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Michigan defies expectations, bringing in $1.7B more revenue than expected

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Consumer spending has remained far ahead of predictions, fueling a rise in taxpayer revenue for Michigan. (ehrlif / Shutterstock.com)

LANSING — Michigan’s revenues continue to defy predictions and remain on a historic rise, despite the COVID-19 pandemic, lawmakers heard Friday.

State officials announced that Michigan has $1.7 billion more than expected for the current 2022 fiscal year. That trend will likely continue in 2023 with revenues increasing by over $1.4 billion, according to the Consensus Revenue Estimating Conference, a group of state and legislative officials who met Friday morning to revise revenue projections.

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The group’s predictions will guide Gov. Gretchen Whitmer as she crafts her proposed budget.

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“Our revenues are in a great position,” Michigan Treasurer Rachael Eubanks told reporters after the meeting. “However, most of the strength of those revenues is transitory.”

Some of the increase in revenues is due to increased consumer spending — and taxes — during the pandemic, brought on in part by federal stimulus checks, state treasury officials said.

Economists and state officials acknowledged the numbers will fluctuate because of the pandemic. Still, the forecasts are a turnaround from 2020, when state officials feared COVID-19 would cause a revenue shortfall of $3 billion.

In May, the state had forecasted $26.8 billion in general fund and school aid revenues for the 2022 fiscal year that ends Sept. 30, and $27.7 billion for fiscal year 2023.

But the revised forecast presented Friday estimates the state’s combined general fund and school aid revenues for fiscal year 2022 reaching $28.53 billion, $1.7 billion more than earlier projected. 

The updated forecast for fiscal year 2023 is $29.14 billion, about $1.4 billion more than anticipated in May.

State and legislative officials authored the forecast without factoring in the possibility of more federal revenue coming into Michigan, such as President Biden’s Build Back Better plan.

Overall, the state collected $29 billion in revenue in fiscal year 2021. That’s $3.5 billion more than what state officials had estimated at the beginning of the pandemic in  January 2020.

Michigan also has over $7 billion in federal relief funds that still need to be appropriated by the Legislature. 

House Appropriation Committee Chair Thomas Albert, R-Lowell, said the state should remain cautious.

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“Year-over-year inflation rose by 7 percent in December, the fastest rate of growth in nearly 40 years,” Albert said in a statement. “I’m worried that federal government policies, supply chain issues and labor force shortages might exacerbate that trend.

“It’s unsustainable and could cause serious problems for our economy, so we must be prepared for potential consequences.”

Albert added he wants the state to take advantage of the federal aid still available, instead of creating “ongoing costs.”

State Budget Director Chris Harkins told reporters the administration will use the next few weeks to work on a budget recommendation for the next fiscal year. 

He said the state is likely to focus on issues such as jobs, clean water, and education.

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