Updates About Revenue Reports

Michigan’s January Consensus Revenue Estimating Conference (CREC) revealed an upward trend in state revenues for the current fiscal year, with a $588 million increase attributed to higher taxes. Projections suggest a $1.2 billion budget increase for FY 2026, divided between the School Aid and General Omnibus budgets. While job growth continues post-pandemic, Michigan’s unemployment rate has also risen, driven by high federal interest rates impacting manufacturing. These findings set the stage for FY 26 budget discussions, beginning with the Governor’s executive budget recommendation in February.

Details on previous revenue reports are available Here.

A recent report by the Senate Fiscal Agency (SFA) showed that Michigan’s state revenue from major taxes and net lottery earnings reached $2.9 billion in November, marking a 10.5% increase compared to one year ago. Partially credited for the increase was the $147 million above anticipated projections for collections, including $31.8 million above forecast for the General Fund and $103 million exceeding expectations for the School Aid Fund. Additional funds were allocated to entities such as the Local Community Stabilization Authority and gaming-related programs.

Income tax revenue led the growth, totaling $1.1 billion for November, an 11.4% increase from last year and $6.2 million higher than projected. Use tax collections also saw a significant 7.4% increase, reaching $234.7 million. However, not all areas experienced growth; sales tax receipts dipped 1.5% year-over-year to $843.5 million, with motor vehicle sales tax collections hitting their lowest level since June 2024.

In September, the state’s major tax revenues and net lottery earnings reached $3.7 billion, marking a 1.7% increase over September 2023 and exceeding the Senate Fiscal Agency projections by $106.1 million. The General Fund saw tax collections surpassing projections by $165 million, while School Aid Fund collections fell $60 million short of expectations. Overall, fiscal year-to-date revenue for the General Fund stands $475.4 million above forecasts, and the School Aid Fund is $66.7 million over target.

¶Key Highlights:

• Individual Income Tax: Up 20.2% year-over-year, with record breaking withholding collections at 20.6% above last year.
• Corporate Income Tax (CIT): Surpassed predictions by $42.2 million, despite a 7.8% year-over-year decline.
• Sales and Use Taxes: Sales tax dropped 5.1% from last year, falling $4.7 million below the forecast, while use tax grew 11.6% but remained $8 million below predictions.
• State Education Tax (SET): Down 18.6% year-over-year and $86.2 million under predictions.

Overall, Michigan is showing strong fiscal performance driven by higher-than-expected income and corporate tax collections, with some under-performances in education-related revenues and lottery earnings.