Michigan, Other States Want More Flex On Federal Virus Relief Money

Michigan and other states are asking Congress for greater flexibility in how they spend billions of dollars in federal aid appropriated to deal with the COVID-19 pandemic.

Most of the requests have focused on the need to address the decline in state revenue resulting from the combined effects of the illness and government-ordered shutdowns of the economy.

At least one state, Idaho, is planning to use $200 million of its federal aid to provide property tax relief. It will compensate local governments for the cost of police, fire and emergency medical services that would otherwise be financed by property taxes.

Gov. Brad Little said the objective is “getting people to put money (they would otherwise spend on taxes) into the economy,” according to KTVB.

State-focused free-market think tanks like the Mackinac Center for Public Policy also recommended, in an April statement, that Congress give states more latitude in spending COVID relief funds.

Michigan’s share of the aid tops $3 billion, and some of those same voices are now calling for caution in how it uses that money.

“We definitely don’t want to push that money into new and unnecessary spending,” said James Hohman, director of fiscal policy for the Mackinac Center.

While the Idaho tax cuts may be temporary, Hohman said, they are preferable to higher, and potentially permanent, new spending. “It would be nice if the first inclination in Michigan would be to provide relief to taxpayers,” he said.

Ultimately, Michigan’s course may well be — assuming Congress allows it — to use the relief funds to backfill the abrupt decline in state revenues, Hohman said. At the least, that would ameliorate the temptation to use the pandemic as a rationale for raising taxes, he said.