LANSING – Lawmakers will have a slight cushion of revenue to complete budget work in the weeks ahead for the current fiscal year and fiscal year 2019-20, according to the numbers agreed upon Friday by the state’s Consensus Revenue Estimating Conference.
Economists and state budget officials delivering presentations before conference members Friday in the Capitol said while the state’s economy remains strong during one of the longest periods of growth ever, there are concerns over tariffs and trade agreements that pose a threat to the current growth.
The conference agreed Friday upon numbers for the remainder of the 2018-19 budget year, estimating total General Fund and School Aid Fund revenue of $24.334 billion, up $14.9 million from the $24.25 billion decided upon in January. While that overall change is tiny, there was a much more significant difference in the General Fund and School Aid Fund.
General Fund revenue for 2018-19 is expected to be at $10.871 billion, an increase of $151.5 million from the $10.7 billion in January while School Aid Fund was at $13.482 billion, a decrease of $68.2 million from the $13.55 billion set in January.
Appropriators will have for fiscal year 2019-20 total General Fund and School Aid Fund revenue of $24.617 billion, an increase of 1.2 percent over the current fiscal year, or $282.7 million.
General Fund for fiscal year 2019-20 is projected to be $10.777 billion, down $74.8 million from the January projection of $10.717 billion and School Aid Fund is expected to be at $13.840 billion, an increase of $357.5 million from the January estimate of $13.926 billion.
“We saw revenues are essentially flat,” Treasurer Rachael Eubanks told reporters after the conference. “From our perspective, we are relatively stable. There’s certainly uncertainties out there.”
She said as revenues remain flat, officials will continue to monitor them in the coming months to ensure everything stays on track.
When asked about the state bringing in revenue through taxes at a level $10 billion under the constitutional revenue limit, Eubanks said it’s primarily the result of tax policy changes.
“We have seen the General Fund remain flat for 20 years and it constrains the ability to be able to have money for new projects,” she said.
Budget Director Chris Kolb said it’s tough for the state to spend on its priorities with the same of amount of money it had 20 years ago.
“Overall what it does show you is the reason we have these needs is we have not provided the resources that we need to fix our roads, fix out schools and clean our water,” he said.
On the consensus numbers showing a slight decrease in the School Aid Fund and if that would affect Governor Gretchen Whitmer‘s school spending plans, Kolb said in the grand scheme of things, it’s not too different from January estimates.
“We know that the constraints are,” he said. “We know what the needs are. We know that there’s a solution out there and we just all have to come together to do that.”
Those presenting projections were upbeat about the current economic strength but warned of the national economic policy matters such as tariffs that could affect the state.
“Michigan’s economy right now continues to look strong,” Gabriel Ehrlick, director of the Research Seminar in Quantitative Economics at the University of Michigan, said, adding that those hoping the economy continues to remain strong would keep their fingers crossed.
Ehrlick said the hope is that President Donald Trump’s administration and China find a middle ground in addressing the ongoing battle over tariffs rather than any kind of ramping-up of actions between the nations.
Eric Bussis with the Department of Treasury agreed that the economic fundamentals are strong but leveling off. He echoed Ehrlick’s concerns over tariffs and trade.
Bussis told the revenue conference members if there are any sharp negative changes in economic policy in the next couple months that cause a larger tariff fight, the group should meet again and discuss the economic implications.
Other signs of economic growth slowing down included the projection of increased jobs in the state. State fiscal agency officials projected average job gains of 32,200 new jobs in the state this year, a drop from 49,500 new jobs in 2018 and the fewest since recovery from job losses began in 2011 during the last recession. For 2020, total jobs created were estimated to be 15,100 and only 12,500 in 2021.
Another surprise, according to Jim Stansell with the House Fiscal Agency, was that the projected increase in sales tax collections expected have not materialized to the levels projected following the South Dakota v. Wayfair case decided by the U.S. Supreme Court last year. The case granted the ability to collect sales taxes on internet sales from companies that do not have a physical presence in the state.
For light vehicle sales, HFA projected there to be 16.8 million vehicles sold nationally in 2019, down from 17.2 million in the previous year before falling to 16.6 million in 2020 and 16.5 million in 2021. The Senate Fiscal Agency was projecting 16.9 million in sales for 2019, with the same 2020 and 2021 projections as HFA. The governor’s administration projected 16.7 million for 2019 and 16.4 million for 2020 and 2021.
For total K-12 pupil counts, the total count for 2018-19 was raised to 1,470,500, an increase of 100 from the January estimate and 13,692 above the previous year. For the 2019-20 fiscal year the estimated pupil count is expected to be 1,459,400, a decrease of 800 from the January estimate and an 11,100 decline from the current fiscal year.
Senate Appropriations Committee chair Sen. Jim Stamas (R-Midland) he was pleased the state is continuing to see growth, but lawmakers must exercise caution in proceeding to finalize the 2019-20 budget.
“There’s always uncertainty. There’s always something out there that can hurt the economy,” Stamas said of the trade and tariff concerns expressed during the meeting.
He said the Senate budgets that were passed over to the House were within the limits of the January estimate so there is room for movement based on what the House passes and negotiations with the governor.
Stamas said the long-term goal is finding more funding for education and roads.
Sen. Curtis Hertel Jr. (D-East Lansing) the committee’s minority vice chair, said the new numbers were not unexpected and confirm what is already known: that new revenue will be needed for more road and education funding.
He pointed to projections having revenue remaining flat over the next couple of years as the state’s economic growth slows as proof.
This story was published by Gongwer News Service.