LANSING – Michigan’s total general fund and School Aid Fund revenues could drop by more than $1.5 billion in two years, from the 2007-08 to 2009-10 fiscal years, the House Fiscal Agency said Wednesday.
The estimate, released two days before the state’s first 2009 Revenue Estimating Conference, mirrors in many respects the fiscal forecast issued last month by the Senate Fiscal Agency.
Unemployment in the state will average better than 11 percent in both 2009 and 2010, the forecast said, as an estimated 331,700 persons will lose their jobs from 2008-10.
The forecast was as grim as the earlier SFA forecast as the House agency said the state’s already weak economy will be “significantly affected by the national recession, the weakened level of motor vehicle sales, the tight credit conditions and the financial condition of General Motors, Chrysler, Ford and their suppliers.”
The Revenue Estimating Conference is held by Treasurer Robert Kleine, HFA Executive Director Mitch Bean and SFA Executive Director Gary Olson, and will decide on the revenue numbers for the 2009-10 fiscal year that Governor Jennifer Granholm must use in developing her executive budget.
It will also set new revenue figures for the current 2008-09 fiscal year that could lead to further budget cuts. The state last month enacted an Executive Order cutting more than $134 million from the budget, an amount that legislative Republicans have said is not large enough to meet overall revenue shortfalls. Ms. Granholm and Democrats did not want to move to cut more in anticipation of a fiscal stimulus plan enacted under the new Congress and President-elect Barack Obama.
The forecast anticipates that for a variety of factors, not the least being a collapse in car and light truck sales for 2009 to 10.9 million sold compared to more than 16 million sold in 2007 (and the percentage of the Big Three’s market share falling to 41.3 percent in 2010 from 58 percent in 2004), the unemployment rate in Michigan will jump from an average of 8.4 percent to 11.3 percent in 2009 and then increase again to 11.4 percent in 2010.
The state is expected to have lost 73,000 jobs in 2008, but that number will balloon to 191,700 jobs in 2009. Another 67,000 jobs are expected to be lost in 2010, according to the forecast.
The impact that will have on state revenues will be considerable, according to the forecast.
Total state general fund and School Aid Fund revenues for 2007-08 are anticipated at more than $20.5 billion. For 2008-09 total revenues are expected about $19.2 billion and for 2009-10 revenues should total about $18.9 billion.
General fund revenues are expected to fall from $8.98 billion in 2008-09 to $7.99 billion in the current year. Nearly half that decline will come from a drop of $537 million in income tax revenues. Sales and use taxes are expected to drop by another $80 million and business taxes are expected to fall by more than $300 million.
For 2009-10 the state’s general fund should total $7.7 billion, and the income tax is expected to fall another $353 million but there could be some growth in the sales and use taxes.
SAF revenues of $11.5 billion in 2007-08 are expected to fall to $11.38 billion and then to $11.26 billion in 2009-10.
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