DALLAS – A $330 million surplus this year from better-than-projected fund balances and other one-time savings will help Michigan's fiscal 2018 budget, according to new state financial projections.
The House Fiscal Agency, Senate Fiscal Agency and Department of Treasury released the surplus figure and revenue projections for fiscal 2018 and 2019.
The parties gathered Thursday at Michigan's revenue conference, a twice yearly meeting where the three settle on a consensus on projections used to craft the next budget and ensure it remains balanced. Gov. Rick Snyder will reveal his proposed budget for fiscal year 2018 on Feb. 8.
Michigan's fiscal year begins Oct. 1."Today's consensus revenue conference once again confirms the positive outlook for Michigan's economy," state treasurer Nick Khouri said in a press release. "The growing economy supports modest, but positive growth in state revenues during the next three years."
The consensus figures show the state closed out fiscal 2016 with an extra $332.6 million in the bank, including $51.3 million in the School Aid Fund and $281.3 million in the general fund. The one-time revenues come from agency lapses, money not spent by departments in fiscal 2016, as well as the fact that the state didn't have as many tax credits to issue as was anticipated.
Redemption of old business tax credits cost the state nearly $880 million last year, but that was about $150 million less than previously expected.
The same report says the state went into the current budget year, 2016-17, with projected balances in those funds $169 million more than anticipated.
Michigan's general fund for the 2018 fiscal year is projected to total $10.5 billion — up 2.3 % from current-year projections. The fiscal 2018 school aid fund revenue estimate has been revised up by $22 million to an estimated $12.783 billion. It's projected to climb slightly to $10.59 billion in FY 2019.
The revenue estimates are based on the most recent economic projections and forecasting models.
Incoming State Budget Director Al Pscholka cautioned that while that the numbers appear positive "it is important to remember that we have some one-time revenues for 2018 that will not be built into the ongoing base budget and we will be facing a number of budget pressures in 2019."
A major budget pressure in fiscal 2019 will be a required $150 million investment in transportation infrastructure that will come from Michigan's general fund.
This increase, said spokesman for the state budget office Kurt Weiss, is part of Michigan's roads deal that was worked out last year which requires increased investment in roads and starts to hit in 2019.
A report Snyder commissioned in December argued that Michigan is underinvesting in infrastructure by about $4 billion per year. Transportation infrastructure accounts for the biggest funding gap. The report shows that the state has an annual investment shortfall of $2.7 billion that will exceed $40 billion over the next 20 years.
Another looming pressure, said Weiss, "would be healthy Michigan, as the state begins to pick up more of the costs for the Affordable Care Act." As in the rest of the U.S., hundreds of thousands of state residents would likely be affected by a repeal of the Affordable Care Act.
The implications of an immediate repeal of the ACA could be felt by nearly one in 10 Michigan residents, and as much as 13%of the population in places as different from one another as the Detroit area and rural Emmet County, according to a report by the Center for Michigan.
These budget pressures come as the state begins to consider eliminating income tax– which is currently a flat tax rate of 4.25% -- for Michigan citizens.
On Wednesday State Representative Lee Chatfield, R-Levering, introduced legislation that would immediately reduce the income tax from 4.25% to 3.9% in 2018 and phase out 0.1 %every year until eliminated.
State Sen. Jack Bradenburg, R-Harrison Township, is also is working on legislation to eliminate income taxes.
"There is no better way to help families, workers and seniors across the state than by letting them keep more of what they earn," said Chatfield in a press release. "A healthy, vibrant economy starts in homes across the state. It's time we give personal economies a homegrown boost."
Income tax is Michigan's largest source of revenue, bringing in more than $9 billion annually. The majority goes to the general fund, and about 30 % is allocated for school aid.
"We would rather the people of Michigan have that money than some government agency," said Gideon D'Assandro, spokesman for the majority House Republicans.