MI BUDGET & ECONOMIC NEWS
Download Governor Granholm's 2010 State of the State Address
We have the full text available here >>
Michigan House Fiscal Agency Report
The nonpartisan House Fiscal Agency (HFA) released its annual economic
projections for 2010 and 2011. The HFA is an agency that is part of the House
that provides assistance and counsel on legislative fiscal matters. Click
here for a copy of their latest report that projects continuing economic
problems for our state in 2010. Reading this report will help you to better
understand the tough decisions that will face state policymakers this year.
RSQE Forecast for 2010-2011
Each January, Michigan executive and legislative economic forecasters hold what is called the Consensus Revenue Estimating Conference. This conference, which includes presentations from the highly esteemed University of Michigan’s Research Seminar in Quantitative Economics (RSQE), is intended to bring state executive and legislative branches into agreement as to what revenue the state will have to work with for the coming fiscal year before the budget process begins. Unlike the federal budget process and those utilized by other states, where revenue estimates are made up as the budget is enacted, this approach ensures that all parties are aware and agree to revenue figures.
With Michigan’s current ongoing economic problems, these forecasts do not present a pretty picture. RSQE estimates that the per capita wage and personal income growth ranking for Michigan has declined from 20th to 37th in 2008 and that by 2011 Michigan will further drop to 40th or 41st in the rankings. They also forecast the state unemployment rate will remain above 14 percent through 2010 and 2011 while shedding more than 85,000 more jobs during that same time frame. MOA extends thanks and appreciation to RSQE for allowing us to share their U.S. and Michigan-specific outlook presentations provided in the links below.
State of Michigan Outlook >>
US Outlook >>
State Revenue Forecast Meeting – Glimmers of Improvement Seen
The second meeting of the organizations that develop the forecasts for the amount of state revenue that will be available for the remainder of this fiscal year and next have concluded their deliberations. Figures indicate that this year’s state general revenue for programs including health care will be down another $243.5 M from what was estimated just five months ago. This is obviously not good news. However in the good news category, it now appears that general fund will be up slightly from prior estimates for the 2011 fiscal year. The main reasons for the ongoing revenue shortfalls are that businesses being unfamiliar with the new MBT overpaid and are now applying for refunds and that individual income tax refunds are also running higher than projected.
Sales and use tax collections which are mostly used to fund K-12 education rose $291.8 M for FY 10 and are also projected to rise by another $352.4 M in FY 11 according to the agreed upon forecasts. This not only helps education funding but does indicate that some spending is starting to improve as consumers get a bit more confident that a recovery is starting to occur.
There have been some other sparkles of light that MI may be nearing the end of our long period of declining economic activity. Unemployment dropped by 1/10 of 1% last month which while not much was at least movement in the right direction. There are also some signs of increased numbers in the MI workforce. Our combined personal income which actually declined in CY 2009 by 3% is projected to actually start growing and is now forecast to increase by a very modest approximately 1.1% by the end of CY 2010. In CY 2011 the sense is that it will grow by around 2.7%.
The problem that remains is that by comparison the national personal income growth for CY 2010 is expected to increase around 3.1% and for CY 2011 it will grow roughly 3.8%. This means that for at least two more years Michigan’s growth will lag by roughly 50% that of the rest of the nation.
