LANSING – Compared to a year ago when Michigan was facing a deficit in excess of $1 billion, the state is looking at “good news” on the budget, Senate Appropriations Committee members were told by Senate Fiscal Agency Executive Director Gary Olson.

Assisted by the balance left over from the 2006-07 budget, the state should get through the remainder of the 2007-08 fiscal year with another balance of more than $200 million going towards the 2008-09 fiscal year, Olson said.

That could allow as much as an inflationary increase for programs like higher education, the Department of Corrections and other programs in the 2008-09 budget, Olson said. That is possible even with the state continuing to undergo an unprecedented contraction in the state’s total number of jobs, Olson said.

Olson spoke after last week’s Revenue Estimating Conference that set new revenue expectations for the current 2007-08 fiscal year and the upcoming 2008-09 budget. Governor Jennifer Granholm must use the conference’s revenue estimate in establishing her proposal for the next fiscal year.

The administration will present its 2008-09 budget recommendations at 11 a.m. Thursday, February 7 to a joint meeting of the Senate and House Appropriations Committees.

In many respects, Olson said, the major uncertainty to resolve at this point on the current and upcoming budget is whether any funds would be allocated to the Budget Stabilization Fund, which now stands at $2.3 million.

Olson recommended that the Legislature do allocate some funds to the BSF, but said if the entire anticipated surplus is allocated that will force changes to what the state could budget.

Revenues for the current year are expected to be lower than the number estimated last May, Olson said, but the surplus the state saw from the 2006-07 fiscal year will help offset that amount.

House Republicans have charged that the surplus was hidden from the general public and have called for it to refunded to the taxpayers.

Olson said the surplus was the result of two main factors: underestimating revenues in May and Granholm’s administration holding the line on spending. “The administration did a very good job putting the clamps on spending,” he said.

The state saw more than $100 million in lapses from the 2006-07 fiscal year, he said, and more than 80 percent of that came from the Departments of Community Health and Human Services.

The administration has just put in requests for some $67 million in supplemental budgets in both the general fund and School Aid Fund, Olson said (see related story). If there are no further major changes to the budget then the state should finish with a general balance of $217 million at the end of the fiscal year that would be available for the 2008-09 fiscal year.

Olson said the only thing anyone knows about the executive budget at this time is how much the estimated revenue will be and that “it will be balanced.”

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