CHICAGO — General fund revenues in Michigan are expected to decline more than 20% in fiscal 2009 from last year — the single largest drop since the state began tracking the figures in 1962, fiscal officials say.
The state’s school aid fund is expected to decline around 5% in 2009 from 2008, which is also the largest year-over-year decline since the fund was created in 1981.
The declines are driven largely by the state’s sky-high unemployment rate, which reached 15.3% in September, the highest in the nation.
Michigan suffered an 8.5% drop in wages and salaries in 2009, and has lost 80% of its automobile manufacturing jobs in the last decade, said Gary Olson, executive director of the Senate Fiscal Agency, a nonpartisan agency that, along with the House Fiscal Agency, tracks and forecasts revenue data.
“Unemployment — that’s what’s driving these numbers down,” Olson said. “We’ve seen huge job losses, as has the U.S., but these are pretty remarkable job losses and that’s impacting state revenues.”
Revenues making up the general fund, which totals roughly $7.5 billion, are expected to decline by $2 billion in fiscal 2009 compared to 2008, according to fiscal reports.
Revenues making up the school aid fund, which totals about $11 billion, are expected to drop $600 million.
The declines are the biggest in decades, said Rebecca Ross, senior economist with the House Fiscal Agency.
“For both funds’ declines in 2009 you have to go back several years to find anything like that. You may never find anything like that,” Ross said.
Total tax revenue is expected to be down nearly 13% in fiscal 2009 from fiscal 2008, according to the Senate Fiscal Agency, which released a monthly revenue report Monday.
Preliminary data show that income tax collections in 2009 totaled $5.9 billion, down $1.32 billion, or 18.2%, from a year ago.
Sales and use tax revenue are expected to decline nearly 12%, or $961 million, in fiscal 2009 compared to the previous year.
In addition to the year-over-year declines, revenues have declined from projections in May, the state’s last revenue forecasting conference. Based on collections from November 2008 to October 2009, revenue has declined by $102.5 million below May projections.
The real estate transfer tax is one of the only taxes to increase over May projections. While the tax declined 27.5% year-over-year, collections increased by $27.2 million over May projections.
That could signal that the state’s real estate market has bottomed out, according to Olson.
“I think we’ve hit the bottom on the transfer tax, but not yet on property taxes, which lag,” he said. “I think we’re beginning to see some kind of firming in the real estate market in Michigan.”
Despite the gloomy numbers, Olson said the state should begin to see gains by late 2010.
“Better times are ahead. When the national economy turns, and the automobile companies get close to stable and won’t shed any more jobs, we’ll get some growth in Michigan,” he said. “We’ll start to see some marginal growth in employment in late 2010, though we’ll have more job losses until then. The worst is over.”