Michigan Capitol | Susan J. Demas
State fiscal agencies convened at the Capitol Friday to break down their projections for Michigan’s finances as budget negotiations continue between Democratic Gov. Gretchen Whitmer and Republicans in the state Legislature.
The House Fiscal Agency, Senate Fiscal Agency and Department of Treasury said that there’s now $83.3 million more in the state’s coffers for fiscal year 2019 than they estimated back in January.
At the Friday Consensus Revenue Estimating Conference (CREC), fiscal heads announced the General Fund had an increase of $151.7 million compared to their previous estimate, but there was a $68.2 million decrease in Michigan’s School Aid Fund.
Whitmer has proposed a $60.2 billion Fiscal Year 2020 budget. She and GOP leaders must reach a deal by Sept. 30 to avoid a government shutdown. The CREC found that there will be $27.8 million in FY 2020 revenue for the state than previously expected.
The General Fund has $59.1 million more than what was estimated in January, but the School Aid Fund took an $86.9 million hit for the next fiscal year.
But Michigan’s top economic officials don’t see the largely flat revenue numbers making much of a dent in overall funding needs.
“We’ve seen the General Fund remain basically flat for 20 years, and it constrains the ability to have revenue for new projects,” State Treasurer Rachael Eubanks told reporters after the fiscal agencies’ joint presentation.
State Budget Director Chris Kolb echoed Eubanks’ concerns.
“If the General Fund just kept up with inflation over the last 20 years, we have about 5.5 more billion dollars,” Kolb told reporters. “It’s tough to look at 20 years ago, how we had the exact same amount of money in the General Fund as we have today.”
The $10.9 billion General Fund is what the state uses to fund a wide range of priorities, including prisons, environmental programs, local governments, the Michigan State Police and more. The School Aid Fund, which has $13.5 billion in revenue, goes to the state’s K-12 schools, but, in the last decade, has also gone to community colleges and public universities.
The majority of Michigan’s budget, however, comes from the federal government with specific requirements for the programs for which it can be used.
Eubanks warned that uncertainty over the President Trump administration’s trade policies, including a potential trade war with China, had the “potential to impact our economy in a meaningful manner” and upend the state’s economic predictions.
That assertion was shared by the House Fiscal Agency, which wrote in its report that “in the event that trade barriers escalate, both the U.S. and Michigan would likely experience employment reductions, declining incomes, and higher prices for a number of consumer goods.”
Vice President Mike Pence recently appeared in Detroit in an attempt to garner support for Trump’s proposed alternative to NAFTA, the United States-Mexico-Canada Agreement (USMCA). Automakers there voiced their concerns over Trump’s aluminum and steel tariffs. The administration announced on Friday it would lift them from Mexico and Canada.
This week’s consensus predictions are unlikely to significantly change the ongoing budget negotiations between Whitmer and Republican leaders, who are currently clashing over two main issues: finding revenue to repair the state’s cracked roads and boosting its most under-funded schools.
The Republican-controlled state Senate passed its own $58.2 billion budget this week that left out the 45-cent gasoline tax Whitmer has proposed to raise $2.5 billion for road repairs. Without that tax, Whitmer has unequivocally said that she won’t sign a budget into law.
The Senate budget also didn’t include funding that would have specifically targeted schools that lag the rest of the state in what they receive from the School Aid Fund based on Michigan’s current formula.
In response to fears that a tax increase to fill those holes in the budget might slow Michigan’s already modest economic growth, Kolb told reporters he and Whitmer had different priorities.
“I look at… the cost individually, an average of over $600 per year, the cost of our vehicles when we hit potholes, we blow out tires and break our rims,” Kolb said. “I look at the cost of not providing our kids an adequate education and making sure they have the ability to be successful in the future.
“Those are the issues that the people should be caring about and those are the issues that we’re going to work the Legislature to solve.”
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