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Michigan revenue projections complicate budget debate

Jonathan Oosting
Detroit News Lansing Bureau

Lansing – Michigan is projected to generate $376.7 million less than anticipated in general fund tax revenue this year and next, according to House analysts, a sobering projection that could complicate pushes for tax relief or teacher pension reform.

Officials will meet Wednesday in Lansing to finalize revenue estimates ahead of final budget negotiations for the upcoming fiscal year. The nonpartisan House Fiscal Agency was first out with its forecast on Monday.

House analysts say the state is generating less revenue from withholding and annual income tax collections than officials estimated in January. The agency lowered its general fund projections for the current fiscal year by $223.7 million and for next year by $153 million.

But House analysts are projecting healthier growth in the School Aid Fund. The swell in that state piggy bank, funded largely by sales tax collections, is expected to top previous estimates by $154.4 million this year and $209.3 million next year, according to the House agency.

The Republican-led Legislature has in recent years shifted School Aid Fund revenue to budget areas like universities and community colleges traditionally supported by general fund dollars, a move Democrats have opposed.

“We have budgeted conservatively the last few years, so we are able to finish ahead of time and manage Michigan's recovering economy,” House GOP spokesman Gideon D’Assandro said in an email.

“We are also planning to wait for another revenue estimating conference, which will give us better and more accurate data before we make any final decisions.”

Overall, state revenue is still projected to grow by nearly $600 million in the upcoming fiscal year, but the revised House estimates could wipe out much of the general fund savings House and Senate Republicans had carved out of budget bills they approved earlier this month.

The Senate budget would trim $270 million in general fund spending proposed by Republican Gov. Rick Snyder and refrain from making a $266.5 million deposit into the state’s “rainy day” savings fund.

The House budget proposed $272 less in general fund spending than Snyder had recommended.

While some conservatives continue to eye income tax cuts, legislative leaders have used the potential budget savings to renew a push to close the state’s teacher pension system to new hires, a move that could entail significant up-front costs to reduce the risk of continued growth in unfunded liabilities.

The Senate Fiscal Agency is expected to release its own revenue projections ahead of Wednesday’s estimating conference. The Snyder administration will also release its figures and officials will attempt to agree on consensus figures that will inform final budgets, which legislators hope to send to the governor’s desk in June.