Updates About Revenue Reports

The Senate Fiscal Agency (SFA) recently released Michigan’s Monthly Revenue Report for September. Total collections generated from major taxes and net lottery proceeds came in at $3.8 Billion, up 0.6% from SFA’s report one year ago. Despite this slight increase, revenue was still nearly $192 million below projections made during the Consensus Revenue Estimating Conference (CREC) this past May. Higher-than-expected Individual Income Tax (IIT) refunds and weaker Corporate Income Tax (CIT) collections were the primary drivers of the shortfall, though stronger returns from gaming-related revenue helped offset some losses. While September marks the end of the fiscal year on a calendar basis, the state’s accrual accounting practices mean that these totals represent eleven months of revenue activity.

General Fund and School Aid Fund tax collections also came up short by $183 million and $19.6 million, respectively. So far this fiscal year, General Fund collections are tracking $267.0 million below projections, while School Aid Fund revenue remains $76.5 million above expected levels. Income tax withholding was slightly higher than last year, but larger-than-anticipated refunds reduced net revenue. Sales tax receipts grew modestly year-over-year but still missed forecasts, and use tax revenue declined by nearly 10%. Corporate tax revenue also lagged significantly, down more than 36% from last September.

According to the Senate Fiscal Agency’s July 2025 Revenue Report, Michigan’s major taxes and net lottery revenue totaled $2.9 billion in July, down 1.6% from last July and about $130 million short of their May prediction. General Fund revenues came in $125.9 million less than forecasted, while School Aid Fund revenues missed expectations by $15.7 million.

Contributing factors included individual income tax refunds that were larger than originally anticipated, paired with smaller corporate income tax receipts and lower net lottery revenue. Stronger results from real estate transfers, the sales tax increase of 4.5%, and wagering taxes helped, but not enough to offset. So far this fiscal year, General Fund and School Aid Fund revenues remain $53.0 million and $3.6 million below expectations, respectively.

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.