Regardless of which party controls Congress or the White House, the one thing that Washington politicians seem to agree on is the desire to spend more. Michigan’s state government has been a beneficiary of Washington’s excess.
The federal government showered states with money since the beginning of the COVID-19 pandemic, both with special spending bills and by increasing spending through the normal federal budget process. State officials in Michigan expected to receive $23.1 billion from the federal government when they enacted the 2019-20 fiscal year budget.
Then the pandemic happened, and federal transfers to Michigan jumped up to $33.0 billion. Then $38.8 billion the year after. And $36.8 billion for the current year. In other words, the federal government splurged, sending another $39.2 billion to state government beyond what it sent before the pandemic began.
Here are the budget areas that received the largest increases:
The Department of Health and Human Services oversees the state’s Medicaid program. The federal government tied some of its COVID spending to a requirement that the state keep people on Medicaid during the pandemic, even if their income went above eligibility limits. The state has 637,000 more people on Medicaid than it did when the pandemic began.
Public schools get most of their funding through the state budget, and the federal government increased its transfers to schools here. None of the funding was based on whether schools were open to in-person instruction.
Unless Congress decides to do something different, it looks like the pandemic ratcheted up state spending. Federal transfers are $8 billion more than the pre-pandemic level on an annual basis, a 34.6% increase, and little of this increase is from temporary stimulus spending. I don’t think we’re getting proportionally better government for the spending.
It’s not as if the federal government has the cash at hand to finance this expansion of state government. It has accumulated record deficits, and there is no end in sight under current spending policy. This ramp- up in largesse is at least partially responsible for the spike in inflation.
State lawmakers already have the tools they need to increase spending if they want to. They have the authority to tax and spend, subject to state limits they are well under at the moment. They can also ask voters to approve more debt if there’s a pressing need for current spending.
Federal lawmakers have less compunction about spending than state leaders do. Congressmen seem to jump at every chance to put more in the budget. Indeed, they seem willing to explore the theoretical limits of federal debt in order to keep writing checks.
It’s a lot to ask state leaders to turn down the cash federal officials offer to them. State residents are responsible for federal debt, even if state officials reject new funds from Washington. Michiganders should be more concerned about federal spending than they are, and more skeptical that they’re getting good returns on the continually increasing federal spending in the state budget.
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