(The Center Square) – Michigan’s economic recovery indicators are billions of dollars better than previously projected, state financial leaders agreed Monday after a rare third Revenue Estimating Conference.
Experts previously estimated that Michigan’s revenue would drop by $6.3 billion over the next two fiscal years.
Now, that deficit should be closer to $3.4 billion.
“The good news is that the decline in revenues have not been as severe as we forecasted in May in the early days of the pandemic; however, we are still down nearly $1 billion overall from January’s forecast,” State Treasurer Rachael Eubanks said in a statement.
“Federal stimulus programs played a critical role in indirectly supporting state revenues, albeit still quite a bit less than we would have likely generated had it not been for the pandemic. As we move forward, we have not assumed additional federal assistance will be available due to the delay in its enactment, which is the main driver for the precipitous drop in revenues for fiscal year 2021.”
Possible risks to the forecasted recovery include further COVID-19 outbreaks and national economic trends.
The state brought in billions more in revenue than expected through taxing unemployment income, stronger delayed payments for income and corporate taxes, and a faster recovery for manufacturing and automotive products.
The Coronavirus Aid, Relief, and Economic Security (CARES) Act impact was underestimated, and Michiganders bought more taxable goods than expected.
Three programs within the CARES Act pumped about $43.3 billion into the Michigan economy, propping up an otherwise battered state.
The Paycheck Protection Program loaned nearly $16 billion to Michigan businesses.
Economic Impact Payments dished out $8.3 billion to Michigan residents.
Pandemic Unemployment Insurance Compensation provided $19 billion in benefits, of which $13.4 billion was federally funded, and expanded to people who were previously ineligible.
“While today’s updated revenue picture is better than the forecast in May, it’s still far worse than the January forecast and we are still looking at dramatic revenue losses in fiscal years 2021 and 2022, totaling nearly $4.2 billion,” State Budget Director Chris Kolb said in a statement.
“We need additional federal aid to help us manage through the devastating impact COVID-19 has had on our revenues or else we will be facing tough decisions about what essential services and programs to cut. An additional federal stimulus package is a must to help our residents and businesses and to provide crucial support to state and local governments.”
Rep. Shane Hernandez, a Port Huron Republican and chair of the Appropriations Committee, disagreed.
“The Trump administration deserves our thanks for buying us some time with the federal response to COVID-19 – but in no way is federal money a permanent solution,” Hernandez said in a statement. “It’s not sustainable over time, and it would be an irresponsible approach for taxpayers and future generations.”
Hernandez recommended two immediate steps “necessary for a sustainable recovery and a healthy budget over the long term.”
“The economy must be safely and fully reopened, and we must make wise, conservative budget decisions to avoid bigger problems in the near future,” Hernandez said.
“This includes continuing to work on reductions in state spending, and reinvesting in the state’s rainy day fund to lessen the impact of budget cuts that would be needed when the federal funding ends