CHICAGO — Less than four months into fiscal 2015, Michigan officials said they expect general fund revenue for the year to miss their most recent projections by $325 million.
The decline is largely because businesses have cashed in business tax credits at a higher-than-expected rate, state Treasurer Kevin Clinton said Friday.
Fiscal 2016 general fund revenue is also forecast to be down by $532 million from the most recent estimates, released in May 2014.
School aid fund, meanwhile, the state's largest fund, is estimated to see its 2015 revenue rise by $36 million over last year's projections, and see its 2016 revenue rise by $6 million.
The state released the figures as part of its twice-annual revenue estimating conference. The treasurer crafts the figures with independent analysis from the House Fiscal Agency and the Senate Fiscal Agency.
Gov. Rick Snyder and legislators will use the latest revenue figures to consider whether to make budget cuts.
"While today's revenue projections present new challenges for the budget, the news about Michigan's economy in the coming years remains very positive," Budget Director John Roberts said in a statement. "We will continue to work from the same sound financial principles and investment strategies that have been so instrumental to our state's strong comeback."
State economists have predicted that the business tax credits could end up costing the state $200 million more annually than originally expected. Altogether the value of the tax credits is estimated at $3.2 billion, according to reports. Businesses can cash them in any time before 2032.
"Economic activity in Michigan continues to be strong, with employment growth continuing and vehicle production and sales remaining positive, but current and future year revenue estimates are being significantly impacted by outstanding Michigan Business Tax credits," said Clinton in a statement. "The credits, many of which were awarded as much as a decade ago, have been a serious risk over the last few revenue estimating cycles, but have now turned to reality."
Combined, general fund and school aid fund revenue estimates are down $289 million for fiscal 2015, which ends Sept. 30, 2015. Together the two funds are expected to total $21.4 billion in fiscal 2015.
In fiscal 2016, general fund and school aid fund is expected to be up from 2015 but down from last year's estimates by $526 million, for a total of $22 billion.