Updates About Economy

The House Fiscal Agency’s June 2025 Revenue Report brought positive short-term news, with major tax revenues and lottery earnings totaling $3.3 billion—an 8.3% increase from June 2024 and $64 million above the May 2025 Consensus Revenue Estimating Conference (CREC) projections. General Fund revenues were bolstered by stronger-than-expected individual income and corporate tax collections, contributing to a $71.8 million surplus above forecasts. Individual income tax revenue alone totaled $1.5 billion (up 15.5% year-over-year), and corporate income tax revenue exceeded estimates by more than $30 million. However, revenues dedicated to the School Aid Fund missed projections by $17 million, with an additional $9.2 million redirected to other earmarked funds.

Looking ahead, however, the recently enacted federal One Big Beautiful Bill Act of 2025 (OBBBA) may substantially alter Michigan’s fiscal landscape over the next decade. The act introduces sweeping federal tax changes that are expected to reduce Michigan’s business tax base and, consequently, state revenue. The House Fiscal Agency now anticipates Michigan could lose $677 million in FY 2025-26, $613 million in FY 2026-27, and $444 million in FY 2027-28 due to provisions such as expensing for research and experimental costs, Section 179 expansion, and limitations on business interest deductions. While some of these losses will taper off by FY 2030-31, Michigan is expected to forgo billions in revenue over the long term unless it decouples from the affected federal tax provisions.

As lawmakers head into the next phase of FY 2026 budget negotiations, they will need to balance the strong performance of current revenues with the looming structural changes driven by OBBBA. These federal changes, combined with upcoming reductions in Medicaid and SNAP cost-sharing adjustments, will likely place additional pressure on the state’s General Fund in the years to come.

Review previous revenue estimates and CREC reports here.

According to a recently Michigan Economic Indicators (MEI) report by the Senate Fiscal Agency (SFA), Michigan’s economy showed signs of resilience in April. Our state added 16,000 jobs, the largest monthly gain in over two years, driven primarily by growth in professional, education, and health services. Manufacturing, however, continued to lag, shedding 10,000 jobs compared to the same time last year. Motor vehicle production rose by 8.2% month-over-month, but remained down 9.2% from April 2024, with Michigan’s share of national auto production at its lowest level in over a year.

Despite positive movement in employment and modest housing start gains, national consumer sentiment hit a concerning low, falling for the fourth consecutive month to one of the weakest readings since the survey began in 1952. At the same time, oil prices dipped to their lowest point since 2021, retail sales posted a healthy 4.7% year-over-year gain, and inflation in Detroit remained relatively modest at 1.4%. While some sectors are clearly under pressure, Michigan’s labor market and industrial activity continue to show pockets of strength amid broader economic uncertainty.

Read the full SFA report here.

Attorney General Dana Nessel has formally intervened in Consumers Energy’s request to raise electric rates by approximately $436 million, potentially the largest request filed in decades. The proposed hike, submitted to the Michigan Public Service Commission (MPSC), would increase electric bills for Michigan residential customers by 13.3% and take effect in May 2026, if approved. In addition to the rate increase, Consumers Energy is also seeking to recoup $24 million in deferred distribution costs through a separate 12-month charge.

The multi-billion dollar company announced the latest hike to electric rates just seven days after the MPSC approved a separate $154 million rate increase that went into effect in April. The Attorney General’s office has stated they will be closely examining the filing to prevent state residents from paying unnecessary costs.