Michigan’s budget status just got complicated

By PAUL EGAN
Detroit Free Press (TNS)

LANSING — Finalizing the 2018 state budget just got a little more complicated for state lawmakers.

The state’s main checking account — the general fund — continues to grow, but it’s growing at a slower rate than officials estimated as recently as January, the House and Senate fiscal agencies said in reports released late Monday.

Due mostly to lower-than-anticipated personal and corporate income tax revenues, state general fund revenues for the 2017 and 2018 fiscal years will be $377 million lower than estimated in January, the House Fiscal Agency said.

The Senate Fiscal Agency had a more pessimistic outlook — pegging the two-year decline at $492 million.

The reports, which are to be discussed Wednesday at the twice-annual revenue estimating conference at the state Capitol, complicate efforts to finalize the 2017-18 budget.

Lawmakers in both chambers have been cutting hundreds of millions of dollars from Gov. Rick Snyder’s budget recommendation, in the hopes of funding either a closure of the public school retirement system to new members, or a reduction in the state income tax rate.

The fiscal agencies said that based on the new numbers, there may not be enough general fund revenues to fund such extra expenditures, even if those cuts are made.

But the news isn’t all bad.

The School Aid Fund, which is largely reliant on improving sales tax revenues, is now expected to perform much better than officials estimated in January.

The House Fiscal Agency expects School Aid Fund revenues for 2017 and 2018 to be $364 million better than the January estimates.

The Senate Fiscal Agency pegs the two-year improvement in the School Aid Fund at a lower amount — $286 million.

Lawmakers are more restricted in how they can spend School Aid Fund money than in how they can spend general fund money. School Aid Fund money must be used for education-related purposes.

At Wednesday’s conference, state officials will also consider a third set of estimates, which has not yet been made public. It is produced by the state Treasury Department.

Compared with the January estimates, “forecasted U.S. economic growth in both 2017 and 2018 is slightly stronger, while the Michigan forecast is slightly weaker in 2017 but slightly stronger in 2018,” the Senate Fiscal Agency said.

“High vehicle sales levels, although lower than in 2016, and stronger profitability in Michigan’s vehicle sector, will provide stability to the Michigan employment situation — even if Michigan grows more slowly than the U.S. as a whole.”

avatar

Posted by Tribune News Services

Leave a Reply