Local Government Budgets Not Out of the Woods Yet

The coronavirus pandemic hit Michigan in March and quickly came emergency orders triggering school, government and business closings. This left many concerned about the potential economic impact on these industries and sectors and beyond. These concerns still loom today, especially as Gov. Gretchen Whitmer just announced a three week pause of in-person learning for high schools and universities, indoor dining, operations for casinos and movie theaters and other forms of recreation to help slow the rampant spread of the virus.

Local county government have adapted, however, approving or recommending balanced budgets, in most cases, despite early economic concerns. Much of this is because of actions taken by the counties themselves, such as hiring freezes and furloughs, coupled with COVID-19 funding passed down by the federal and/or state governments. COVID-19 funding comes with stipulations on spending, while it also frees up general fund monies for other expenses. 

On Aug. 31 it was announced by the State of Michigan that $150 million in Coronavirus Relief Local Government Grants (CRLGG) program funds would be administered to county and municipal governments through the State of Michigan Treasury Department. Below we show how much each county in Southeastern Michigan received through the CRLGG program. These funds replace the statutory revenue sharing payments that local governments would have normally received for the month of September. Counties, cities, townships and villages receive an annual amount of revenue sharing but those payments come in monthly; the CRLGG funds are about 150 percent of the amount local governments would have received for their September amount. 

In addition to CRLGG funding a handful of counties, and the City of Detroit, received direct CARES Act funding from the federal government early in the pandemic, the City of Detroit received $117 million, Wayne County $197 million, Oakland County $219 million, Macomb County received $152 million and Kent County received $115 million. In addition to the State of Michigan receiving $3 billion from the CARES Act funding.

Just as with CRLGG funding, CARES Act monies must also be used on CARES Act stipulated expenses. Such approved expenses include: personal protective equipment, public safety items and personnel, public health items and personnel, social services and items related to emergency management and communications. Also, under both programs, any funds used on non-eligible expenses or not used by Dec. 30, 2020, must be returned by Jan. 30, 2021.

Despite counties such as Oakland, Wayne and expectedly Macomb passing balanced budgets with minimal funding cuts, and monies still in the fund balance, losses in government employment continue. According to the National Association of Counties, about 1.4 million local government jobs were lost during the COVID-19 pandemic across the country, and of those 451,000 have since been restored. However, this means that 939,000 jobs have yet to be restored to reach pre-pandemic levels. NACO also noted that state and federal job levels are being restored at a faster rate than local government jobs levels. Data for the State of Michigan on local government employment was not available. 

Overall, while supplemental funds have been sent to aid local governments we must be aware and concerned of the potential long-term effects of this pandemic on government services, and of course the overall economy. Government entities are primarily funded by property taxes; revenues from the state and federal governments, services, special tax levies, also impact a government unit’s budget. Declines in property value driven by an economic downtown would not show up just yet on government units’ tax rolls, meaning the longer-term impact of the COVID-19 recession have yet to be seen. If government revenue declines so do the services it can support, including public health, social services and public safety. We are still weathering this storm on a local, national and global front. As COVID case numbers continue to increase rapidly actions are being taken to curb that spread. Complaints rise as shutdowns occur. However, greater responsibility on mask-wearing, social distancing and limiting interaction with others could also help curb the spread, and result in less stringent mandates that directly impact the economy.  

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