Conference Confirms Revenue Reduction

May 15, 2014

Michigan's economy improves, but at a slower pace

The long, harsh winter slowed the state's economic recovery. And it took a bite out of tax revenues, leaving Governor Rick Snyder and the Legislature with about $300 million less to work with as they put the finishing touches on a new state budget.

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That was the finding of a conference of state budget officials who set a revenue number to be used in the final weeks of budget talks at the state Capitol. The budget conference looked at all kinds of factors affecting the state's economy to come up with a new revenue forecast for lawmakers to use.

Unemployment and wages are expected to improve through 2016 as manufacturing, business services, IT, and construction slowly rebound. But, experts say there are still a few variables that could affect the state's short and long-term economic future. New home building is one. So is the auto industry. And University of Michigan economist George Fulton says a lot also depends on how the Detroit bankruptcy plays out.
        
"It's still the major city in Michigan," he said, "and in states, major cities and how they go is important to how the economy as a whole goes."  
    
Fulton says, otherwise, Michigan seems to be on track for slow-but-steady growth, but the state is still a couple years away from having a jobless rate that's on par with the national average.

State Budget Director John Roberts says, overall, things are still looking good for the budget.  

"We understand that we have to make adjustments, but we really like the trend we're seeing," he said. "You guys saw, have seen the growth, it's steady. We'd like more, but the growth is steady - eight consecutive months of unemployment being down.  We feel good. If we budget appropriately, we'll grow with it."

Roberts says this does dim the prospects for an election year tax cut, or putting more money into the state's "rainy day" savings. But the administration is still looking for a revenue source to raise money for roads. And he says money for the Detroit bankruptcy settlement is also a priority.

"I think you've heard from a lot of people that they have other priorities in the Legislature, so I would say, if people want to have rumblings and want to keep talking about it, we'd be there, but with people saying they're less interested in moving it, our priorities right now are definitely transportation and Detroit in the budget."   

Roberts says the Snyder administration and the Legislature are still on track to wrap up next year's budget by early June.