LANSING (AP) – Michigan’s budget will have about $300 million more this year than predicted in January, a combination of higher-than-expected tax payments and fewer people receiving Medicaid and welfare benefits, according to state economists.
Much of the extra money may go into Michigan’s rainy day fund or be set aside in case the state loses legal fights over collecting income taxes on public pensions or having state workers pay more of their pension costs, budget director John Nixon said.
Officials also estimate the state will have about $100 million more to spend in the budget year that starts Oct. 1. That again comes from lower caseloads, along with $114.5 million more than expected for the state’s $11 billion school aid fund, offset by $64.7 million less for the state’s $9 billion general fund.
“I’m sure there will be a lot of good, healthy debate on how to spend that” extra money in the upcoming budget year, Nixon said. But since it’s less than a percent of the expected $20 billion in state revenue, “it’s not going to radically change the course that we’ve been on,” he said.
Lawmakers have been awaiting the latest numbers from Wednesday’s revenue-estimating conference as they try to wrap up work on the budget by June 1. Republicans hold majorities in both the House and Senate, leaving Democrats little say in the budget process.
The Senate wants to give school districts more of a per-pupil increase than Gov. Rick Snyder proposed in December, something that may be possible with the higher revenue. David Hecker, president of the American Federation of Teachers-Michigan, said he hopes lawmakers will consider raising K-12 appropriations.
“Schools are still hurting from slashing funding to classrooms across Michigan” in recent years, he said in a statement. “The step lawmakers have taken to restore some funding to Michigan’s schools is a step in the right direction, but doesn’t go far enough.”
Several advocacy groups noted that state economists estimate businesses may pay even less than expected next year under sweeping corporate tax cuts that took effect in January.
“While there is no evidence that the business tax cuts will create new jobs, we do know there will be less revenue for investing in public structures that will help grow the economy,” said Karen Holcomb-Merrill, public policy director for the Michigan League for Human Services. “This news comes at a time when the Legislature is looking to further reduce business taxes by cuts to the personal property tax, reducing revenue for local governments and schools.”
The tax changes enacted last year have moved more than $1 billion in tax payments from businesses to individual taxpayers. The Senate Fiscal Agency expects individual taxpayers to pay $523.1 million more this year than last, while companies will pay $1.3 billion less. In fiscal 2012-13, individual taxpayers are expected to pay $1.4 billion more, while businesses pay $1.9 billion less.
Unlike estimating conferences during Michigan’s economic slump, Wednesday’s didn’t cause much consternation. Past conferences forced a mad scramble for spending cuts when revenues came in lower than expected.
“The good news is, we have additional revenue,” Nixon said.
University of Michigan economist George Fulton told state officials Wednesday that Michigan is still struggling to replace the 859,000 jobs it lost from 2000 to 2009, having gained only 151,000 jobs since that low point just more than two years ago.
Fulton sees continued improvement in 2013 and 2014, with job growth dipping from an expected 57,900 new jobs this year to 44,000 next year and 53,500 in 2014. He expects the state jobless rate to drop to an annual average of 7.7 percent. The rate was 8.3 percent in April.
“It’s progress, but these remain stubbornly high jobless rates,” he said.
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