Michigan faces a general fund deficit of up to $1.8 billion in fiscal 2012, but could enjoy a school-aid fund surplus of up to $583 million, according to economists and fiscal officials at last week’s semiannual state revenue estimating conference.
The numbers will be used to help craft the fiscal 2012 budget proposal that new Gov. Rick Snyder will present to the Legislature next month. Michigan’s fiscal year begins Oct. 1.
There is good news for Michigan despite the deficit, officials said. Sales tax collections are expected to be strong and the jobless rate is expected to fall during the next two years, declining to 11.4% in 2012 from the current rate of 12.4%.
“Michigan’s unemployment rate is expected to begin to trend downward over the next several months,” new state Treasurer Andy Dillon said in a statement. “With modest economic growth expected in 2011 and 2012, we will need a continued emphasis on creating jobs in Michigan to ensure the economy and consumer confidence continues to grow.”
Overall revenue now is expected to exceed recent estimates by $277 million through 2012. Fiscal 2011 general fund revenue is projected to reach $7.23 billion, which exceeds recent estimates by $131 million. Fiscal 2012 revenue is expected to reach $7.29 billion.
School aid funds in 2011 are expected to reach $10.9 billion, up $146 million from last May’s estimates, and climb to $11.2 billion in fiscal 2012.
Despite the additional revenue, Snyder and lawmakers will still need to eliminate a general fund deficit that could be as high as $1.8 billion. Most of that shortfall is due to the loss of hundreds of millions of dollars of federal aid that has propped up the budget over the last two years.
Lawmakers are facing a “budget pickle” due partly to the declining value of the dollar, according to George Fulton, director of the research seminar in quantitative economics at the University of Michigan. He said each dollar of revenue collected in 2000 dwindled to 73 cents in 2012 and to 49 cents when inflation is taken into account.
“There are many tough choices on the horizon,” Fulton told lawmakers after a presentation Friday morning. “Our good wishes are with you.”