US Treasury set to release nearly $11B in relief funds to Michigan, localities

Melissa Nann Burke
The Detroit News

Washington — The U.S. Treasury Department said Monday it's ready to begin releasing $350 billion in emergency coronavirus recovery funds to states and localities, including over $6.54 billion for the state government of Michigan and nearly $826.7 million allocated for Detroit. 

The funding flows from President Joe Biden's American Rescue Plan that Congress passed in March. It is intended to help plug revenue shortfalls that state and local governments experienced as a result of the pandemic and to aid in the local response to COVID-19.

In addition to the $6.54 billion allocated to the state of Michigan — based largely on the number of unemployed workers — counties in the state are set to receive an additional $1.9 billion. That includes nearly $339.8 million for Wayne County, $244.3 million for Oakland County and $169.8 million for Macomb County. 

Michigan cities would be eligible for a total $1.8 billion. Those slated to get the largest awards through the relief fund are Detroit with $826 million, $94.7 million for Flint, $92.3 million for Grand Rapids, $52 million for Saginaw, $49.9 million for Lansing and $47.2 million for Dearborn, according to data from the Treasury Department. 

The agency said the state would oversee the distribution of another $644.3 million in funding for other localities in Michigan.

These figures don't include roughly $3.9 billion the state is expecting to receive for schools. 

"We all know that one of the things that held back the recovery the most after the Great Recession was the contraction of state and local government," Gene Sperling, the White House American rescue plan coordinator, said on a Monday call. 

"This is responding to the lessons of the past in a powerful way. This is ensuring that those state and local governments are able to not just bounce back, not just build back but  — as somebody I know says — build back better and build back quickly."

The allocation of the emergency aid is the first direct federal COVID-19 relief that many Michigan localities can count on since the pandemic began.

Direct aid provided under the CARES Act a year ago was restricted to municipalities with populations of 500,000 or more, which in Michigan covered only Detroit and the states' largest counties.

'Good news for cities'

Communities saw major holes blown into their municipal budgets a year ago as businesses and offices closed and large gatherings were suspended. Revenue from investments, gas taxes, building permits, facility rentals and other fees evaporated overnight as construction stopped and residents were asked to stay home. At the same time, overtime for first responders and public health expenditures ballooned. 

In Detroit, officials this month said the pandemic cost the city more than $410 million in revenue over a 16-month span in March 2020, resulting in layoffs, furloughs and other cuts. 

Rochester Hills Mayor Bryan Barnett had pressed for direct federal aid as president of the U.S. Association of Mayors last year, arguing that local governments know the needs of their community better than Washington bureaucrats. 

"It's been it's been a long road. We've been actively pursuing this and advocating for it for, geez, it seems like about a year. But essentially, this is good news for cities like Rochester Hills," said Barnett, a Republican.

"This will allow us to meet some budgetary needs and some holes that were created by COVID and allows us to invest in some infrastructure components that cities are always really starving for resources for."

Rochester Hills will receive $6.2 million, according to Treasury data, and Barnett noted that there are restrictions on how the money may be spent. For example, it can't be used for road infrastructure, which is disappointing because that's a large need for municipalities, he said.

"But this is significant. I don't think there's ever been anything quite like this, at least to this magnitude," Barnett said. "And our job now is to make sure we're responsibly allocating the dollars in the best way possible to make sure we get the maximum benefit for our community."

Treasury officials stressed the flexibility they're allowing in the use of the direct aid, saying it may be used for public health needs, such as setting up emergency medical or vaccination sites; supporting small businesses that are struggling; water, sewer or broadband infrastructure; or providing aid to households with food or housing shortages. 

The money may also be used by local and state governments to rehire staff that were laid off, such as teachers, utility or other front-line workers. The White House has said that 1.3 million state and local jobs were lost since the onset of COVID-19.

The funds may also be used to provide premium pay for essential workers such as nursing home staff or warehouse workers; and to target aid for industries or communities hit hardest by the pandemic, officials said. 

The latter category could include efforts to address homelessness and provide affordable housing, programs to remediate lead hazards or to address educational disparities through early learning services, or expanded resources for high-poverty schools.

"It's about (ensuring) that we have a recovery that brings everyone along that increases not just growth, but dignity and security and opportunity that reduces the scarring that can often happen to people who are out of the labor market for too long," Sperling said.

The White House coordinator said he was referring to making sure that states and local governments don't pull back on "the very things that are important for equity," but instead have resources to keep people in their homes, help students catch up with learning loss and allow workers get the training they need to, "to bounce back from this difficult period."

After a certification process, the funds could begin flowing in just a few days, officials said.

"State and local fiscal recovery funds provide substantial flexibility for each jurisdiction to meet local needs," Deputy Treasury Secretary Wally Adeyemo told reporters on a call. 

"In the coming days and weeks, the Treasury's Office of Recovery Programs will work hand in hand with governors, mayors, members of Congress and other local officials to answer any questions and ensure funds are making it to communities as soon as possible."

Restrictions outlined

Governments may use the funds for priorities such as roadway construction if it's related to the revenue that was lost due to the COVID-19 crisis, senior administration officials said.

The Treasury also issued guidance Monday that spelled out what local and state governments may not use the funds for: directly or indirectly cut taxes or to make a deposit into a pension fund. 

That's bad news for some local governments that had indicated tax relief was something that they were looking at. 

The COVID relief funds also may not be used to fund debt service, pay legal settlements or judgments or deposit into rainy day funds or financial reserves.  

Treasury officials assured reporters that there would be a check through a reporting framework to ensure that state and local governments aren't indirectly using relief funds for an ineligible use.

Local governments will receive the funds in two equal tranches, according to the Treasury Department, with half provided in May 2021 and the rest a year later. The state might also receive its funding in two separate tranches, depending on factors related to its unemployment rate at the time of certification by the Treasury Department.

U.S. Rep. Andy Levin, D-Bloomfield Township, wrote to Treasury Secretary Janet Yellen last week urging her agency's guidance for state and local aid give "deference and flexibility" to local leaders to determine the best use for funds. 

He said her department was "overly restrictive" in implementing the CARES Act, offering the example of a city manager in his district who wasn't allowed to use CARES funds to purchase a new ambulance because there were concerns it would be used for non-pandemic purposes in addition to COVID-related responses. 

Levin argued the ambulance "should have been an obvious and allowable use of funds."

In Wayne County, officials have suggested aid might go toward foreclosure prevention, rental assistance and aid for restaurants and other small businesses. 

Oakland County Executive David Coulter has said it will devote some funds to COVID-19 vaccinations, mental and behavioral health resources, food insecurity and housing needs and infrastructure. 

Macomb County's Mark Hackel has said he hopes to address health department service costs, including facility renovations.

Gov. Gretchen Whitmer last month said her priorities for Michigan's billions in new federal COVID relief dollars include infrastructure, learning loss solutions and workforce investment.

At the time, the Democratic governor stopped short of suggesting to the Republican-controlled Legislature what dollar amounts should be attached to each category, saying it would serve as an "opening salvo" in negotiations.

Among the priorities outlined by Whitmer for the federal dollars are small business grant programs and accelerators, business attraction efforts, infrastructure investments, expanded public health capacity, senior services and health care access, expansions to preschool and child care, addressing pandemic-induced learning loss and behaviorial health supports.

The state Legislature has attached conditions to some of the federal aid that has already reached the state and previously battled Whitmer over her vetoes of COVID-19 relief for businesses and the state's unemployment trust fund.

Detroit News Staff Writers Beth LeBlanc, Mike Martindale and James David Dickson contributed.