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.
For FY 2024, the agreed upon Net General Fund-General Purpose (GF-GP) revenue is projected to be $13,597.4 million, which is $359.1 million more than the May 2023 estimate but is a decline of 2.6% from the current year budget. The School Aid Fund (SAF) revenue is projected to be $17,946.9 million, which is $58.8 million more than the prior estimate and a small growth of 0.5% above the current year budget. In FY 2025, the GF-GP revenue should grow 3.1% to $14,022.2 million and the SAF revenue is projected to grow 2.0%, which is $41.1 million higher than the prior estimate.
- Real GDP growth will slow due to slowing consumption.
- The market for existing homes should remain tight, leading to growth in the market share of new construction.
- Existing housing will likely remain unaffordable as compared to 2010 levels.
- Manufacturing is shrinking, which is causing some concern.
- The chance of a recession is low.
- The unemployment rate is projected to rise to around 4.2% at the end of 2024, after which it should edge down below 4% by the second half of 2026.
- Mortgage rates should decline to 5.5% by the end of 2026.
- Labor demand is cooling off.
- Payroll employment is projected to grow at a moderate pace and should be above the pre-pandemic level by mid-2024.
- The fastest job growth will be in white-collar industries.
- The unemployment rate is estimated to rise to 4.5% in the first half of 2024, and then will slowly inch down through 2026.
- GDP is expected to continue growing at trend rates.
- General Fund-General Purpose revenue is down from historic numbers, but collections remain strong on a nominal basis.
- The School Aid Fund is projected to grow through the next three years.
Risks to the economic forecast include a number of items, such as a shift in the economic momentum, future monetary policy, inflation, commercial real estate, and geopolitical situations. In Michigan, experts will keep a close eye on changes to consumption levels and inflation, the sunsetting of provisions within the Federal Tax Cuts and Jobs Acts, and state-level economic development tax incentives and their impact on reduced revenue in the future.
The House, Senate, and administration will use the agreed-upon numbers as they begin drafting the state budget for the upcoming 2024-2025 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.