Michigan is taking in billions more in state revenue than previously expected, adding to the historic amount of money currently at the government’s disposal, according to projections from the state’s top fiscal experts.
The state’s current fiscal year general and school aid funds are projected to clock in at $28.53 billion, $1.72 billion more than previous estimates. And in the next fiscal year, the total estimate comes to $29.14 billion, up $1.4 billion from past projections. That’s not counting the billions more in federal COVID-19 aid and infrastructure funding available to the state.
It’s a far cry from predictions at the outset of the pandemic, where experts feared the worst as wide swaths of the economy shut down. On Friday, State Budget Director Chris Harkins called the current trends “astounding,” but cautioned the revenue boost should be seen as a one-time opportunity, not an ongoing guarantee.
“We now see incredible revenues...a large chunk of which are the result of pandemic-related supports,” Harkins said. “So I’m very optimistic. I think we are in a very good position, and it gives us a lot of things to consider as we go forward.”
The projections were announced at the state’s latest Consensus Revenue Estimating Conference, where analysts from the Michigan Department of Treasury and state House and Senate fiscal agencies agree to an updated estimate on how much money the state can expect in tax revenue. The estimates help inform the governor and legislative leaders as they work through state budget negotiations.
Contributing to the boost, analysts said, were ongoing benefits of federal stimulus, higher-than-expected income tax collections and robust consumer spending through the COVID-19 pandemic, particularly on taxable goods in lieu of services and entertainment.
Potential risks to the rosy budget picture include ongoing pandemic-related pressures, including new variants and continued labor shortages in key industries, as well as inflation fluctuations and unexpected changes in the national or international economy.
State Treasurer Rachael Eubanks said she expects growth rates to return to more typical levels as effects from the stimulus wind down.
Legislative Republicans cautioned that the better-than-expected budget picture is not necessarily reflective of what citizens are experiencing, noting they hope to invest the extra money wisely without saddling the state with unsustainable ongoing programs.
“Even with this substantial revenue increase, we owe it to the hardworking people of Michigan to effectively and responsibly put their tax dollars to use in a positive and productive manner,” Senate Appropriations Committee Chair Jim Stamas, R-Midland, said in a statement.
One Republican lawmaker suggested the projections leave room for tax cuts. Senate Finance Committee Chair Jim Runestad, R-White Lake, said in a statement he would pursue proposals to reduce the state’s income tax and personal property taxes for businesses.
“In light of the CREC report, there is no excuse for continuing to overtax Michigan residents,” he said.
The updated revenue projections come as Gov. Gretchen Whitmer prepares to present a spending plan to the Legislature in the coming weeks, kicking off the next budget cycle. Harkins told reporters the administration’s priorities will include investments in clean water, education and jobs.
The state’s current fiscal year runs through Sept. 30, 2022. Lawmakers and the governor must agree to a budget for the following fiscal year prior to Oct. 1.
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