborhood of $3.4 billion, according to economic analysts. The state’s total budget is about $58 billion.

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In terms of the U.S. economic outlook, economists said more COVID-19 recovery aid is needed from Washington. As anticipated, the coronavirus pandemic has had a significant impact on the national and state economy. 

The federal government’s $600 weekly benefit to people out of work helped to boost the state economy, but that ended in July. About 1 million people will see an extra $300 weekly benefit under Federal Emergency Management Agency (FEMA) funding approved for Michigan, but that’s only expected to last another five to six weeks.

Whitmer and Democrats have been arguing that more federal aid is necessary to help state and local governments during the pandemic. The White House and congressional leaders have not struck a deal.

Relief programs added nearly $43.3 billion to the Michigan economy during the last fiscal quarter. The Paycheck Protection Program (PPP) loaned about $16 billion to Michigan businesses; $8.3 billion was paid to state residents through the economic impact payments; and $19 billion in benefits were paid out through pandemic unemployment insurance compensation. 

Sen. Curtis Hertel, Jr. (D-East Lansing), minority vice chair of the Senate Appropriations Committee, argued that in spite of the coronavirus crisis, the state economy under Gov. Gretchen Whitmer’s leadership is poised to recover. 

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“While challenges still exist and we have a long road ahead, the economic numbers announced today are proof that our science-based strategy is working. By prioritizing the health and safety of our residents first, Michigan — led by Gov. Whitmer — has become the only state to show a growth in consumer spending over last year, and our recovery is among the top 10 in the nation. By managing this virus and saving lives, we can now build back faster than states that did not take the same precautions.” 

Rep. Shane Hernandez (R-Port Huron,) House Appropriations Committee chair, was cautiously optimistic about the report. 

“Two things must happen right now: The economy must be safely and fully reopened, and we must make wise, conservative budget decisions to avoid bigger problems in the near future,” Hernandez said. “This includes continuing to work on reductions in state spending, and reinvesting in the state’s rainy day fund to lessen the impact of budget cuts that would be needed when the federal funding ends. These are the steps necessary for a sustainable recovery and a healthy state budget over the long term.”

Gilda Jacobs, Michigan League for Public Policy president and CEO, described the report as a “classic case of ‘good news, bad news.”

“As today illustrates, COVID-19 continues to be the lens lawmakers need to see everything through,” said Jacobs who served in the Michigan House and Senate. “Most importantly, state lawmakers need to continue to call on Congress for comprehensive, flexible fiscal relief to alleviate the pandemic’s impact on residents and the state budget. But policymakers also need to reevaluate the billions of dollars in ineffective corporate tax breaks that pick winners and losers at a time when all businesses are struggling.”

Ken Coleman
Ken Coleman covers Southeast Michigan, economic justice and civil rights. He is a former Michigan Chronicle senior editor and served as the American Black Journal segment host on Detroit Public Television. He has written and published four books on black life in Detroit, including Soul on Air: Blacks Who Helped to Define Radio in Detroit and Forever Young: A Coleman Reader. His work has been cited by the Detroit News, Detroit Free Press, History Channel and CNN. Additionally, he was an essayist for the award-winning book, Detroit 1967: Origins, Impacts, Legacies. Ken has served as a spokesperson for the Michigan Democratic Party, Detroit Public Schools, U.S. Sen. Gary Peters and U.S. Rep. Brenda Lawrence. Previously to joining the Advance, he worked for the Detroit Federation of Teachers as a communications specialist. He is a Historical Society of Michigan trustee and a Big Brothers Big Sisters of Metropolitan Detroit advisory board member.