Updates About Budget

On May 19, 2023, state economic leaders gathered together for Michigan’s May Consensus Revenue Estimating Conference (CREC). The CREC takes place in January and May every year to discuss independent economic and revenue forecasts that inform decisions made around the state budget.

The overall assessment from Friday’s CREC is that state revenues are trending down, with an estimated decline in state general fund dollars of $989 million for FY 2023 and $1.85 billion for FY 2024. Economists at the CREC stated that this decline is due to slowing economic growth, reductions in the individual tax rate, and timing issues associated with the 2021 adoption of a flow-through entity tax. CREC leaders also cited the impact of tax cuts adopted in 2023 and a shift in consumer behavior to purchasing more services, which are not subject to tax, as also contributing to the state’s revenue decline.

These forecasts provide the foundation for legislators and the Executive Branch to finalize the state’s FY 24 budget. We expect budget target discussions to begin as early as this week and final budget negotiations to continue into June.

This week, the legislature passed a $1.3 billion supplemental package comprised of nearly $630 million for Ford Motor Company’s proposed new battery plant slated to be built in Marshall, Michigan. Additionally supplemental highlights include:

• $75 million to support health care recruitment and retention programs
• $67 million to support long term care workforce recruitment and retention programs
• $63.5 million to increase long term care reimbursement rates
• $10.8 million to establish an office of community violence intervention services
• $60 million for a competitive grant program to provide grants to community centers
• $170 million to deposit in the state’s Strategic Outreach and Attraction Reserve Fund (SOAR)
• $25 million to deposit in the Water Shutoff Prevention Fund
• $212 million for energy efficiency updates completed by homeowners/landlords

We anticipate the Governor to sign the supplemental in the coming weeks.

As previously reported in Updates from the Capitol, the Michigan Independent Citizens Redistricting Commission (MICRC) sued the state Legislature for failure to properly fund the commission on December 12, 2022. The commission expected the Legislature to appropriate around $3.1 million to the commission for Fiscal Year (FY) 2023, but a year-end supplemental was not passed prior to adjournment.

On January 18, the Senate passed two close-of-books supplemental appropriations bills to provide funding for multiple departments for FY 2021-22 and FY 2022-23. The supplementals included $1.5 million for MICRC’s expenses, about half of what the commission originally asked for in 2022.

Senate Bill 7 appropriates $146.3 million for FY 2021-22 and $1.5 million for FY 2022-23. Senate Bill 8, a School Aid supplemental, appropriates $45.6 million for FY 2021-22 and $27.9 million for FY 2022-23. Both bills have been transmitted to the House for further consideration.