Michigan Revenues This Year, Next Are $333 Million Below Estimates

By David Eggert, Associated Press

LANSING (AP) - Lower-than-expected growth in tax revenue will force Michigan Gov. Rick Snyder and lawmakers to enact a new state budget with less spending than initially proposed, but the dip should not lead to cuts below current funding levels, the state budget director said Tuesday.

With revised budget figures in hand, the Republican governor and GOP-led Legislature may scale back funding increases for universities, expanded dental coverage for low-income children and a proposed new $165 million fund to address drinking water and other infrastructure improvements statewide following Flint's lead-contaminated water crisis, John Roberts said.

But, he said, the administration remains committed to education, public safety, emergency aid for Flint and a rescue of Detroit's ailing school district. The state, which has managed the district for seven years, is being asked to pay off hundreds of millions of dollars in operating debt over a number of years as part of a plan to launch a new district.

"All investments are on the table for review," Roberts said.

He spoke to reporters after state officials revised downward the revenue forecast for this fiscal year and next by $333 million in the state's two main accounts, a key step before Snyder and legislators soon finalize the budget that will take effect in October. Officials also identified roughly $130 million in unanticipated Medicaid costs because caseloads have not dropped as much as predicted and costs have risen.

"Anything that saw an increase" in Snyder's budget proposal, "we'll go back and revisit," Roberts said. He said he does not anticipate needing to enact cuts in the current budget, though some proposed mid-year spending increases could be put off until the new fiscal year.

Economists said income tax withholding payments and lottery revenue are much stronger than projected in January, but corporate income tax revenue is down 20 percent and sales tax collections continue to fall below expected levels.

The $10 billion general fund is now projected to have $300 million less this year than last year and grow by $404 million, or 4.4 percent, next year. The $12 billion school aid fund, which is $320 million higher this year, will rise by $335 million next year, or 2.8 percent, according to the new estimate.

"First and foremost, the sky is not falling," said House Appropriations Committee Chairman Al Pscholka, a Stevensville Republican. He said the House budget plan "came in below the governor's suggested spending" and "we are prepared to handle this situation with minimal impact on government."

Democrats, though, said the corporate income tax structure is too volatile five years after Republicans overhauled and reduced business taxes while raising them on individuals.

"This should be a wake-up call. We need to make long-term investments in our infrastructure and our kids, which is impossible without a predictable revenue stream," said Sen. Curtis Hertel Jr., an East Lansing Democrat.

Gilda Jacobs, president and CEO of the Michigan League for Public Policy, an advocacy group for the poor, said she hopes "no lawmaker uses this news as a justification to turn their backs on the children of Flint, Detroit and communities around the state."

Snyder and majority GOP lawmakers want to enact the next budget by early June, likely in conjunction with another mid-year supplemental boost in emergency aid for the Flint disaster. The state has authorized roughly $70 million in funds for the emergency, and Snyder is seeking $165 million more through the budget process this year and next.

Senate Appropriations Chairman Dave Hildenbrand, a Lowell Republican, said "there's going to be a lot of trimming in a lot of areas, so I don't think there's going to be any one area that's going to see significant reductions."

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