While the impact on health is at the forefront of everyone’s concern, rightfully so, the economic impact of COVID-19 will be significant. This is already being felt from the Federal government, to local governments, to the pocketbooks of families across the country.
On Thursday morning, the U.S. Department of Labor announced that a staggering 3.3 million people have applied for unemployment benefits. That surpasses the prior record of 695,000 claims, which was set in 1982. Economists are concerned that this is only the beginning and that number will continue to skyrocket. In Michigan alone, there were 129,298 unemployment claims last week. Compared to the prior week, which had 5,000 claims, that’s a worrisome number.
Practically speaking, what does that mean? It means everything from larger payouts in unemployment to declining tax collections, impacting revenue for governments. The less revenue state or local governments have, the less dollars they have to spend on programs such as public education and public safety net programs. The question is how much of a decline in revenue will they face? Right now, it’s too early to tell. But one thing is sure, this will play a role in Michigan when the legislature returns to work on the budget for the upcoming 2020-2021 Fiscal Year budget. While it’s too early to peg down a workable number, some are estimating the state has a potential to lose between one and two billion in revenue as a direct result of this health crisis. Even after the health crisis is over, governments will be feeling the ramifications to their coffers for a long time.
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