Michigan has already notified its government workers, many of whom are supported by federal funds, they may be laid off. (Dale G. Young / The Detroit News)
Washington— Michigan is running out of time and money to float federal programs hamstrung by the government shutdown and may have to cut staff, jobless checks and food aid programs.
The state already has notified its workers, many of whom are supported by federal funds, they may be laid off. If the shutdown isn’t resolved by Monday, the layoffs could kick in for about 15,000 to 20,000 state workers, said Kurt Weiss, spokesman for the state budget office.
“Each day that goes by, it’s getting more and more serious,” Weiss said.
In addition, the state of Michigan likely cannot subsidize federal programs beyond October that help low-income families pay their bills, purchase baby formula and feed their children. Discontinuation notices would go out around Oct. 20 to the millions in the state who rely on such programs, Weiss said.
Michigan’s automakers are also starting to feel the effects of the shutdown. The National Highway Traffic Safety Administration, for instance, has halted most vehicle safety programs and furloughed 333 of its 597 employees. And auto analysts on Wednesday were saying a prolonged shutdown could reduce consumer confidence and hurt car and truck sales.
More than 41 percent of the state’s budget — about $20 billion — is federally funded.
The subsidized federal programs that could be affected, meanwhile, include unemployment compensation, the Women Infants and Children program for baby formula, Temporary Assistance for Needy Families cash assistance, school lunch programs and food assistance.
“The state really can’t afford to be in the business of replacing the federal programs that are so big and so costly. The state really doesn’t have the reserves to keep them going much longer,” Weiss said.
Food assistance alone, he noted, costs about $250 million a month to help 1.6 million Michigan families.
Gilda Jacobs, CEO of the Michigan League for Public Policy, said the loss of the social program funding would especially affect low-income residents.
“Those are the dollars people use to pay their rent and their utilities and just pay their everyday living and shelter expenses,” Jacobs said.
Kristen McDonald, vice president of program and policy at the Skillman Foundation in Detroit, is troubled by the lack of concern for children in the political conversation about the shutdown.
Many Detroit parents rely on federally funded school lunches for their children’s daily nutritional needs, McDonald said.
“You can’t cut off food to kids,” said McDonald, whose foundation advocates for Detroit children.
The economic toll grows with each day, said Charles Ballard, a professor of economics at Michigan State University.
“The longer we go, the more damage we inflict,” Ballard said Wednesday.
Another consequence of the Oct. 1 partial shutdown is Michigan’s unemployment requests have skyrocketed as laid-off federal workers seek help, Weiss said. In one day, the unemployment office experienced a 40,000 spike in claims, putting a tremendous strain on the system, he said.
The shutdown could affect the federal court docket next week with the city’s bankruptcy case in Detroit and Michigan’s affirmative action case before the U.S. Supreme Court in Washington. Federal courts have remained open through a 10-day window of operational funds. A Detroit federal court spokesman said he expects to hear Friday on what cases can go forward next week.
In addition, the state of Michigan officials are extremely concerned about Congress failing to raise the debt limit by the Oct. 17 deadline. If the United States begins to default on its debt, state officials said they are preparing for possible chaos in the stock and bond markets — which in the long run could mean a higher cost of borrowing for publicly funded improvement projects, such as new college buildings.
Mitch Bean, former director of the Michigan House Fiscal Agency, agreed that failing to raise the debt ceiling is the real threat to the country’s financial health.
“I think it ends up hurting everybody, whether it’s higher interest rates or loss of consumer confidence,” said Bean, now a principal at Great Lakes Economic Consulting. ”