by Gongwer News Service
February 23, 2009

It may seem churlish, but in some ways the analogy is still apt: state officials are as anxious to make use of the federal stimulus money as teenagers flush with Christmas gift cards. But how and by when to use the money is still a question.

Also still not completely clear is how much money, both directly and indirectly, the state will receive. Data collected by several national organizations and the Senate Fiscal Agency put the direct amount of money Michigan state and local governments could receive at nearly $7 billion.

One estimate last week said that when the tax benefits Michigan residents will receive under the proposal are included, the total direct and indirect benefit will be more that $18 billion.

Unclear is what effect the money the federal government will spend on specific federal purposes will have on the state. Since Michigan has few major federal installations anymore — in terms of military bases, major laboratory or processing centers — the impact of direct federal money is not likely to be huge.

But huge has been the response from the administration and legislative Democrats to the enactment of the stimulus plan.

Even more huge are the hopes riding with the stimulus. The White House (which since President Barack Obama’s inaugural has been extremely aggressive in reaching out to local news media outlets, unlike his immediate predecessors) estimated the stimulus could generate as many as 109,000 jobs in Michigan.

That alone would not wipe the slate clean in terms of job losses the state has suffered in the last decade. Nor can these jobs be seen as long-term jobs that will be in place for years to come. But the importance of generating some jobs, moving more money into the system and possibly generating more employment through the vaunted economic multiplier effect cannot be underestimated both in its potential tangible and psychological impact.

That, too, explains the hope inherent in the tax cuts enacted: that they will help move some money into the economy to build jobs.

One tax credit especially could have a big impact on Michigan, and it’s a tax credit that hasn’t gotten a lot of attention. Under the stimulus law, if you buy a new car or truck in 2009, you can deduct the sales tax on the purchase (until the major tax restructuring of 1986 you could do the same thing). It’s not limited to U.S. brands, but that could provide a big help in moving sales of cars this year.

Governor Jennifer Granholm has wasted no time in touting the effect the stimulus could have, while also pointing out that the state’s needs exceed what the plan promises it. The state unveiled a recovery website that included a 1,200-page list of all the potential projects that schools and local governments proposed. The more than 16,000 proposed projects — everything from rebuilding roads and bridges to installing lighted flagpoles at schoolhouses — would total $59 billion if fully paid for. That just shows how much need there really is in Michigan, the administration said.

Ms. Granholm has aligned the state so that unemployed workers can get the extra benefits allotted them in the federal law.

Unlike in some other states, where the Republican governors are talking about not taking the money, Republicans in Michigan aren’t turning their nose up at the cash. Some have grumbled about the long-term payback it represents (and a continued downturn going into the 2010 election could prove beneficial to Republicans), but the GOP wants the economy in Michigan to rebound as much as anyone.

And actually getting the money into the state can’t come fast enough for some. One House official said that as soon as Mr. Obama signed the law, lawmakers wanted to know when the state would start to see the funds. Soon, is the answer, but not right now.

While a great deal of emphasis was put on sending the loot to shovel-ready projects, there are still processes that must be followed. The money is being allocated through some 40-different federal programs, and using existing formulas for allocation (which is why some road construction groups have cried the state is getting short-changed on road repair money).

It will have to be appropriated, and Ms. Granholm is quickly readying a supplemental budget for the legislature to act on so the money is released.

That potentially sets up a major fight, since Senate Republicans will insist both on forcing the funds through an appropriations process and also want to make sure the state does not use the money to expand government. Ms. Granholm has said repeatedly the money will not be used to expand the budget, though clearly some of the money will make the state able to prop up the budget some as it prepares everyone for the major restructuring that is getting underway.

So, don’t be too surprised if work on the 2009-10 budget gets slightly delayed as lawmakers and the administration focus on how to get the stimulus money to work.

For nearly 50 years in Michigan, Gongwer News Service has provided independent, comprehensive, accurate and timely coverage of issues in and around Michigan’s government and political systems. For subscription information, including a free trial, visit Gongwer online.