What COVID stimulus plan would mean to Michigan’s jobless, cities and renters

A $900 billion coronavirus relief package that is taking shape in Congress reportedly does not include direct aid to local governments (a plan favored by Democrats) or shield corporations from liability (which Republicans favor). (Bridge file photo).

By Madeline Halpert (Bridge)

After months of stalemate, congressional leaders are closing in on a $900 billion COVID-19 stimulus deal that would provide support for businesses, COVID-19 vaccine distribution, and direct payments to individuals.

For some Michiganders, that might mean $600 stimulus checks, enhanced unemployment benefits, rental relief, eviction delays, money for schools, and small business loans. But the deal also omits relief for municipal governments that are struggling with lost revenue from declining income tax and state funding.

“Our budget reserves are at historic and dangerous lows,” said Robert Widigan, the Lansing city finance director. “It’s a big hole we need to fill.”

In March, the federal government approved the $2.2 trillion Coronavirus Aid, Relief, and Economic Security (CARES) Act, which included small business loans, $1,200 per-person stimulus checks and a bailout for local and state governments.

Michigan received over $3.8 billion.

Now, after months of negotiations, congressional leaders are nearing agreement on a second stimulus, as leaders fear the economy, which was bolstered by the CARES Act, is worsening.

Michigan’s unemployment rate in November climbed to 6.9 percent from 6.1 percent, the first increase since April, according to figures released Wednesday. Nationally, job growth slowed in November, due in part to coronavirus restrictions on businesses, according to the U.S. Department of Labor.

The latest stimulus is a work in progress. Here’s a look at how it may impact Michigan.

Cities struggling to survive

As of Wednesday, the stimulus didn’t include Democratic-backed aid for state and local governments — a decision that civic officials said could have catastrophic consequences.

The package also likely no longer includes a liability shield provision to protect businesses, local governments and universities from lawsuits from injured or infected workers.

Statewide, at least 24 Michigan municipalities face $250 million in revenue losses from declining taxes, said Chris Hackbarth, the director of federal and state affairs at the Michigan Municipal League.

Some of that loss was mitigated by $350 million in federal CARES Act funding provided to local governments.

The money, though, couldn’t be used to fill budget holes, and cities that rely on income taxes are especially hard-hit.

That’s because state law doesn’t allow cities, whose income taxes constitute 30 percent of their revenue, to collect local income taxes on unemployment or from employees who are working remotely during the pandemic.

In Lansing, where 12,000 non-resident state employees work in the city, “it’s like Flint losing General Motors,” said Widigan, the Lansing finance director.

The city cut $12.5 million for a total budget of $136 million for the 2021 fiscal year, but did not have to lay off workers.

Other municipalities were not so lucky. Battle Creek had to lay off 26 employees last month to save $400,000, said Rebecca Fleury, city manager.

Municipalities need at least $250 million in direct federal aid to fill the income tax revenue gap, Hackbarth said.

Without it, Fleury said she expects more layoffs, service cuts and occasional office closures next year. Some communities may possibly even need to seek state emergency manager protection, Hackbarth said.

“I don’t know how state and local governments can continue to survive without the federal government,” Widigan said.

Partisan politics shouldn’t play a role in giving municipalities the money they need, civic officials said.

A looming eviction crisis

The stimulus would delay evictions through January and provide $25 billion in rental assistance. But there’s a huge backlog, with 4,500 cases of late rental payments scheduled for court in January and February in Detroit alone.

“We’re looking at a staggering number of potential evictions come the first of the year,” said Ted Phillips, executive director of United Community Housing Coalition, a nonprofit that works with renters to prevent foreclosure.

In Michigan, as the COVID-19 pandemic drove unemployment rates to an annual average of 10.2 percent from January through October in Michigan, many struggled to pay rent and make ends meet.

Now as some have gone back to work, they’re having difficulty catching up on payments, Phillips said. Many owe thousands of dollars in back rent.

In March, federal CARES Act money helped fund the state’s $60 million eviction diversion program, which has been “incredibly helpful,” Phillips said. Through the program, those who make 50 percent or less of the area median income are eligible for $3,500 in back rent and up to $1,200 in support for the following two months’ rent.

But the program ends Dec. 30, Phillips said, adding that Detroit needs at least $14 million in funding to help pay overdue rental payments.

“This would help a lot of people,” Phillips said. “But there’s still a lot more who need to be helped.”

Stalled state stimulus

In the absence of federal relief, Gov. Gretchen Whitmer in late November implored lawmakers for a $100 million COVID-19 relief plan to provide “direct financial support to the families and small businesses that have been hit hardest by the pandemic.”

Whitmer also asked for an extension of unemployment benefits – currently capped at $362 a week, the lowest in the Great Lakes region– and a statewide face mask mandate.

The Legislature has just a few days left before the term ends, and leaders are working through details of a supplemental bill for aid, said Gideon D’Assandro, a spokesperson for House Speaker Lee Chatfield of Levering.

The proposal will be “north of the $100 [million] figure proposed by the governor,” said Amber McCann, spokesperson for Senate Majority Leader Mike Shirkey, R-Clarklake.

But “there was not much detail from the governor on where the $100 million would be spent or what she wants to do with the money, so there is a lot to work through yet,” D’Assandro added.

Despite the state’s own budget deficits, Whitmer on Tuesday implored lawmakers to act quickly to provide assistance to struggling Michiganders.

“If it’s not done this week, it’s unlikely anything will happen until January … and that’s a very scary thing for our businesses and our people who are holding on by their fingernails,” Whitmer said.

For as little as $1 a month, you can keep Manchester-focused news coverage alive.

by Marsha Chartrand

Marsha Johnson Chartrand, a founder, writer, and copy editor with the Manchester Mirror, is a 50-year resident of Manchester. She has a long history of volunteer and community involvement.