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.
For FY 2025, the overall revenue projections were increased by $770.4 million from prior estimates, and the FY 2026 estimates were also increased by $910.2 million. Broken down, the General Fund revenue estimates increased by $457.7 million for FY 2025 and by $591.2 million for FY 2026. School Aid Fund dedicated revenue estimates increased by $312.7 million for the current fiscal year and by $319 million for FY 2026.
National:
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- Economic uncertainty remains elevated.
- The housing market remains rough in the near term, but experts feel upbeat on the long-term outlook.
- Mortgage interest rates should drop below 6% by mid-2025 and are projected to reach 5.6% by the end of 2028.
- An uptick in inflation in 2026 is projected due to tariffs and tax cuts.
- The job market is cooling, and the unemployment rate is inching up.
- Gradual gains in payroll employment are projected through the end of 2025.
- The gross domestic product is anticipated to grow at modest rates.
Michigan:
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- The unemployment rate is trending up, it’s not concerning yet but something to watch.
- High interest rates will continue to hamper vehicle sales.
- There’s slower growth in payroll employment as the state heads towards full employment.
- The unemployment rate is projected to remain roughly flat and should edge down to 4.4% by the end of 2027.
- Personal income per capita should grow over the next three years.
- State tax revenues should grow at a steadier pace.
One of the biggest risks to the economic outlook on both the national and state levels is potential tariffs under the incoming administration. This is especially important to Michigan’s economy, given our high reliance on the auto industry, which would likely feel a strong impact. Nationally, immigration policy, population growth, ongoing geopolitical situations, and economic momentum evaporating remain risks, among others. In Michigan, changes to the minimum wage and sick leave policies remain a risk, along with the future path of EVs and a potential national recession, among others.
The House, Senate, and administration will use the agreed-upon numbers as they begin drafting the state budget for the upcoming 2025-2026 Fiscal Year. The next step in the process occurs when Governor Gretchen Whitmer presents her budget recommendations to the legislature next month, followed by the Appropriations Subcommittees beginning to meet on the budgets under their purview.
To read the full consensus report, please click here.
