CHICAGO -Michigan revenues are projected to fall short of previous estimates by up to $472 million in fiscal 2009 amid weak personal income growth and a weak housing market, state officials said last Friday.
But in fiscal 2008, which ends Sept. 30, the state faces a relatively modest revenue shortfall of $61 million. Lawmakers will use the fiscal estimates to craft the fiscal 2009 budget.
The downward revision comes despite a pair of tax increases implemented last year which are expected to boost revenue but not to the extent first projected when fiscal analysts presented revenue figures in January.
Michigan's total net revenue is expected to reach $20.539 billion in fiscal 2008, down $60.6 million from January projections, state fiscal analysts said at a revenue estimating conference on Friday. Revenue is expected to total $20.6 billion in fiscal 2009, down $472.3 million from January projections.
The revenue numbers include both the general operation fund - which in 2009 is expected to total $8.9 billion, down $309 million from projections in January - and the school aid fund, which is expected to total $11.7 billion in 2009, down $163.2 million from January.
Income tax collections, which along with sales taxes are the state's chief revenue sources, are expected to grow 11.6% in 2008 before dropping 2.4% in fiscal 2009, officials said. The increase comes on the heels of a late-2007 increase in the income tax rate to 4.35% from 3.9%.
The state's sales tax revenue is expected to increase 2.2% in 2008 and a modest 0.3% in fiscal 2009. Tobacco tax revenue is projected to decline 5.6% in fiscal 2008 and another 2.1% in 2009. Meanwhile, the state's soft housing market is likely to lead in 2008 to an expected 21.7% decline in real estate transfer tax collections, revenue that goes only into the school aid fund. The real estate transfer tax is projected to be flat in fiscal 2009.
"There's going to have to be some downward adjustments," state Treasurer Robert Kleine said at the conference.
Michigan's economy is expected to worsen through 2009. One of its biggest challenges is the unemployment rate, which was at 7.2% in 2007 and expected to rise to 7.6% in 2008, and 8.4% in 2009, according to House Fiscal Agency director Mitchell Bean.
Meanwhile, Senate Fiscal Agency director Gary Olson last week told lawmakers that the state's new film promotion program - in which movie projects receive tax credits of up to 42% of production costs - could end up costing the state $110 million. The number came as a surprise to many lawmakers, who said it was likely they would consider cutting back the program as it could bite into the school fund.