By SHELDON KRAUSE
Capital News Service
LANSING — As the COVID-19 pandemic has devastated the American economy over the past year, a new report ranking the states based on their reliance on federal funding puts Michigan right around the national average.
WalletHub, an online financial advising firm, examined that question in light of significant federal aid from pandemic-related relief packages. WalletHub made its calculations based on return on taxes paid to the federal government, share of federal jobs and federal funding as a percentage of state revenue.
Michigan ranked 27th on federal reliance. On that scale, New Mexico ranked 1st as the state most dependent on federal money, while Kansas, in 50th place, is the least dependent.
Professor Carter Wilson, the head of the Political Science Department at Northern Michigan University, said that those figures don’t mean much in the grand scheme of things.
“Michigan, like other states, receives billions of dollars from federal grants, as well as extra money from COVID relief,” he said.
The renewed focus on federal funding comes as events in the past year have put the relationship between state and federal governments in focus: the pandemic, related federal relief bills, and threats by President Donald Trump to cut funding from Washington to Democratic-led states after massive protests over the summer.
While some political figures in the last year have argued that financially prosperous states could run without federal funding, Wilson says that argument has little merit.
“The idea that state governments are independent of the federal government is a myth,” he said.
Wilson, who specializes in public policy, continued, “Federal money comes from multiple sources,” including grants, health care, education, highway repairs and Medicaid.
Wilson also cited aid provided in the recent coronavirus relief packages passed by Congress. The first package included $37 million for the Michigan Department of Education
Kurt Weiss, a press officer for the Department of Technology, Management & Budget, said the annual state budget of about $60 billion “is heavily reliant on federal funds. We have a lot of federal money, like other states, that comes in to help support our budget.”
Weiss said that around $20 billion comes from state taxes and goes towards two key funds, general government operations and school aid.
“Once you get past those two big buckets, which is about $20-some billion, the bulk of the rest of the money is federal,” he said.
Weiss also said he doesn’t think some state programs could run without federal funding.
“I would say we’re dependent on the federal money, just because it’s so much, it’s such a big number,” he said.
“We can’t run our state programs, and how in the world would we run food assistance and help kids on free and reduced lunch without that federal money? We just wouldn’t have enough state tax dollars to do it,” he said.
As for COVID relief programs, Weiss said that “The CARES (Coronavirus Aid, Relief, and Economic Security) package gave the state quite a bit of money for pandemic response,” about $3 billion to the state and close to $1 billion to governments.
A lot of that money was for testing supplies and necessary personal protective equipment, he said.
Michael LaFaive, the senior policy director of the Morey Fiscal Policy Institute at the free-market oriented Mackinac Center for Public Policy in Midland, called the recently passed American Rescue Plan “much too big. At least 15% of it has nothing to do with the pandemic.”
LaFaive said Congress could have passed a much smaller relief package.
“States and local units of government were recovering economically before its passage, and in fact, according to the Tax Foundation, net changes in state revenues were down only 0.2%,” he said. “So much of this package is designed to rescue budgets that don’t need rescuing.”
LaFaive said he is concerned about the relief package altering the relationship between states and Washington.
“The bill looks like a bill to federalize American states,” he said. “‘He who pays the piper calls the tune,’ so when the federal government sends down money for purposes that it believes are more useful than others, then we’re stuck with that program unless we reject the subsidy.”