WUOMFM

State economy still creeping up, but it won't help general fund much

Jan 11, 2018

Credit Flickr user 401(K) 2012 / Creative Commons

The state got an idea Thursday of how much money it could have for the next couple years.

Economists gathered for the Consensus Revenue Estimating Conference Thursday. Michigan won’t see a big economic rebound in the upcoming years. Economists told lawmakers it’s more like a slow crawl.

Gabriel Ehrlich is an economic forecaster at the University of Michigan. He predicts – barring any unforeseen national problems – Michigan’s economy will continue to steadily improve. That includes a rise in incomes.

One nice thing is that’s going to translate into increases in real purchasing power,” Ehrlich said. “So even adjusting for inflation, we’re going to start to see healthier increases in wages and incomes.”

Ehrlich says a part of the reason wages will go up is fewer people are looking for work. So businesses need to increase wages to be more competitive.

But there is a conflict brewing between the Legislation and the governor’s administration over whether this small yet steady increase means the time is right for additional tax cuts.

The approximately 10 billion dollar General Fund probably won’t keep up with inflation, and the School Aid Fund is still smaller than it was a decade ago, if adjusted for inflation.

“Any discussion of tax cuts has to be combined with additional spending cuts or revenue increases in other places,” said state Treasurer Nick Khouri. “And until we can have that broader discussion and identify those other areas, tax cuts right now are a difficult conversation.”

State Budget Director Al Pscholka said there’s pressure on the General Fund with a lot of it already earmarked.

But lawmakers might try to make more cuts anyway.

Representative Laura Cox, R-Livonia, is on the committee that makes the state’s budget.

 

“There’s definitely an appetite in the House and I think there’s some sort of appetite in the Senate to provide all the taxpayers of Michigan some sort of tax relief,” she said.

The governor’s administration will use the projections to come up with budget recommendations for next year.