Michigan expects 'staggering' revenue losses from coronavirus
Michigan expects to lose $3.2 billion in revenue it was counting on to fund this year’s budget, and another $5 billion over the next two fiscal years as the COVID-19 pandemic pummels the state’s economy.
The revised numbers came Friday during a revenue estimating conference. The House Fiscal Agency, Senate Fiscal Agency and either state budget director Chris Kolb or Treasurer Rachel Eubanks are required to hold the conferences in January and May to keep the current budget on track and provide a framework for the next.
“These numbers are staggering,” Mary Ann Cleary, director of the House Fiscal Agency, said at the end of the three-hour meeting.
The new projections are down nearly $3.1 billion from prior estimates for the fiscal year beginning Oct. 1 and down nearly $2.1 billion for fiscal 2022.
The estimating conference expects to meet again in late summer for an update.
“With the state income tax deadline now in July, we will have a better revenue picture after an additional conference later this summer,” said Eubanks.
Michigan, like other states, moved its income tax filing deadline to July from April to match the federal government.
The revenue blow caused by COVID-19 exceeds that of 2009 and 2010, when Michigan's revenues dropped by $3 billion, said Eric Bussis, director of the office of revenue and tax analysis.
Officials and economists who compile the projections and say the state’s recovery could lag the nation's, because the coronavirus hit harder than in many other states and depends on the automotive industry, which is experiencing deep losses.
The two factors represent a “double-whammy," said Jim Stansell, who presented the House Fiscal Agency’s projections. The House, Senate, and administration’s separate projections are used to reach consensus projections. “We are looking at an economic recovery that is going to be slow and prolonged.”
Gov. Gretchen Whitmer announced a total of 50,079 positive cases COVID-19 cases Friday and 4,825 deaths.
The new fiscal 2020 general and school funding revenue projection is down 12% to $21.7 billion.
The state cut the fiscal 2021 estimate by nearly $3.1 billion to $22.46 billion, which would represent a 3.5% increase over the revised 2020 figure. The state expects another $2.1 billion loss in fiscal 2022 over the January estimate, with revenues totaling $24.07 billion, a 7.2% gain over the revised fiscal 2021 number.
The revised figures allow the state to draw $287 million from its stabilization fund under statutory regulations with no draw or deposit expected in fiscal 2021 and a deposit of $287 million anticipated in fiscal 2022. The rainy day fund holds about $1.2 billion.
Whitmer declined to say how she would close the gap when asked Friday. “I’m not going to go into all the possibilities…we know that Congress has the ability to help us,” Whitmer said, warning that otherwise the state faces cuts to public health, safety and education that would be damaging to services needed during the pandemic. “This is a really a critical moment and we need this kind of assistance.”
Michigan is not alone in seeing revenue numbers hammered by the virus.
“They are grim for every state in the nation too….and that is precisely why it is my hope that Congress takes action to get states the kind of help we need,” Whitmer said. “We are all in this same predicament.”
Whitmer called on state and federal lawmakers who represent Michigan from both sides of the aisle to lobby for the help, especially Republicans who oppose the $3 trillion relief bill that cleared the Democratic-controlled House Friday. It faces uncertain prospects in the GOP-run Senate.
Whitmer is a Democrat and in her first term has butted heads with the GOP majority in the legislature. Michigan has about $6.4 billion of outstanding debt and carries ratings in the double-A category.
GOP leaders called on Whitmer to work together on spending cuts and outline a revised fiscal 2021 plan.