University of Michigan economists say the state's economy will still be recovering from COVID-19 in 2023. While some sectors of the economy have started to crawl out of the red, others are at a standstill, slowing down the flow of tax dollars governments count on.
Shutdowns in Michigan to try to stop COVID-19's devastating human toll has hit the state's economy hard leaving some businesses shuttered for weeks. Through the end of October 2020, revenues from sales tax, corporate and business taxes, casino taxes and gas taxes were all down from the 2019 numbers.
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That was before a second round of restrictions, including a ban on in-person dining and several other indoor businesses, which dried up the revenue streams governments rely on.
“While we’re hoping for improvements in 2020, we know that 2021 and 2022 and even 2023 are still in question," said Battle Creek City Manager Rebecca Fleury.
Fleury said without help from the federal government, already struggling cities across Michigan could be in dire straits. Projecting a 20% reduction in city income tax, Battle Creek laid off 26 workers, which accounts for about 5% of city staff.
“We don’t use the phrase 'doing more with less anymore,' we know that we’re doing less with less,” Fleury said.
University of Michigan economist Gabriel Ehrlich said governments are typically more conservative with hiring back workers because they have to maintain balanced budgets.
“The recovery from the Great Recession was slow, in part because local government was slow, and state government was slow to hire back employees coming out of the recession and I worry we’re going to have a repeat of that scenario,” Ehrlich said.
With revenues uncertain, he said that means governments may have to make tough decisions.
“Teachers, police officers, firefighters, nurses potentially, so these are people who do very important jobs in the community and their jobs could be at risk if we don’t see federal help,” Ehrlich said.
Battle Creek was already feeling the cuts. Three police officers and a firefighter were among the layoffs, in addition to unfilled positions eliminated earlier in 2020.
Fleury said they have been able to respond to calls for service, but wouldn't be able to have the same community outreach as years past.
She said people may see delays in other city departments, like utility billing, as a result of layoffs.
When it comes to public services, like road treatments and snow plowing, funding isn’t the only concern, there's also the human toll, if people get sick.
Fleury said a breakout of COVID-19 among staff could cripple services.
A bipartisan group of lawmakers have proposed a stimulus package which includes $160 billion for state and local governments but so far Senate Majority Leader Mitch McConnel has rejected the aid, calling it a “bailout” and a “blank check”