Budget director: Michigan has unexpected $575M to spend
Lansing — Michigan officials will have about $575 million in unexpected money to spend on top priorities this year as a result of a 2015 surplus, Budget Director John Roberts said Thursday.
Gov. Rick Snyder will propose a spending plan in February, according to Roberts, who stressed that the surplus is one-time money.
“Roads or Flint definitely are things we'll be considering and looking at, but only the one-time versions,” Roberts said. “We’re not going to come out and say we want long-term road projects.”
The governor could present a supplemental appropriations bill for Flint as soon as next week, but Roberts declined to discuss the size of the potential spending plan.
“There’s a lot of experts right now sitting in rooms to try to find out what we need in the interim and what we can do to help,” said Roberts, noting any supplemental spending would likely address immediate needs, not the city’s aging pipe infrastructure, which contributed to elevated lead levels that have been detected in drinking water and the blood of children.
Budget officials and analysts met Thursday at the state Capitol for a consensus revenue estimating conference, agreeing on projections that will be used to shape next year's state budget.
The 2015 surplus, attributed to higher-than-expected income tax collections and lower-than-anticipated refunds under the old Michigan Business Tax, was a bright spot in a conference that otherwise included some sobering projections.
The Snyder administration, along with House and Senate fiscal agencies, agreed to lower current-year revenue estimates by $149 million and 2017 estimates by $20.2 million.
The School Aid Fund, in particular, is facing sluggish revenue growth, partly because low gas prices are depressing sales tax revenue.
Overall revenue available for school spending is projected to grow by about $356 million in 2016, but that's more than $100 million less than anticipated when Snyder and lawmakers finalized the current state budget last year.
Business tax credit refunds will likely rise in 2016, according to David Zin of the Senate Fiscal Agency, but the volatility that has complicated recent budgets is likely to dissipate next year due to agreements the state reached with Detroit automakers.
Roberts said the governor and legislators must be wary of increased costs for specialty drugs provided through the state's Medicaid program and to prisoners, including medication for Hepatitis C and cystic fibrosis, calling it the biggest pressure facing the state budget.
“With what’s going on in the pharmaceutical industry, because these are not blockbuster drugs that a lot of the population will use, the prices for treatment are pretty high,” he said.
The 2015 surplus could provide legislators with an opportunity to blunt criticism over slow-to-phase-in road funding plan they sent to Snyder's desk in October, which will not actually kick in until 2017.
“It’s certainly something that would be on my shortlist, to the extent we're meeting other needs, other urgent needs," said House Speaker Kevin Cotter, R-Mount Pleasant, on Wednesday.
But Cotter stressed a cautious approach to surplus spending.
“We need to be careful that we don’t start writing checks too early here,” he said. “Let’s make sound decisions, and there's no reason to rush.”
Senate Minority Leader Jim Ananich, D-Flint, would like to see funding for his home city in a supplemental spending bill and the next state budget. He met with the governor's staff and cabinet members on Wednesday.
“When kids are damaged with lead, potentially, there are a number of developmental issues that can occur,” he said. “And we’re working to try to find programs — whether it’s nutrition, health, education — that can help make sure folks who were damaged catch back up again.”
House Appropriations Chairman Al Pscholka, R-Stevensille, said this week that he expects some of his colleagues will also push for additional higher education funding.
“I think we have to be a little bit careful here and understand these are one-time dollars,” he said.
Michigan's economy continues to recover after bottoming out in the Great Recession, according to University of Michigan economist Gabriel Erhlich, but there are signs the recovery is slowing.
Job growth will continue the next two years, Erlich told lawmakers during the revenue conference, but not at the same rate as recent years. After adding 76,500 payroll jobs in 2015, Michigan is projected to add 63,000 jobs in 2016 and 2017 but 45,500 in 2018.
At that point, Michigan would boast about as many jobs as it did in 2003 but still be down more than 200,000 jobs from peak employment in 2000.
Michigan's economy remains closely linked to the auto industry, which celebrated a record 17.4 million light vehicle sales in 2015. Light vehicles sales, including crossovers, drove the boom, said Ehrlich.
The Research Seminar in Quantitative Economics at the University of Michigan projects auto sales will grow to 18.1 million units by the end of 2017 but then level off.
"A key challenge will be diversifying sources of job growth as the manufacturing sector matures," Ehrlich said.