Pandemic-related aid led to revenue dip, but analysts say Michigan’s economy remains strong ⋆
Top economic officials for Michigan on Friday lowered their estimates for net tax revenues in the state over the next few years, but applauded Michigan’s expected resilience against a national economic downturn.
Leaders of the State Treasury Department and House and Senate fiscal agencies met with economists and their partners Friday at the Michigan Capitol for the state’s final Consensus Revenue Estimating Conference (CREC) for 2023 and created their forecasts for 2023, 2024 and 2025.
State revenues are expected to be lower than originally anticipated over the next few years, but this is due to purposeful policy plans that offer economic relief to residents following the hardships many faced during the COVID-19 pandemic, State Treasurer Rachael Eubanks said at a news briefing after the conference.
“We’re projecting revenue growth in the coming years even with the responsible tax relief due to our strong economic position, thriving businesses and low unemployment,” Eubanks said. “I think we can be proud of those accomplishments.”
Earlier this year, Gov. Gretchen Whitmer signed Democratic lawmakers’ “Lowering MI Costs” plan which, among other things, steeply increases the Earned Income Tax Credit (EITC) from 6% to 30% of the federal level.
The governor and state Legislature promised tax relief for Michiganders hit hardest by the COVID-19 pandemic, and they delivered on that promise in March, State Budget Office Director Chris Harkins said.
“You see the results of purposeful and sustainable tax policy changes,” Harkins said. “We rolled back the retirement tax and helped over 500,000 households, quintupled the working family’s tax credit and directly benefited over a million children in the state of Michigan.”
The group of economic leaders estimated that this year’s net revenue forecast will be $31.5 billion, which is $883 million lower than it estimated at its first meeting of the year in January. In 2024, Friday’s consensus set net revenue estimates to $31.1 billion – $1.8 billion less than estimated in January. By 2025, the group estimated the net revenue will be $32.2 billion, a $1.6 billion drop from its January estimate.
State lawmakers will use Friday’s revenue numbers to create their final budget for Fiscal Year 2024.
Whitmer proposed a $79 billion budget in February, and the House and Senate passed their budgets earlier this month. Lawmakers and the governor will now hold negotiations before passing a final budget.
Harkins said Friday the governor’s budget would have to be cut back “slightly” in order to accommodate some of the changes the Legislature would like to see.
State law requires a final budget plan to be passed by July 1, though there’s no penalty for failing to do so. The state’s fiscal year begins Oct. 1.
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authored by Anna Liz Nichols
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