LANSING — State Treasurer Rachael Eubanks, Senate Fiscal Agency Director Kathryn Summers and House Fiscal Agency Director Mary Ann Cleary reached a consensus Friday on revised economic and revenue figures for the remainder of the Fiscal Year 2022 and for the upcoming 2023 and 2024 fiscal years.
The revenue estimates presented and voted on Friday were based on the most recent economic projections and forecasting models. As with any economic and revenue forecast, there are potential risks to the estimates agreed to, including further COVID-19 outbreaks, unexpected changes in the national economy and international economic issues.
The overall revenue forecast, including the General Fund and School Aid Fund, for FY 2022 in January 2022 was shown as $28.53 billion which was an increase of the project from May 2021 by $1.72 billion. Similarly, for FY 2023, the overall revenue forecast was shown to be an increase of $1.40 billion ($29.14 billion) when compared to estimates from May 2021.
In addition to the FY 2022 and FY 2023 forecasts, initial revenue estimates for FY 2024 were shared Friday. It showed the overall revenue forecast at $29.87 billion ($13.31 billion for the General Fund and $16.56 billion for the School Aid Fund).
“Revenue growth continues to be strong as the economy recovers,” Eubanks said. “We are also still seeing the positive impacts of the federal stimulus programs. We expect growth rates to return to more typical levels as the support of the stimulus fades.”
State Budget Director Christopher Harkins said Michiganders can be excited about the economic picture that was presented Friday and about the revenues the state has available to build the budget, especially when considering it was just under two years ago when the revenue estimates did not look good during those early days of the pandemic.
“I do want to remind everyone, however, that much of this revenue is one-time in nature and should be used for one-time investments that keep our budget in balance for the long term,” Harkins said. “I am remaining mindful of the fact that revenues can still fluctuate and change quickly during a pandemic.”
Sen. Curt VanderWall, R-Ludington, said the information shared on Friday was great news as it shows the Michigan economy continues to see an increase with more tax dollars and revenues than expected. He also said with that comes the challenge of what to do with the surplus.
“Do you save the money or use it for a special project,” he said. “Let’s take care of things we need to with the (America Rescue Plan Act) dollars and put some of it away for when things are a little tight,” he said. “We are seeing the inflation pick up but the last census showed the state of Michigan lost 300,000 people. When the cost of goods are up and you have a loss of people it goes to the bottom line of reduced revenues in the future.”
The Michigan League for Public Policy Fiscal Policy Director Rachel Richards said Friday’s revenue estimates were welcomed news for state residents, policy advocates and policymakers as we continue to get through the pandemic. Richards said there needs to be continued investment in the state, its’ communities and its’ people, especially in the policies and programs that best support kids and promote economic and racial equity.
She also said the revenue estimates reached Friday give elected officials the opportunity to build on the bipartisan 2022 state budget and continue to seek common ground on investments with the state’s American Rescue Plan dollars and the 2023 budget.
“We are currently seeing how volatile COVID is, and the revenue adjustments made (Friday) really show how hard it is to predict what recovery will look like post-pandemic,” Richards said. “With that in mind, policymakers should resist the call for broad-based tax cuts and instead look at sound, strategic investments and targeted support for residents with lower incomes like increasing the Michigan Earned Income Tax Credit, improvements to healthcare access, funding Michigan Reconnect and Futures for Frontliners, and continuing to help make child care more affordable for working parents.”
FY 2022 spans from Oct. 1, 2021, to Sept. 30, 2022, while FY 2023 spans from Oct. 1, 2022, to Sept. 30, 2023. FY 2024 begins on Oct. 1, 2023. The Consensus Revenue Estimating Conference is held at least twice a year, in January and May. The January conference starts the annual budget process for the State of Michigan.
As prescribed by the Management and Budget Act, the revenue forecast adopted in the January conference is the starting point for the Governor’s executive budget. Principals of the conference are the Director of the House Fiscal Agency, Director of the Senate Fiscal Agency and either the State Treasurer or State Budget Director.
The January Consensus Revenue Estimating Conference’s detailed forecast can be found at Michigan.gov/CREC.