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State Revenues To Tick Up $264M This Year, $225M More Next Year

January 15, 2019

Gov. Gretchen Whitmer is starting off with $264.7 million more in state revenues than previously expected this fiscal year and $225 million more than previously estimated in state revenue for her first budget for Fiscal Year (FY) 2020.

But the agreement reached Friday at the Consensus Revenue Estimating Conference (CREC) still amounts to a $245.2 million decrease in General Fund (GF) dollars from FY 2018, meaning the decrease from FY 2018 to FY 2019 ended up being less than expected. 

The principals at CREC decided the GF estimates today were $288.6 million more than expected in the May 2018 estimates. As for the School Aid Fund (SAF), it still increased from FY 2018 to FY 2019, but $23.9 million less than expected. 

The consensus on total FY 2019 GF revenue was $10.7 billion and $13.5 billion for the SAF.

For next budget year, FY 2020, there was $199.1 million more for GF and $25.9 million more for SAF than previously estimated, for a net increase estimate of $225 million more in FY 2020.

But state Budget Director Chris Kolb described the numbers approved today as “pretty flat.” He also said spending commitments the Legislature has tied money to — like the growing contribution of GF dollars to roads — need to be taken into account as well.

Asked about getting rid of the “pension tax” — restoring the tax exemption on all government employee pension income — and if it would be concerning to lose more state revenue, given the projections released today, Kolb said, “I don’t need a calculator to answer that one.”

And asked if a road-funding plan would be incorporated into Whitmer’s first budget, Kolb said, “We’re working with the Governor to make sure that her priorities are reflected in the budget.”

Kolb said the state constitution gives a new governor an extra 30 days to come up with a budget, meaning the Whitmer administration has 60 days from the first day of session to come up with a recommendation, giving her until March 10.

“We’re going to take as many of those days to do it [as needed],” Kolb said.

State Treasurer Rachael Eubanks said there would be continued growth through FY 2021, albeit at a more modest rate. In a press release issued later today, Eubanks attributed GF estimates going up due to higher projected growth in individual and corporate income taxes.

Income tax payments were projected upward for FY 2019, compared to the May estimates, and so were use tax and business tax revenue projections, according to the state.

Kolb pointed out the state’s GF revenue stream is roughly the same now as it was in 2001 — right around $10 billion.

“General Fund revenues have remained flat over a long period of time, and so we have a fundamental problem of constrained resources and additional funding needed to address real problems for Michigan’s residents,” Kolb said in a statement.

In terms of the revenue limit the state is subjected to, the state will be $10.4 billion below the limit in FY 2019, and that’s expected to rise to $11.9 billion below the limit in FY 2021.

For the initial estimates on FY 2021 numbers, the CREC principals projected GF dollars go up $134.8 million, to $10.8 billion, and SAF was projected at increasing $337.7 million to $14.2 billion.

For FYs 2022 and 2023, combined GF and SAF growth was projected at 2.9 percent in 2022 and 2.8 percent in 2023.

Sen. Jim Stamas (R-Midland), chair of the Senate Appropriations Committee, said today in a statement it’s “good news that Michigan’s economy is growing and is expected to continue to grow” and that the “economic and fiscal forecast illustrates that we must continue making smart budget decisions that meet our challenges and keep our state on solid financial footing.”

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