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Michigan's budget shortfall improves by $2.3B in new forecast

Craig Mauger
The Detroit News

Lansing — Michigan still is expecting a large revenue drop due to the COVID-19 pandemic, but revenue projections improved during a Monday conference of state government officials.

Despite lingering uncertainty, Michigan's improving financial picture is adding up to revenues being $2.3 billion higher for this year and $600 million higher for next year than budget officials predicted in May.

But the projections remain lower than those from January, which was two months before the pandemic began to ravage the state's economy.

"We are still looking at a dramatic revenue loss," said Chris Kolb, the state's budget director, who called for additional federal aid.

“Until COVID-19 is defeated, uncertainty is the word when it comes to revenues and their impact on our budget,” Kolb added.

Chris Harkins, director of the Senate Fiscal Agency, speaks at a consensus revenue estimating conference on Monday, Aug. 24, 2020.

During a Monday virtual conference, Michigan budget officials re-examined their revenue estimates from May 15. Citing the positive impacts of federal relief dollars, stronger than expected automobile sales and increases in remote purchases, the officials approved hiking the projections for this fiscal year, which ends Sept. 30, from a $3.2 billion drop to a $900 million drop — a $2.3 billion improvement, which could allow officials to roll additional dollars into the next fiscal year.

For next fiscal year, they approved increasing the projections from a $3.1 billion drop to a $2.5 billion decline — a $600 million improvement.

“We’ve had a stronger than anticipated recovery,” said David Zin of the Michigan Senate Fiscal Agency.

Tax collections have had "positive surprises," said Eric Bussis, chief economist with the Michigan Department of Treasury.

"We are apprehensive and view those positive developments cautiously," Bussis said.

In January, state officials approved revenue projections that estimated $24.9 billion combined for the School Aid Fund and the General Fund for this fiscal year, which ends Sept. 30. The new numbers put the estimate at $24 billion.

Michigan Budget Director Chris Kolb

In January, state officials approved revenue projections that estimated $25.5 billion for the School Aid Fund and the General Fund for next fiscal year, which begins Oct. 1. The new number put the estimate at $23 billion.

While the new projections are improved over May, they are a "significant revision downward," said Chris Harkins, director of the Senate Fiscal Agency.

"I don't want that lost," Harkins added.

In July, Michigan officeholders reached a deal to resolve what was then pegged at $2.2 billion shortfall in the current budget year while boosting funding for schools.

The plan used the vast majority of what remained from more than $3 billion in federal relief dollars. It also set aside $53 million in hazard pay for teachers and provides a net increase of $136 million for the K-12 budget.

cmauger@detroitnews.com