Today, the directors of the House and Senate Fiscal Agencies came together with State Treasurer Rachael Eubanks and State Budget Director Jen Flood to reach a consensus for 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 May Consensus Revenue Estimating Conference enables us to lock-in our revenue picture after the individual income tax season,” State Treasurer Rachael Eubanks said. “Today’s consensus is that Michigan has a strong and stable revenue and economic foundation for finalizing the state budget. Our economy is adding jobs and bringing more people back to work, marking a strong recovery in labor participation. This is great news now and for our future.”
The principals agreed upon slight changes to the revenue estimates made at January’s conference. For the current fiscal year, they increased the General Fund-General Purpose dedicated revenue by $351.4 million to $13.95 billion, while they revised the School Aid Fund revenue down by $163.3 million to $17.78 billion. For FY 2025, the General Fund-General Purpose revenue was revised up by $235.6 million to $14.62 billion, while the School Aid Fund projected revenue was revised down by $160.1 million to $18.15 billion. They agreed there shouldn’t be any pay-ins or pay-outs to the Budget Stabilization Fund for the current and upcoming fiscal years, while in FY 2026 they projected a pay-in of $15.7 million.
National:
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- The GDP should grow at a modest rate.
- Inflation should slow during the next three years.
- There has been healthy job growth and the deceleration was expected at some point
- The Feds will likely issue the first policy rate cut in mid-September.
- The deficit should remain around 5.2% – 5.4% of GDP through FY26.
- Economists are somewhat concerned with credit card and auto loan delinquencies.
- There are several risks to the forecast including, the outcome of the elections this year, inflation, and current geopolitical situations.
Michigan:
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- Payroll employment is back above the pre-pandemic level.
- The Detroit three share of the total vehicle market has declined, causing some concern.
- The state’s economic outlook should track national growth.
- The unemployment rate is projected to increase by a tenth of a percentage point to 4.3% in 2025 and remain steady in 2026.
- Net Income Tax Revenue should remain fairly steady through 2026.
- Net Sales and Use Tax Revenue should also remain steady through 2026, hovering around $13.5 billion.
- Provisions within the Federal Tax Cuts and Jobs Act begin to sunset in 2026 and that has the potential to negatively impact the state’s revenue forecast.
- There should continue to be progress on inflation but slower than consumers would like.
The House, Senate, and administration will use the agreed-upon numbers to finalize the state budget for the upcoming 2024-2025 Fiscal Year.
For more information, please visit Michigan.gov/CREC.
