Michigan, Pennsylvania, Wisconsin warn of $14 billion coronavirus hit

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The governors of Michigan, Pennsylvania, and Wisconsin warned of $14 billion in collective tax losses due to the COVID-19 economic shutdown in a letter Thursday pressing President Trump for more relief.

The letter was sent as initial funding is being made available through an online portal launched by Treasury this week for eligible state, local, and tribal governments to apply for reimbursement for expenses tied to their COVID-19 response under the Coronavirus Aid, Relief, and Economic Security Act signed late last month.

Michigan Gov. Gretchen Whitmer warns of a $7 billion revenue hit through the next fiscal year due to COVID-19.

“While we appreciate that this will allow an initial $71 billion to be made available to meet some immediate cash flow needs of state and local governments, the magnitude of the crushing economic impact this virus has had on our states and residents cannot be overstated,” wrote Michigan Gov. Gretchen Whitmer, Pennsylvania Gov. Tom Wolf and Wisconsin Gov. Tony Evers.

The three governors are all Democrats, and their states, narrowly won by the Republican president in 2016, are key to his re-election prospects.

Because the $2 trillion CARES Act provides funds only to cover expenses, governments are exposed to the loss of tax revenue from the shutdown of large segments of the economy to limit the spread of the coronavirus.

The governors urged the administration to support additional resources for all states and localities to tackle budget shortfalls amid expected tax losses. “Without this leadership, the damage to our state economies will be exacerbated by the cuts we know we will be forced to make,” they wrote.

Michigan warned of a $3 billion revenue hit in the state’s current budget that runs through Sept. 30 and a total $7 billion when factoring anticipated losses in the coming fiscal year.

“These cuts will undoubtedly lead to continued and major job losses in my state, where over 1 million new unemployment claims have been filed since March 15, a 5000% increase over a 4-week period, representing roughly a quarter of the state’s workforce,” Whitmer said.

Wisconsin warned that its unemployment rate is estimated at roughly 15% of the workforce and preliminary estimates project a $2 billion revenue loss over the next year. “This significant revenue shortfall will damage the state’s ability to respond to the economic crisis faced by our workers and businesses,” Evers said.

Pennsylvania projects a budget deficit ranging between $4.5 billion and $5 billion. “That deficit will make it incredibly difficult to focus our efforts on supporting workers and businesses as we move past the COVID-19 pandemic and attempt to rebuild our economy for Pennsylvania’s middle class,” Wolf said.

The group backs the National Governors Association’s advocacy for $500 billion in state stabilization funds to replaceme lost revenues and pay for other expenses. Debate is ongoing between the administration and congressional leaders on a followup to the CARES Act.

Whitmer and Evers are participating in a new Midwest seven-state partnership coordinating their efforts to reopen economies once the peak coronavirus threat subsides. The others are Illinois Gov. J.B. Pritzker, Ohio Gov. Mike DeWine, Minnesota Gov. Tim Walz, Indiana Gov. Eric Holcomb, and Kentucky Gov. Andy Beshear.

Stay-at-home and school closure orders have varied among the governors. Evers on Thursday extended an existing order until after the Memorial Day holiday, while schools will not reopen for the current academic year.

DeWine said Thursday he would begin efforts to reopen the state’s economy through a slow and measured process. The state’s stay-at-home order expires at the end of the month.

“If we don't get this right, the consequences could be horrendous," DeWine said.
Whitmer has received pushback from some Republican lawmakers and a protest at the capitol was staged Wednesday over her stay-at-home order that remains in place through April. It’s considered one of the strictest as it bans travel between homes and lacks some exemptions other states have granted.

“We will make decisions based on facts, science, and recommendations from experts in health care, business, labor, and education,” the governors said. “Phasing in sectors of our economy will be most effective when we work together as a region. This doesn’t mean our economy will reopen all at once, or that every state will take the same steps at the same time. But close coordination will ensure we get this right.”

The group said they would consider the potential impact on rates of new infections and hospitalizations, test and trace capabilities, having sufficient health care capacity to handle a case resurgence, and best practices for social distancing in the workplace.

Pritzker said at his daily COVID-19 briefing that each state would reopen its economy on its own timeline but the regional collaboration would help efforts to prevent a resurgence of cases.

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