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State of Michigan facing budget cuts as economy slowly recovers from COVID-19

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Posted at 7:29 PM, May 15, 2020
and last updated 2020-05-15 19:29:49-04

LANSING, Mich. — Michigan's economy was hit a lot harder during the COVID-19 pandemic than the national average.

The state of Michigan is on track to lose $6 billion in the next year and a half.

"It's something we've never seen before and we are having to deal with it in real-time," said Chris Kolb, State Budget Director.

Kolb said the shortfall comes primarily from two places, income tax withholdings and sales tax.

Both are down significantly because Governor Gretchen Whitmer's stay home order has closed so many businesses.

Now, the state is looking at options to bridge the gap and the rainy day fund won't be enough.

"Even if we spent every single penny of it, we would still have $2 billion more to fill in that hole. That's the size of what we are dealing with," said Kolb.

Kolb said there's nothing off the table right now, including a possible income tax hike down the road.

In the meantime, the state is furloughing workers for the next several weeks.

"I can eliminate 12 departments, including if we did away with the budget for the legislature and judiciary branch and we would not have $2 billion," said Kolb.

State Treasurer Rachel Eubanks says issuing bonds, like the state is doing with roads, isn't an option.

"Those relate to very specific uses of funds. There is an ability to borrow for cash but that has to be paid within the fiscal year," said Eubanks.

Kolb said the only way Michigan survived the last recession is because it had help.

"It's critical if we are going to get through this crisis, the federal government pitches in and provides the state and Michigan the resources we need," he said.

These projections could change depending on new laws or even if we see a significant second wave of coronavirus.

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