The regular gathering of key players in the Michigan economy came together today for an update consensus revenue estimating conference, but there was anything but normal dialogue today considering the current state of affairs in the state’s budget as a result of the coronavirus pandemic.
Expected revenues from all accounts have plummeted by an estimate of nearly $3.2-billion dollars.
State Treasurer Rachael Eubanks, State Budget Director Chris Kolb, Senate Fiscal Agency Director Chris Harkins and House Fiscal Agency Director Mary Ann Cleary today reached consensus on economic and revenue figures for the remainder of Fiscal Year (FY) 2020 and for the upcoming 2021 and 2022 fiscal years.
Following today’s Consensus Revenue Estimating Conference, net FY 2020 General Fund-General Purpose (GF-GP) revenue is projected at $9.0 billion, down almost $2.0 billion from estimates agreed to in January. Net FY 2020 School Aid Fund (SAF) revenue is now estimated at $12.7 billion, down $1.2 billion from January. Combined, GF-GP and SAF estimates have been revised down approximately $3.2 billion for FY 2020.
State Treasurer Rachael Eubanks says, “The COVID-19 pandemic is a crisis unlike any we have seen before,” and adds, “This public health emergency is the root of the revenue shortfalls we are experiencing. With the state income tax deadline now in July, we will have a better revenue picture after an additional conference later this summer.”
Net GF-GP revenue for the FY 2021 — which begins Oct. 1 — is now forecasted at $9.3 billion, down $1.9 billion from January’s estimate, while the FY 2020 SAF revenue estimate has been revised down by $1.1 billion to an estimated $13.2 billion.
In FY 2022, GF-GP revenue has been revised down $1.4 billion at $10.1 billion and SAF revenue has been revised down $719.7 million to $13.9 billion.
State Budget Director Chris Kolb noted that given the unprecedented health crisis the state of Michigan is facing right now, flexibility and additional funding from the federal government is crucial to ensure Michigan and states across the country can continue working on behalf of the people.
Kolb says, “We know we have difficult choices ahead on the budget, and we need support from the federal government to help backfill revenue losses to support existing state costs,” adding, “This is an issue that every state in the country is grappling with. We expect that our leaders in Congress and the White House will work together on this to protect the people of Michigan.”
Under the current language, federal CARES Act funding cannot be used to backfill revenue losses or support existing state costs.
The large revenue reductions are a result of the unprecedented global health pandemic. The economy slowed in early spring as consumers and employers responded to the crisis, even before national and statewide public health precautions were enacted.
Slow growth will continue after restrictions are lifted, as people adjust to a new health and economic reality. The public health emergency is having a dramatic impact on state revenues, creating challenges for the state budget if federal funds are not provided to replace lost revenue.
These revenue estimates are based on the most recent economic projections and forecasting models. As with any economic and revenue forecasts, there are potential risks to the estimates agreed to today, including further COVID-19 outbreaks, national economic trends, and international economic issues.
