Michigan budget may face shortfall

Chad Livengood and Gary Heinlein
Detroit News Lansing Bureau

Lansing — Less than three months into a new fiscal year, there’s a new sign of potential trouble for the state’s general fund budget.

The Senate Fiscal Agency on Tuesday projected the $10.1 billion general fund may be $162.2 million over budget for the fiscal year that ends next September. The School Aid Fund, however, is projected to have a $172.7 million balance or surplus when the fiscal year ends.

Overall estimated tax revenues are coming in $212.2 million below state economists’ forecasts in May, the fiscal agency said in a report. The Legislature used the May estimate to set the state budget in June.

If the estimated budget shortfall is judged later next year to be a firm reality, it could be made up with unspent money from the fiscal year that ended Sept. 30, when $359 million was left over in the general fund. But it’s also early in the fiscal year and spring income tax recipients have tended to boost revenue in recent years.

“We’re going to have some challenges over the course of the next few months,” said Rep. Al Pscholka, R-Stevensville, who becomes chairman of the House Appropriations Committee next year. “It’s hard to know what’s going to come in.”

Balancing the state budget, the nonpartisan fiscal agency said, “could be achieved by a shift of revenue from other fund sources or reduced spending” by the new Legislature.

The Senate Fiscal Agency, which produces financial analyses and reports for the state Senate, also is forecasting estimated revenues for the general and school aid funds be lowered by $372.6 million for the 2016 fiscal year budget that Gov. Rick Snyder will propose in February.

The new revenue forecast is the first of three reports that will be used by state economists to create a consensus revenue estimate at a Jan. 16 budget summit at the Capitol. The governor uses the consensus revenue estimate to set target spending in his next budget plan.

“We’re going to have to be prepared for it and make some adjustments not only this year but really look hard at how we’re spending our money going into the next budget year,” Pscholka said Tuesday.

While the Senate’s economists project continued economic growth, they blame the lower revenue projection on “greater-than-expected refunds” for the Michigan Business Tax and individual income tax. A slower-than-usual economic recovery and lower consumer sales tax receipts also have been factors, the fiscal agency said.

Snyder signaled this week that he’s mindful of the budget challenge ahead when he vetoed a bill that would have allowed prorated charges for businesses purchasing state liquor licenses good for a partial year rather than a full year.

While the proposal is sensible, it “would result in a revenue reduction of between $500,000 and $600,000 annually,” Snyder wrote in his veto explanation to lawmakers, adding, “This bill fails to address that loss of revenue.”

Pscholka said if the state budget has to be cut next year, he argues two recipients should be protected.

“I don’t want it to come from local government and schools,” Pscholka told The Detroit News. “I think we need to look inward, inside the buildings in Lansing.”


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