Lansing Mayor Andy Schor is pushing for a federal bailout as the COVID-19 pandemic and its subsequent economic downturn continues to take a punishing toll on the capital city’s budget.
Without a direct infusion of federal cash, Schor said various city departments and services could soon be cut back as his administration grapples with a budget that has already been starved for months by a pandemic-induced economic downturn. Lansing needs a better safety net, he said.
“Every city needs direct and meaningful fiscal assistance,” Schor said. “Our communities, local businesses and residents are suffering from the negative impacts on our economy due to the shutdowns and ongoing pandemic needs.”
Federal lawmakers passed the CARES Act in March, which included $1,200 stimulus checks and created the Coronavirus Relief Fund — a $150 billion pool of emergency assistance cash that went out to states and 36 municipalities, each with populations of 500,000 people or more.
Smaller cities like Lansing didn’t qualify for any direct federal cash. And while most states (including Michigan) doled out payments to local governments, it’s still not enough to cover drastic revenue reductions that smaller municipalities have faced in recent months, Schor said.
And without direct city stimulus or extended unemployment benefits, residents could start to feel the city’s financial pinch in the form of a reduced value for their tax dollars, Schor explained. He wouldn’t elaborate on which specific types of city services and functions could find their way to the chopping block, but he suggested cuts would be inevitable without a bailout.
“We’re doing better. Our unemployment rate is going down, but we still need those federal dollars for both unemployment and directly for cities to really use as a backfill,” Schor said. “Without that funding, that means we’re on our own. Worst case scenario? We have service reductions and budgetary problems to keep things balanced. It’ll be a high-pressure situation.”
Gov. Gretchen Whitmer signed a Senate bill last month that sent out $880 million of the roughly $3 billion the state received in CARES Act funding to local municipalities. However, that cash is earmarked for public safety, virus prevention and business grants. There’s not much left to go around, and it cannot be used to simply plug the city’s ongoing revenue shortfalls, Schor said.
Lansing is still waiting on several million dollars in possible federal reimbursements for things like safety-related payroll expenses and hazard pay for first responders, but it’s time for Congress to step up as unemployment premiums end, officials said. “It’s absolutely vital that Washington comes through with dollars for cities like Lansing,” said City Council President Peter Spadafore. “We managed to put together bailouts for airlines, cruise lines, Wall Street. It’s time to bail out city services. Without federal dollars, cuts will be needed.”
Spadafore also suggested that a severe economic downturn could trigger voluntary city layoffs to become mandatory — especially as a federal $600 boost in weekly unemployment benefits has ended and several dozen furloughed employees return to work this month.
“We just don’t have the fund balance to sustain the status quo. At some point, it’ll require service reductions and probably layoffs,” Spadafore added. “Something is going to give.”
The Council passed a budget in May that slashed the city’s rainy-day reserves by $4.5 million to an expected all-time low of only about $2 million. Tax revenues in the wake of the coronavirus were expected to make an $8 million dent in the city’s budget and contribute to an overall revenue decline of nearly $12.5 million over the next year. Reserve funds padded the blow.
The City Council also approved a possible tax anticipation note — a safety-net strategy that allows the city to borrow up to $21.8 million against future property taxes for the next three years — in order to cover short-term budget shortfalls. Schor hasn’t yet pulled the trigger.
Lansing also leaned down its budget by leaving positions vacant and cutting travel and training budgets for staff. Schor’s administration also relied on boosted unemployment benefits to save uncounted hundreds of thousands of dollars through voluntary furloughs over the last month. With the $600 running out, volunteers are returning to work.
Schor is now standing alongside U.S. Rep. Elissa Slotkin, Sens. Debbie Stabenow and Gary Peters and the U.S. Conference of Mayors in urging Senate Republicans to include more funding for smaller cities like Lansing in order to make an economic recovery from COVID-19.
“Without direct relief to help fund police officers, firefighters, public health workers and other critical public employees, cities can’t do the work to fight this pandemic,” said Greg Fischer, mayor of Louisville and president of the mayors conference. “The situation is growing more dire by the day, and there will be significant consequences if real resources are not provided soon.”
Senate Republicans released a $1 trillion HEALS Act stimulus package last week that would include another round of stimulus checks and other forms of COVID-19 relief. Negotiations with Democrats are still continuing, but initial drafts have left out new funding for local governments.
“Cities must recover if America is to recover,” Fischer said in a statement. “That’s why it is unacceptable that the Senate leadership is willing to leave American cities behind once again.”
That legislation will continue to inch closer to passage, possibly by this weekend. Schor said he’s confident that lawmakers (especially with support from Slotkin) will make the right choice.
“At this point, we’re cautiously optimistic,” Schor added. “Still, the economy did not rebound like it could have. We’re going to continue to keep things under review and by early October, we should have a much better idea of where we’re at financially. It’s going to be a real challenge.”