State Budget Takes Another Hit

By: Liam Martin Email
By: Liam Martin Email

Lawmakers will get a rude awakening upon their return to the capital tomorrow -- their state is hemorrhaging tax revenue.

"June revenue, actual collections, came in about $60 million less than what we expected in June," said Gary Olson, director of the Senate Fiscal Agency.

And another $60 million shy of tax-revenue expectations for May. That according to a report released Monday.

Here's the breakdown:

Tax Revenue Shortfalls

- May: $60 Million Below Expectations
- June: $60 Million Below Expectations

- Total Tax Revenue Down 13% From Last Fiscal Year

Between May and June, Michigan collected $120 million less in tax revenues than it had projected in May.

That means the state's budget hole is deeper than originally thought.

So far this year -- in fact -- tax collections are down a full 13 percent, or $1.8 billion.

The main culprit?

"The income tax and sales tax are two large sources of revenue. They're both extremely weak," Olson said.

To be more precise, income tax in the state was down 20 percent in June from that month a year ago. Michiganders are working less, and spending less -- a sign of the times, as automakers close plants and cut workers.

It all begs the question -- how can the legislature make up the difference?

"We're looking at a couple of billion dollars -- that's billion, with a 'B'," said state Rep. Rick Jones, a Republican from Grand Ledge. "So I would expect that every state program, every service, would face some sort of a cut."

Other solutions -- dig deeper into the $7 billion dollars Michigan has received in federal stimulus funds.

Or --

"And the other option, always, is raising revenue," Olson said.

Raising taxes, in other words. Both Olson and Jones say it might come down to a choice between the lesser of those three evils.


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