Michigan economists, budget officials set to shape state spending decisions
Lansing — Gov. Rick Snyder's administration insisted Friday new dedicated taxes are needed to fix Michigan's crumbling roads as lawmakers eyed an extra $365.4 million pouring into state coffers as a source for their road funding woes.
State economists said Friday most income tax revenue collections are better than anticipated, giving lawmakers an extra $217.6 million for the current fiscal year and $147.8 million for the 2016 fiscal year to spend in the general fund and School Aid Fund budgets.
The chairman of the Senate Appropriations Committee said the majority of the new money could be steered toward repairing roads after voters rejected a tax-hiking road funding plan on the May 5 ballot.
"I think there will be a significant investment in roads and infrastructure," said Sen. Dave Hildenbrand, a Kent County Republican. "The MDOT budget, as I remind people, is $3.7 billion, so we're already investing a lot of money in roads and bridges. This would be an investment above and beyond what that already is, and I think it will be in the hundreds of millions."
Snyder budget director John Roberts said the administration is open to using a portion of the projected surplus on one-time road repair projects.
But the Republican governor still wants lawmakers to raise at least $1.2 billion in taxes and fees dedicated toward transportation needs, Roberts said.
"What I remind people, including the Legislature, is a lot of that is one-time money and one-time money for infrastructure, it's hard for us to pull bigger projects forward when you don't have ongoing revenue," the budget director told reporters. "That's something the administration will be pushing for."
The revised tax revenue forecast — set at the biannual conference Friday — is a reversal of a dimmer estimate economists made in January, when state officials were caught off guard by a surge in businesses cashing in hundreds of millions of dollars in tax credits. It resulted in $411 million in budget cuts and fund shifts, including a trimming of the state's film incentives.
The higher-than-expected revenue projection can be partly traced to a revision in tax credits officials expect to be cashed in by businesses. Because of the credits, Michigan Business Tax revenue is expected to be negative-$753 million, about $72 million less than projected in January.
"It is volatile," said Jim Stansell, senior economist at the House Fiscal Agency. "In any given year, there could be $20, $30, $40 million in credits that could slide back in either (direction). And, obviously, that matters."
Another $60 million in added revenue in the 2016 fiscal year will come from a new law extending the 6 percent sales tax to online purchases from retailers with a physical presence in Michigan, Stansell said.
House Appropriations Chairman Al Pscholka, R-Stevensville, said the new tax revenue gives lawmakers more general fund money to invest in roads.
House Speaker Kevin Cotter, R-Mount Pleasant, wants to dedicate added tax revenue toward his $1 billion road funding plan, which relies on $700 million in anticipated economic growth over four years to avoid significant tax increases.
"If you want to solve the problem, which is a $2 billion problem a year, you actually have to have a long-term dedicated source of revenue and, unfortunately, my (Republican) colleagues in the House did not put such a plan forward," said Rep. Sam Singh, D-East Lansing. "The plan doesn't have real money attached to it. ... Groups are calling it fantasy, calling it a joke."
Roberts warned lawmakers not to accept the new revenue growth as an alternative to raising dedicated new taxes for roads.
"I don't think it gives them leeway long term," Roberts told reporters. "We're not against using the money for transportation if we can continue to ... work on a bigger solution."
Roberts said the Snyder administration is focused on getting lawmakers to fund a third-grade reading program and relieving Detroit Public Schools of debt, which could cost between $53 million and $72 million annually.
Both legislative fiscal agencies and the Treasury Department said lower sales tax receipts are coming into the state's coffers than anticipated, reducing available revenue for the School Aid Fund.
"We don't know if this is a pause from economic activity or what's happening," Roberts said of the sales tax slump.
For the 2016 fiscal year, the sales tax dip amounts to $20.8 million less for the $12.5 billion School Aid Fund, Roberts said.
Roberts characterized the declining revenue as minor compared with the financial difficulties Detroit and other school districts face. "We will still have distressed school districts regardless if the fund is up or down by $20 million," he said.
Top state analysts and the Treasury Department agreed Friday that the state revenue picture has improved, creating more money for the budget:
■The current budget will get an estimated $217.6 million boost.
■The fiscal 2016 budget that starts Oct. 1 gets a $147.8 million increase.
Source: State Revenue-Estimating Conference