Michigan economic outlook predicts revenue to beat expectations by $6.8B
Michigan could beat previous revenue expectations by around $6.8 billion across the current and next couple of fiscal years.
That’s according to a report from Friday’s Consensus Revenue Estimating Conference. The twice-a-year meeting is a chance for the legislative fiscal agencies and the governor’s administration to agree on how much money the state expects to bring in ahead of final budget negotiations.
State Treasurer Rachael Eubanks said this was one of the hardest times for the group to reach an agreement.
“We’re seeing very good news today. I think we just have to continue to maintain a fair sense of caution as we look at the immediate and longer term as we’re dealing with really unprecedented territory in this uncertain economy,” Eubanks said ahead of approving the estimates.
Projections for the state’s combined revenue for the general fund and school aid fund for the rest of the current fiscal year landed at $31.5 billion, about 2.1% higher than officials previously thought at the January conference.
Fiscal year 2023 projections at Friday’s conference came in at $31.2 billion — a 2.5% increase over previous expectations.
And the group estimated the state could bring in $31.7 billion in fiscal year 2024.
During the conference, the agencies' principals and staff heard from various experts about economic indicators affecting Michigan like inflation, employment and consumer patterns, and international outlooks.
The general feeling was that Michigan’s short-term outlook was strong due to factors like higher-than-anticipated sales and use tax collection.
“As a result, we are on track to finish the year, if we maintain this growth rate at 12.8%, which is what we’re seeing year to date, it will be the best year basically that we have ever had on record,” Senate Fiscal Agency Chief Economist David Zin said.
But there was substantial caution for projections beyond the current fiscal year, with inflation and other uncertainties like Russia’s invasion of Ukraine looming.
With that in mind, University of Michigan economist Gabriel Ehrlich mentioned the pre-pandemic economy was considered well-balanced.
“That is one of the reasons that we’ve consistently forecast a strong recovery from the pandemic,” Ehrlich said.
Still, with Michigan residents facing the effects of inflation, leaders of the Senate Appropriations Committee set their focus on immediate help for families while exercising long term caution.
“The rosy budget picture facing state government is not reflective of the reality facing many Michigan families struggling with record-high gas prices and near 40-year-high inflation that is increasing costs on virtually all everyday household needs, like food and energy,” Senate Appropriations Committee Chair Jim Stamas (R-Midland) said in a press release.
A day earlier, legislative Republicans passed a plan for a $2.5 billion tax cut, which Stamas said the Senate’s budget proposal mostly accounted for. Though the plan did win over some House Democrats, it passed along mostly party lines in the Senate.
“We’re not going to support a tax cut that overwhelmingly benefits those at the top of the scale that aren’t struggling right now,” Sen. Curtis Hertel (D-East Lansing) said. “When you start talking about changing a 0.4% reduction in the income tax, that really doesn’t do a whole lot for working families.”
Meanwhile, Gov. Gretchen Whitmer proposed sending working families a $500 rebate. After the revenue estimating conference Friday, Whitmer’s office sent out a press release highlighting items in her budget proposal.
“The budget proposes rolling back the retirement tax to put an average of $1,000 back in the pockets of half a million families and tripling the Michigan Earned Income Tax Credit to deliver an average tax refund of $3,000 to 730,000 working families,” the email said.
The Legislature could resume budget negotiations as soon as next week.