We all love to see lower gasoline prices at the pump, but there always seems to be a catch to good news like that. Weak sales tax collections from the sale of lower-priced fuels is just one of the mitigating factors forcing state authorities to lower their estimates for future revenues coming into the state's coffers and that could lead to budget cuts.
State Treasurer Nick Khouri sat down with Senate Fiscal Agency Director Ellen Jeffries and House Fiscal Agency Director Mary Ann Cleary today to reach a consensus on economic and revenue figures for the remainder of the Fiscal Year 2016, and for Fiscal Years 2017 and 2018.
Following today's Revenue Estimating Conference in Lansing, net Fiscal Year 2016 General Fund-General Purpose revenue is projected at $9.734-billion, down $110-million from estimates just agreed to back in January. Net Fiscal Year '16 School Aid Fund revenue is now estimated at $12.067-billion, down $64-million from that January conference, leaving the combined estimates down approximately $174-million for the current Fiscal Year.
The net General Fund and General Purpose revenue estimate for the 2017 Fiscal Year beginning October 1st, is now forecast at $10.139-billion, a drop of $75-million from the January estimate, while the Fiscal Year '17 School Aid Fund revenue is estimated to drop by a revised $84-million to a new estimate of $12.402-billion.
The Fiscal Year 2018 General Fund and General Purpose revenue estimate has been revised upward by some $8-million to $10.067-billion with the School Aid Fund for that period estimated downward by a $70-million revision down to $12.761-billion.
State Treasurer Nick Khouri says, "The good news is that Michigan's economy continues to improve. As a result of falling unemployment, Michigan's income tax revenue has been revised up over $200-million this year." He notes, however, "Unfortunately, sales tax revenues are projected to come in below original estimates."
The weakness in sales tax collections reflects lower gasoline prices and a longer-term shift to the purchase of non-taxable goods and services. Despite the downward revisions in revenue estimates, overall revenues are still expected to grow in excess of 3.0-percent for the two years combined.
State Representative Al Pscholka is Chair of the House Appropriations Committee. His response today was, "First and foremost, the sky is not falling. The Legislature has budgeted responsibly for the past five years as a precaution against a temporary dip in state revenue, and this year the House came in below the governor's suggested spending. We are prepared to handle this situation with minimal impact on government."
The Stevensville Republican adds, "We have prepared for this by living within our means and practicing responsible, Republican budgeting. We have priorities that need strong funding — education, public safety, and rebuilding our roads and bridges — and we are going to make sure those initiatives are secure. We will also go line-by-line through the state budget to find any remaining unnecessary spending in state departments."
