Today, the directors of the House and Senate Fiscal Agencies, State Treasurer Rachael Eubanks, and State Budget Director Jen Flood came together to reach a consensus on projected state revenue for the upcoming fiscal year. At the biannual Consensus Revenue Estimating Conference (CREC), the principals heard testimony from various economic experts on the key aspects of the state and national economies that will impact state revenue.
The revenue estimates were revised up from January’s consensus numbers. In FY 2026, general fund-general purpose (GF-GP) revenue was revised up by roughly $227 million, and for FY27 it was increased by $94.2 million. School Aid Fund (SAF) dedicated revenue was also revised up by $79.4 million for the current fiscal year and $79.6 million for the 2027 Fiscal Year.
National:
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- Consumer and small business sentiment have weakened since the Iran war.
- Due to ongoing geopolitical stress, overall economic data remains difficult to predict.
- Data over the next few months will be critical in determining the impact of recent hikes in oil prices.
- Growth in AI could help sustain overall economic growth.
- The unemployment rate is projected to rise gradually.
- Mortgage rates will likely remain above 6% through 2027, before dipping slightly below 6% by the end of 2028.
- The federal deficit-to-GDP ratio is projected to stay around 6%.
Michigan:
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- The unemployment rate is holding stable and is projected to hover near 5% through 2028.
- The main impact on the state’s economy is the national economy, not the cost of oil.
- Calculated payouts from the state’s rainy day fund in FY26 are up to $538.7m; however, any payouts require a legislative appropriation.
- Cuts to Medicaid are expected to weigh on the healthcare sector toward the end of the forecast in 2028.
- Real disposable income should return to pre-pandemic trends, averaging 0.9% per year.
- The sales tax growth rate has declined more than the January estimates, coming in at -5.1% year-to-date.
- However, the use tax growth rate is more than previous estimates at 8.3% year-to-date.
One of the biggest risks to the economic outlook is geopolitical tensions, especially the Iran war and the fight over the Straits of Hormuz. The longer the oil prices remain higher, the larger the impact on the economy. Shifts in trade and fiscal policies at the federal level also pose a risk, as does inflation reacceleration.
The House, Senate, and administration will use the agreed-upon numbers to continue to work on the state budget for the upcoming 2026-2027 Fiscal Year.
