May 14 | This Week in Government: Chamber Proposes Return to Work Plan; State to Get $1B More Fed Funding Than ExpectedMay 14, 2021
- Detroit Regional Chamber Suggests $400M ‘Return to Work’ Plan
- State to Get Almost $1B More Than Expected From Feds
- House Moves Supplemental With Frontliner Pay Tied to Ad Board Limits
- Bill Would Provide Income Tax Credit for COVID-Impacted Businesses
- $445M COVID Supplemental, Child Tax Credit Bills Clear Senate
Grants to train and hire employees along with incentives for those getting vaccinated are the key policies the Detroit Regional Chamber proposed to Republican appropriations leaders in a plan released Monday.
The Chamber floated three grant programs that would expire when the funds run out or by Labor Day, calling it the “100K by Labor Day Back to Work Plan,” in a letter to Sen. Jim Stamas (R-Midland) and Rep. Thomas Albert (R-Lowell).
It would include:
- $2,000 return-to-work grants for each returning or new employee, spending $200 million in federal COVID-19 relief funds.
- $1,000 in training grants for each returning or new employee for employers to use for training or an additional signing bonus, spending $100 million in federal funds.
- $100 vaccine incentive grant for employers to support the costs associated with incentivization or compensating time off for employees receiving a coronavirus vaccine, spending $100 million in federal funds.
A House supplemental proposal (HB 4421) would allocate $1,000 in return-to-work grants, spending $400 million.
The Detroit Chamber also expressed support for efforts to dedicate $150 million in federal funds to the Unemployment Compensation Fund.
“Many elements of Michigan’s economy have struggled over the past year, but signs for a strong rebound are evident. Ensuring job creators have the talented people needed to meet consumer demand and accelerate Michigan’s economic recovery is a goal we share,” Detroit Regional Chamber President and Chief Executive Officer Sandy K. Baruah said in a letter. “Building on your strong proposal, the chamber believes a bipartisan solution to accelerate employment growth, economic growth, support vaccine efforts, and replenish our UIA Fund is possible. The Chamber looks forward to working with you to take this positive step for Michigan’s businesses and their employees.”
State to Get Almost $1B More Than Expected From Feds
Michigan is set to receive $6.54 billion in Coronavirus State and Local Fiscal Recovery Funds, the U.S. Department of Treasury said Monday, about $885 million more than originally thought.
The federal agency on Monday announced its interim rule on how states and local governments can spend the funding.
Cities are set to receive $1.82 billion, more than the $1.78 billion originally cited. Counties will receive $1.94 billion and non-entitlement units – or townships – are set to receive $644 million, less than the $686 million originally estimated.
Townships will receive the funding through state appropriations. Other local governments will receive funding directly.
Local governments should expect to receive funds in two steps, with half provided beginning in May 2021 and the balance delivered 12 months later. States that have experienced a net increase in the unemployment rate of more than two percentage points from February 2020 to the latest available data as of the date of certification will receive their full allocation of funds in a single payment; other states will receive funds in two equal tranches.
The crux of the money’s purpose is to meet pandemic response needs and rebuild a “stronger, more equitable economy as the country recovers,” Treasury said.
Funding can be used to support public health expenditures and address negative impacts caused by the public health emergency, which includes economic harm to workers, households, small businesses, and the public sector.
Governments can also replace lost public sector revenue by using funding to provide government services to the extent of the reduction in revenue experienced due to the pandemic.
Additionally, funding can be used to provide premium pay for essential workers and invest in water, sewer, and broadband infrastructure.
Health care needs exacerbated by the pandemic, including substance abuse and mental health treatment, services, hotlines, and crisis intervention, can also be addressed with the funding.
States can also support small business and help speed up the recovery in tourism, travel, and hospitality sectors. They can also work to replenish unemployment trust funds up to pre-pandemic levels.
Funding can also be used to serve the hardest-hit communities and families, which can include investments in housing, addressing educational disparities, and promoting healthy childhood environments.
States cannot use the funding to directly, or indirectly, offset a reduction in net tax revenue due to a policy change implemented after March 3, 2021, and cannot use the funding to make a deposit to a pension fund.
The federal government is also prohibiting the funding from being used for debt service, legal settlements or judgments, and deposits into rainy day funds. Further, general infrastructure spending is not allowed outside of water, sewer, and broadband investments.
A House proposal does include funding for a Flint water crisis settlement and debt service, but uses General Fund for those payments.
House Moves Supplemental With Frontliner Pay Tied to Ad Board Limits
Premium pay for frontline workers during the pandemic would be contingent on Gov. Gretchen Whitmer signing a bill limiting the State Administrative Board’s transfer powers under a supplemental spending plan passed Thursday in the House.
HB 4420 passed 65-42. HB 4082, which limits the Administrative Board to transferring $200,000, passed 58-49. The move comes after Gov. Whitmer used the board to transfer roughly $600 million of the state budget to other things after negotiations broke down between her office and the GOP-led Legislature.
Rep. Sara Cambensy (D-Marquette) and Rep. Karen Whitsett (D-Detroit) joined the Republicans in voting yes on the bill.
The supplemental includes $68.6 million in premium pay for frontline workers in the Department of Corrections, $2.4 million in the Department of Military and Veterans Affairs, and $11.9 million in the Department of State Police.
HB 4669, which would create the Transportation Bond Repayment Sinking Fund, also passed 58-49 with Cambensy and Whitsett voting yes.
Under the bill, the Department of Treasury could deposit money and other assets into the fund and the Department of Transportation would be required to deposit funds whenever it issued new bonds.
Specifically, MDOT would have to make dollar-for-dollar deposits up to $234.6 million each fiscal year until an amount equal to the amount of the new bonds was deposited. HB 4420 includes $626 million for the fund.
Amendments made to HB 4420 on Thursday include funding for police officer support (see separate story), $160 million for hospitals, and $220 million for child behavioral health.
Ms. Whitsett saw an amendment adopted to the bill providing $4.8 million to expand access to the Program of All-Inclusive Care for the Elderly, which serves elderly residents in their homes. Rep. Shri Thanedar (D-Detroit) also saw an amendment adopted to the bill that would provide $5 million for air quality monitoring and increased monitors in Detroit.
Otherwise, Democrats tried to amend the bill and failed. An amendment from Rep. Padma Kuppa (D-Troy) sought to fund programs like Michigan Reconnect, and Rep. Richard Steenland (D-Roseville) sought to reimburse local clerks for extra costs incurred during the 2020 election, along with several more from caucus members.
House Minority Leader Donna Lasinski (D-Scio Township) blasted Republicans and called the tie bars cruel.
“We must focus our efforts on defeating this pandemic so schools and businesses can have the freedom to safely and fully reopen,” she said. “Our friends and neighbors right now were in their hour of need, and yet we’ve waited five months in this chamber, and we’re using that desperation to leverage a political agenda. These federal dollars, make no mistake, they have so many strings attached to them, I’m surprised I haven’t tripped over one on the way to this podium. The waters are rising, the tie bars in this funding force Michiganders to buy a lifeboat, because we’re willing in this chamber to trade away authority to play a political game.”
House Majority Floor Leader Ben Frederick (R-Owosso) called the moves by Gov. Whitmer in 2019 to line-item veto and re-appropriate dollars for certain programs through the State Administrative Board cruel. He called his bill to limit the transfer powers a compromise.
“As we look at any civics course schoolbook, the legislative process is outlined fairly simply. Bills pass the House and Senate, are sent to the governor for signature or veto,” he said. “In Michigan, we may need to place an asterisk noting that in addition to that process, with appropriations, even those things which are passed by both chambers and signed by the Governor are subject to wholesale elimination and reappropriation by an administrative board, which in part consists of the Governor’s own appointees. That’s absurd.”
Rep. Joe Tate (D-Detroit), the minority vice chair of the House Appropriations Committee, said he was encouraged by several items in the supplemental, adding that he is also concerned not all options were exhausted on the strings tied to pay for frontline workers.
“We still have a long way to go. And it’s no secret, we do not agree on budget prescriptions. But as the old saying goes, if two people always agree, one of them is redundant. However, I’m hopeful that after today we will escalate our budget dialogue, differences and all, to come to those solutions that best benefit our residents, families, and communities in the state of Michigan.”
Whitmer spokesperson Bobby Leddy said the Governor has said she is willing to work with anyone who wants to work with her to get things done.
“But we will not let Republicans distract from the fact that they are passing budgets to cut funding for schools, skills training, health care, and clean drinking water while Michigan’s economy is recovering from the worst public health crisis in 100 years,” Leddy said in a statement. “These cuts will hurt Michigan kids, frontline workers, seniors, and working families. It’s time for Republicans in the Legislature to align their priorities with the needs of Michigan’s citizens and start working with the Governor to pass a budget that jumpstarts our economy, invests in our future, and gets us back to normal more quickly.”
The bill also includes $550 million for the Unemployment Insurance Stabilization Fund to be transferred to the state’s trust fund if it falls below $235 million, funding for studies on learning loss and coronavirus orders, and the overall plan includes funding for the Flint water crisis settlement, debt service, and the rainy day fund, though it does use General Fund for those items.
The U.S. Department of Treasury has limited the use of federal recovery funds for settlements, debt service, and rainy day funds.
State Budget Office Director Dave Massaron said in a statement the state needs to be sure it is following federal guidelines.
“The recent guidelines just announced are very specific in that there are differences in how we can spend ARP funds compared to how we could spend CARES Act funds,” he said. “For example, when it comes to supplanting funding for payroll, public safety and public health payroll in FY20 and FY21 was done under a provision of the CRF guidance that allowed states to presume that their public safety and public health staff were substantially dedicated to COVID-19. That blanket presumption is now gone.”
House Appropriations Committee Chair Rep. Thomas Albert (R-Lowell) told Crain’s Detroit Business he still wants to use the federal funding to free up General Fund for legal settlements, reserve funds, and debt service.
In a statement Thursday, he said the budget proposals passed this week would “deliver results for the people of Michigan.”
“This is a significant time in our state’s history, and this budget plan helps chart the best path forward,” he said. “It provides resources where they are needed most, and that starts with our kids who have missed far too much instruction in the past two school years. It provides more tools for families and communities to stay healthy and address the financial challenges posed by this pandemic. It’s fiscally responsible and prepares for the day this wildly unsustainable wave of federal COVID assistance eventually ends.
Bill Would Provide Income Tax Credit for COVID-Impacted Businesses
Business owners that experienced temporary closures and income loss during the coronavirus pandemic would be eligible for an income tax credit to provide relief for losses incurred during periods of closure over the last year through a bill before a Senate committee Wednesday.
Before the Senate Finance Committee for testimony only was SB 393, which drew support from Republicans on the panel and a business owner that testified.
The bill would amend the Income Tax Act to allow for, during the 2020 and 2021 tax years, a qualified taxpayer that experienced the closure of his or her business to receive a tax credit against the income taxes equal to the business’s total property tax collected that calendar year. The credit would also be available for a portion of a business’ rent if it leases property subject to property taxes or against a taxpayer’s liability as a member of a flow-through entity if the business owner is a member of a flow-through entity.
The bill would be retroactive to tax years beginning Jan. 1, 2020.
Sen. Kevin Daley (R-Lum) said his bill would be for qualified business owners that were closed for at least six weeks during the pandemic and lost at least 25% of sales.
“They made bank-breaking investments to keep their employees and customers safe, and many were still forced to close their doors during the pandemic and some unfortunately for good,” Daley said. “This bill creates another source of relief to help some businesses who were hit by the governor’s shutdown orders stay afloat and hopefully keep their doors open.”
Aaron Keel, director of legislative affairs for the Department of Treasury, said the agency had no position on the bill. Some concerns by the department, he said, include the possible cost to the state both in revenue and in administration of the proposal.
Sen. Aric Nesbitt (R-Lawton) expressed frustration over business owners being forced to close while state employees did not miss a paycheck. He also said the Governor also vetoed multiple attempts by the Legislature to provide relief to business owners.
“I’m just having a real trouble with how Treasury and the administration can go ahead and stand by and say ‘nope, it’s fine, we’re not going to provide any relief to these folks that we’ve forced to close down no fault of their own’,” Nesbitt said.
Keel said the department is not saying no, but that the issue needs to be part of a broader budget conversation.
This prompted Nesbitt to argue that putting relief in the tax code is the best method and would provide fairness to all business owners. He said business relief programs have had scattered results at best, noting many business owners in his district have not been able to obtain any funding through state programs for grants or relief.
Sen. Jim Runestad (R-White Lake), committee chair, said some form of equitable relief is critical.
“What we’re proposing here is objective,” Runestad said, noting the business owner would provide proof of qualifying for relief.
Daley agreed, saying business owners have gone through significant hardships to stay afloat.
“We’re a year late already on this thing,” he said. “These guys need this relief, and they need it quick.”
PPE TAX EXEMPTION: Also before the committee for testimony only were HB 4224 and HB 4225, which would exempt businesses from sales and use tax when purchasing personal protective equipment and other coronavirus-related items to prevent infection.
The bills would only allow businesses to obtain the exemption if the products, either PPE or other personal property if it the purchases were related to COVID-19. Businesses would also be required to have a COVID-19 safety plan in place. The proposed exemptions would be retroactive to March 10, 2020, through Dec. 31, 2021.
$445M COVID Supplemental, Child Tax Credit Bills Clear Senate
Supplemental appropriations providing significant federal coronavirus relief funding for emergency rental assistance passed the Senate unanimously Thursday while separate legislation to provide a child tax credit drew a more divided vote and competing takes on the proposal’s impact.
The supplemental, SB 37, contained $445.7 million gross spending, with $424.7 million being federal pandemic relief and the remaining $21 million General Fund.
The lion’s share of the federal funding, $378.3 million, would go to the Department of Labor and Economic Opportunity for emergency rental assistance. Another $46.4 million federal funding was for Federal Emergency Management Agency projects recommended to the state by the Department of State Police.
A December 2020 COVID-19 relief package passed by Congress is the source of the federal funding.
For the $21 million General Fund, the Department of Technology, Management, and Budget would be used for the purchase of Venture Michigan Fund vouchers.
The supplemental was passed 35-0 without debate.
Also passing was SB 378, which would amend the Income Tax Act to allow for a $500 income tax credit for four tax years with the tax year beginning Jan. 1, 2022, and ending Dec. 31, 2025.
Senators voted 25-10 on SB 378.
The bill’s sponsor, Sen. Jim Runestad (R-White Lake), said Michigan families have likely endured one of the toughest years in state history during the pandemic and noted that many families will likely feel its impacts for a long time.
Runestad then spoke about what he said was a declining birth rate in the state, noting his understanding is one reason for a lower birth rate is economics.
“To have a child is very, very expensive,” Runestad said. “Today with so many of these families trying to return back to the workplace, they’re really struggling with child care.”
He said the cost for child care is extremely high, costing several thousand dollars per year.
“We are trying to help these families by giving them back $500 of their taxes to be able to offset these family’s costs and hopefully be able to allow families to have children again,” Runestad said.
Sen. Erika Geiss (D-Taylor) said the devil was in the details of the bill, pointing to the Senate Fiscal Agency’s analysis of an estimated $725 million reduction of income tax revenue for the General Fund and School Aid Fund per year. The estimated split would be a reduction to $690.5 million to the General Fund and $34.5 million to the School Aid Fund per year.
She said that money would be taken from schools for the same children are educated, which makes no sense.
Geiss also pointed to the fact there once was a $600 per child tax credit for dependent children under age 19, but that was eliminated by the Legislature in 2011. She said some current members of the Senate were among those who voted for the elimination of the credit at that time.
The fact the proposal only provides the credit for four years struck her as odd as well, she said.
“It’s almost as if families and the care and nurturing of dependent children only lasts for four years, which is laughable because it’s 18 at minimum,” Geiss said. “It seems to be an arbitrary number not grounded in reason.”