Invest Rescue Plan where it’s needed
The federal American Rescue Plan Act (ARPA) provides unprecedented cash resources to families and significant investments in key areas like housing, child care, education, and health coverage.
It also provides significant resources to help states, localities, tribes, and territories meet COVID-19-related challenges.
With those funds, Michigan has a chance to right our fiscal ship, undoing bad policy decisions of the past and paving the way for a brighter future for all Michiganders.
After decades of disinvestment, critical programs and services in Michigan have been underfunded, making it even harder for kids, families, and workers to thrive. By prioritizing tax cuts for the wealthy and corporations over investments in our state’s residents, the state Legislature weakened Michigan’s foundation so that when, COVID-19 hit, the state was already on shaky ground.
ARPA is a historic opportunity for Michigan to invest in an equitable economic recovery that could leave our communities better off than they were before.
To ensure that we move forward with a better economy and stronger communities, Michigan lawmakers should spend the federal relief where it is needed most.
Michigan lawmakers should also make budget decisions that address the future, not just create patches for the dire problems that currently exist. It’s past time to raise additional revenues — the state will need them to make investments that can build on the foundation laid by this one-time federal stimulus.
It’s key that the unprecedented aid should target essential workers, communities of color, households with low incomes, and others most affected by the COVID-19 crisis through investments in child care, education, and infrastructure. Prioritizing those areas helps Michiganders right now, but will also help workers and their children down the road.
Now is the time to advance long-term, equitable policies like strengthening our safety net programs, developing a statewide housing plan, and fully funding the At-Risk School Aid program. Robust state investments must be sustained to mitigate the crisis and foster inclusive recovery. It remains critical for Michigan’s lawmakers to create a state budget that strengthens programs that help families make ends meet, businesses reopen, and students return to classrooms.
Lawmakers must also avoid making decisions that could cause Michigan to lose money.
ARPA has an important provision: States cannot pass tax cuts using the funding. It’s an important guardrail that ensures states are using the federal dollars to help families, businesses, and communities most impacted by the COVID-19 crisis.
That means that, if any state changes its laws in a way that reduces net tax revenue after March 3, 2021, and before the state has spent its entire federal ARPA allocation, the U.S. Department of Treasury may deduct an equivalent amount from the aid received by the state.
But Michigan lawmakers are already considering bills that could cost the state up to $60 million in federal aid. We learned through the Great Recession, from which the state still has not recovered, that tax cuts for the wealthy and budget cuts to critical services will NOT get the economy moving again. Tax cuts like those were an ineffective strategy at the time, and they are a bad idea now.
The American Rescue Plan Act is a critical response to a global pandemic and economic downturn, and will help many Michiganders recover in the short term. But the stimulus will run out, leaving the effects of the tax and budget choices that state policymakers make today in full view. Michigan’s lawmakers cannot rely on federal relief alone. They must make and sustain critical investments for the state.
Instead of tax cuts for the wealthy and corporations, as has been done in the past, Michigan should prepare for the future by building revenue. Some ideas include: eliminating the triggered state income tax cut set to take place in 2023, expanding the state sales tax to personal services, and implementing a graduated income tax through a ballot initiative.
Those revenue-generating policies will keep families in their homes, keep workers employed, keep students enrolled in college, and keep businesses open.
Our federal government has taken bold, sweeping action to provide real relief for struggling families and deal a significant blow to poverty and racial and economic disparities.
We need to make sure that our state lawmakers follow suit.
More information on ARPA can be found at mlpp.org, and we hope you will join us in advocating for the sound investment of the funding.
Alex Rossman is external affairs director at the Michigan League for Public Policy.