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State in contingency planning for federal default

Project Hope

State officials are hoping for the best when it comes to the federal shutdown and potential default on its debt.

But they're preparing for the worst.  State agencies have been told to submit contingency plans to the budget office by next week.

The worst-case scenario is pretty grim.  

Food banks could quickly be overwhelmed if the 1.6 million people getting food assistance in Michigan lose their benefits, and tens of thousands of people on unemployment are cut off from their checks. 

Michigan gets $20 billion of its $50 billion budget from the federal goverment.  The state has already sent potential layoff notices to nearly 20,000 state union employees. 

Notices to people getting food assistance and unemployment checks will go out on October 20th, if the default happens.

Kurt Weiss, spokesman for the state budget office, says the state probably can keep programs running  through the end of October, but that's about it.  The state has roughly $580 million in its rainy day fund, but it won't go very far.

Says Weiss:  "We're talking about some widespread impacts, if we do get to the end of October and this isn't solved.  There's not a lot we can do from here in Lansing, they really need to just get in a room and solve this thing."

Weiss says people should not assume a default will only hurt poor people.  He says the stock market shock from a default would be severe.

"Folks are not gonna want to look at their 401(k) balance on October 18th if they don't get this solved," he says.

Weiss says one of the priorities for the state will be making sure people don't go hungry.

Tracy Samilton covers energy and transportation, including the auto industry and the business response to climate change for Michigan Public. She began her career at Michigan Public as an intern, where she was promptly “bitten by the radio bug,” and never recovered.
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