For Michigan officials building an $80B budget, ‘boring is a good thing’

• New projections show Michigan to bring in $31.7 billion in tax revenue this year, $32.4 billion next year
• Modest surplus means Michigan lawmakers, Gov. Gretchen Whitmer have slightly more money available to spend than previously projected
• General fund grew, but school aid money dipped slightly amid sluggish consumer spending

After years of economic whiplash from the COVID-19 pandemic, record-high budget surpluses, fluctuating unemployment rates and the pinch of inflation, officials say Michigan’s latest financial projections seem, well, boring. 

But for officials tasked with predicting revenues for what is expected to be a roughly $80 billion state spending plan for the next fiscal year, “boring is a good thing,” Treasurer Rachael Eubanks said Friday. 

New projections show the state government is expected to bring in $31.7 billion in tax revenue this year, up slightly from earlier estimates, according to the Department of Treasury and the nonpartisan House and Senate fiscal agencies. 

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The state is expecting to collect $32.3 billion in tax revenue for the next fiscal year that begins in October, which would be a 2.1% bump. 

The economy also appears to be stabilizing, according to forecasters from the University of Michigan, who on Friday predicted lower inflation rates, modest job growth and low unemployment. 

But Gabriel Ehrlich, director of the University of Michigan’s Research Seminar in Quantitative Economics, noted that positive progress “doesn’t really make people feel a lot better when grocery prices, when rents are spiking” as inflation continues to plague necessary purchases and eat into individual income growth.

The latest estimates came out of Friday’s Consensus Revenue Estimating Conference, the second of two annual meetings where state fiscal analysts and economic forecasters provide a snapshot of the state’s economy and tax revenue projections to inform the budget process. 

After back-to-back record budgets boosted by federal stimulus funding, Michigan Gov. Gretchen Whitmer and Democratic majorities in the state House and Senate have each proposed slightly smaller spending plans for next year. 

The new revenue projections will inform negotiations over a final budget deal, which could come this summer but is required by October. 

State general fund revenues for the current fiscal year are now expected to clock in at $13.95 billion, up $351.4 million from January predictions. The state’s school aid fund dipped slightly to $17.78 billion, down $163.3 million from initial estimates. 

Senate Appropriations Minority Vice Chair Jon Bumstead, R-North Muskegon, said the latest estimate indicates people are spending less “as they struggle to overcome the highest inflation seen in some of their lifetimes,” urging caution as lawmakers build out the budget. 

But Treasury officials attributed the latest estimates to higher wages and interest earnings boosting individual and corporate income tax collections, while a dip in consumer spending on taxable goods led to a slightly smaller budget for schools. 

“Today’s consensus is that Michigan has a strong and stable revenue and economic foundation for finalizing the state budget,” Eubanks said. 

“Our economy is adding jobs and bringing more people back to work, marking a strong recovery in labor participation. This is great news now and for our future.”