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Economists and representatives of Michigan’s fiscal authority on Friday announced a new budget plan for 2024 aimed at forecasting Michigan’s economic conditions in the coming years and assessing the state’s ability to raise funds for the new budget process. met at the first Consensus Revenue Estimates Conference (CREC) in 2017.
Led by State Treasurer Rachel EubanksAnalysts at the conference, including Senate Fiscal Affairs Secretary Kathryn Summers and House Fiscal Affairs Secretary Mary Ann Cleary, said that although Michigan is finally beginning to fully recover from the losses caused by the pandemic, many economic indicators are lagging behind the nation. It presented an image of a state struggling to meet the average.
Whitmer signs tax cut bill.Law increases EITC and eliminates pension tax
But despite tough economic conditions, financial experts say Michigan’s government funding remains stable and there are strong general and school grants that lawmakers should consider when crafting next year’s budget. He made it clear that he had the money ready.
Since the last meeting in May 2023, revenue projections for both the state general fund and school aid fund have increased. The general fund is expected to end the 2024 fiscal year, which ends Sept. 30, at $13.6 billion, an increase of $359 million from expectations in May. The school aid fund’s projected revenue for fiscal year 2024 is $17.95 billion, $59 million more than it expected in May.
The projections made during CREC will be reflected in Gov. Gretchen Whitmer’s fiscal year 2025 state budget proposal, which Budget Director Jen Flood said will be finalized soon. Stated. Whitmer typically announces her major budget priorities for next year after her State of the Union address, scheduled for January 24th.
“Under Governor Whitmer’s leadership, we have passed a balanced budget on time every year. We have built a record balance in our rainy day fund and paid off nearly $20 billion in debt. ” Flood said in a statement. “After today’s meeting, we will finalize the Governor’s budget proposal that continues to prioritize reducing costs, investing in our children, and growing jobs and the economy.”
Michigan House Speaker Joe Tate (D-Detroit) said in a statement that the state’s economic outlook is “stable and healthy” and that he expects positive changes from a tripartite Democratic Congress starting in early 2023. He said it was reflected.
“Today’s revenue estimates conference confirmed that the efforts of the Democratic majority have continued to move our economy in the right direction,” Tate said. “We created a responsible plan for Michigan that puts money back in the hands of working families without sacrificing the programs and services that benefit millions of residents. , you can now give thousands of your hard-earned dollars back to seniors.”
State Rep. Sarah Lightner (R-Calhoun), the ranking Republican on the House Appropriations Committee, said the tax cuts for Michiganders should bring in more revenue than expected for the state. In her statement, Leitner said there is “no reason at all” to impose tax increases on state residents, especially at a time when so many people are feeling the effects of inflation on their daily expenses.
“Even though Michiganders have seen wage increases over the past few years, they are still being eaten up by inflation, and families continue to feel the pinch every time they step into the grocery store,” Leitner said. “The role of state government is not to spend all the people’s money.”
“When taxes are lower, people keep more of the paycheck they earn so they can cover their daily living expenses. Michigan’s higher-than-expected revenue will help fund government services and provide tax cuts. You can keep it.”
Last year, Whitmer signed The tax cut plan included a significant increase in the Earned Income Tax Credit (EITC) for working-class households and a phase-out of the so-called pension tax.
House and Senate fiscal analysts said their May 2023 tax revenue projections were largely accurate and that major external events, such as the United Auto Workers strike, did not have a significant negative impact on the state’s collections.
Revenue from Michigan’s corporate tax and Michigan business tax is projected to exceed $2 billion over the next three years, and the growth is “very robust,” analysts said.
University of Michigan economists Gabriel Ehrlich and Daniil Manaenkov published a study showing that the state’s economic situation is starting to calm down, despite a period of post-pandemic instability over the past few years. Inflation is gradually normalizing, labor demand is flat, and unemployment is expected to remain stable.
“We expect salaried employment to fully recover from the pandemic recession in the first half of this year,” Ehrlich said. “Our growth will continue over the next few years.”
But several factors could pose risks, particularly to the state’s 2024 revenue. new tax policy Measures such as raising the EITC and rolling back pension taxes will go into effect this year.
Leslie McGranahan, an economist at the Federal Reserve Bank of Chicago, said population growth in Michigan and the Midwest as a whole has lagged behind the rest of the nation, and gross domestic product (GDP) growth in the Great Lakes region has been lower than in other regions. Ta. part of the country.
“Population growth in the Midwest is slow and has been for quite some time,” McGranahan said.
Whitmer last year Establishment of Council for Growing Michigan Together The idea is to come up with a proposal aimed at increasing Michigan’s stagnant population.
Economists say one of the best ways to counter the effects of population stagnation and slowing GDP growth is to have more active consumers of goods and services, but the burden on consumers will be too high. agreed that it could be difficult.
McGranahan said that while spending power has remained largely stable, signs of stress, primarily related to big financial commitments, are beginning to surface.
“There are some subtle signs of stress,” McGranahan said. “Some of that is due to student loans, but a lot of it is mortgages.”
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