Michigan’s Budget Process Begins

The good news and the bad news at January’s Consensus Revenue Estimating Conference.

Michigan’s Consensus Revenue Estimating Conference (CREC) took place on Friday, January 13, 2023. The CREC meets in January and May of every year and brings together the state’s leading economists to discuss the national and state economic outlook, and issue revenue forecasts that help inform state policymakers ahead of the state budget process. The budget process is expected to formally begin in early February when Governor Whitmer releases her Fiscal Year 2024-2025 Executive Budget Recommendation. View the full CREC report (pdf).

While revenues are up over May 2022 estimates, net General Fund/General Purpose revenue for FY 23 was forecasted downward 2.8 % from FY 22 at $14.7 billion, and School Aid Fund revenue is expected to be down 1.1 %t at $17.6 billion, for a combined total of $32.4 billion. Budget Director Chris Harkins stated, “The nature of this forecast reminds us that revenues may fluctuate, and it remains important that we continue to ensure that any available one-time revenues be used for one-time investments to grow and build Michigan.”

In FY 24, estimates were revised upward 1.6 % with combined General Fund/General Purposes and School Aid Fund at $32.9 billion.

In FY 25, the CREC estimates 6.7 % growth year over year for a combined General Fund and School Aid Fund total of $33.8 billion.

Meanwhile, the state's surplus has climbed to an unprecedented $9.2 billion ($5.1 billion General Fund, $4.1 billion School Aid Fund), according to information shared during the conference. And it should be noted that nearly $6 billion of the surplus is considered one-time money, meaning it's not recurring tax revenue that can be used to fund state agencies and programs in future years.

Is there a recession on the horizon? Economists from the University of Michigan’s Research Seminar in Quantitative Economics forecast a 60 to 65 percent chance the United States will enter a recession in late 2023 – also stating that it will be mild and growth is predicted to resume the following year. The Senate and House Fiscal Agencies as well as the Dept. of Treasury all predict Michigan will enter a recession as well predicated on the response from the Federal Reserve. The estimates were based on a projected unemployment rate of 4.8% by 2024, which was the indicator of a mild recession.