While Michigan’s economy has continued to grow at a modest rate, there won’t be a lot of extra money bouncing around when the next budget drafts need to be made, as revenues will likely remain flat. That’s the general consensus following Friday’s Consensus Revenue Estimating Conference.
When State Treasurer Rachael Eubanks, State Budget Director Chris Kolb, Senate Fiscal Agency Director Chris Harkins and House Fiscal Agency Director Mary Ann Cleary met on Friday, they reached consensus on economic and revenue figures for the remainder of Fiscal Year 2020 and for the upcoming 2021 and 2022 fiscal years.
Following the Consensus Revenue Estimating Conference, net Fiscal Year 2020 General Fund-General Purpose revenue is projected at $11.0 billion, up $235.2 million from estimates agreed to in May. Net Fiscal Year 2020 School Aid Fund revenue is now estimated at $13.9 billion, up $85.7 million from May.
Treasurer Eubanks says, “Michigan’s economy continues to grow at a modest rate,” but cautions, “While today’s agreement does show a slight increase in both the School Aid Fund and General Fund, revenues overall remain relatively flat. The state doesn’t have a lot of extra revenue coming into the Fiscal Year 2021 budget.”
Net General Fund-General Purpose revenue for Fiscal 2021 — which will begin on October 1st — is now forecast at $11.2 billion, up $274.0 million from May’s estimate, while the Fiscal 2021 School Aid Fund revenue estimate has been revised up by $138.0 million to an estimated $14.3 billion.
In Fiscal 2022, General Fund-General Purpose revenue is estimated at $11.5 billion and School Aid Fund revenue is estimated at $14.6 billion. Those are the initial revenue estimates for Fiscal 2022.
The modest increases in forecast revenue from the May 2019 Consensus reflect the slow and steady economic growth of the past year and projected in the coming years in Michigan.
Budget Director Chris Kolb says, “We inherited some significant budget challenges from the past that are now having a direct impact on the Fiscal Year 2021 budget,” and points out, “With unemployment at 4-percent and economists forecasting continued growth, the budget problems we face today are not the result of an economic downturn, but rather a result of past decisions that have kept the state’s General Fund flat for 20 years. The pressures on the General Fund are significant.”
The revenue estimates are based on the most recent economic projections and forecasting models. As with any economic and revenue forecasts, there are potential risks to the estimates agreed to, including national economic trends, international economic issues, and a significant change in oil and gasoline prices.
