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Michigan tax revenues are $2.1B above earlier projections

Projected tax revenues in Michigan’s two major accounts will be $2.1 billion higher than...
Projected tax revenues in Michigan’s two major accounts will be $2.1 billion higher than previously anticipated over two years.(Associated Press)
Published: Jan. 16, 2021 at 6:00 AM EST
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LANSING, Mich. (AP) - Projected tax revenues in Michigan’s two major accounts will be $2.1 billion higher than previously anticipated over two years, driven by increased federal unemployment benefits and consumers’ online purchases in the coronavirus pandemic.

Economists in the Legislature and Gov. Gretchen Whitmer’s administration agreed Friday to economic and fiscal forecasts.

For the current budget year, revenues in the general and school funds are projected to total $24.3 billion — down $505 million, or 2%, from last year but $1.2 billion above an August estimate. The combined revenues for the 2021-22 fiscal year are $25.3 billion, up $1 billion, or 4.3%, from this year. It is $875 million higher than a prior projection, which would nearly wipe clear a potential $1 billion shortfall that had been suggested months ago.

One legislative fiscal agency projected the state also may have a $3.7 billion surplus from last fiscal year, though the books are not yet closed.

The Democratic governor will use the rosier-than-anticipated numbers to craft her third annual spending plan, which will be delivered to the Republican-controlled Legislature in February.

“The revenue shortfall this year in not nearly as severe as we had feared,” said state Treasurer Rachael Eubanks, also noting that $900 billion in federal COVID-19 relief was enacted weeks ago. “Our economy is still in need of recovery and assistance from the federal government.”

President-elect Joe Biden on Thursday unveiled a $1.9 trillion coronavirus plan.

State economists pointed to stronger-than-expected consumer spending and income tax withholdings, due to more generous jobless benefits and an expanded eligibility pool. The latest federal aid includes an extra $300 weekly unemployment benefit, a $600 stimulus check, $90 million in pandemic-response funds and $1.6 billion for education.

State budget director Dave Massaron cautioned that unanticipated revenue is “one-time” and the state must prepare for a “structural and real gap” in the 2022-23 fiscal year. He suggested there may be ways to use the surplus to “generate savings in the future.”

The administration also will work with lawmakers to quickly enact a supplemental COVID-19 spending measure that uses the new federal funds, Massaron said.

Republican legislators, who have opposed the Whitmer administration’s ban on indoor restaurant dining, said continued federal aid is unsustainable.

“My goal is to direct some available one-time money to address the impact of the pandemic on various areas of our state and create a fiscal plan that ensures Michigan is as prepared as we can be for the future,” said Senate Appropriations Committee Chairman Jim Stamas of Midland.

His House counterpart, Rep. Thomas Albert of Lowell, said the governor’s virus restrictions are arguably the harshest in the U.S. and “there won’t be a real economic recovery — and the state budget won’t be truly healthy — until our economy is reopened.”

Eubanks, however, contended that precautionary steps taken by the private business sector and public account for a larger share of the coronavirus-caused economic slowdown than government restrictions do.

“We will not have a normal economy until the public health situation is under control,” she said.

Copyright 2021 The Associated Press. All rights reserved.