Michigan to Face More Budget Cuts as Tax Revenues Plummet

by Scott McClallen


A storm of skyrocketing unemployment paired with plummeting tax revenue have plunged the state budget into a multi-billion dollar deficit.

State Budget Office Communications Director Kurt Weiss told The Center Square in an email that tax revenues for this fiscal year are projected to drop between $1 billion and $3 billion.

There’s another $1 billion to $4 billion projected for Michigan’s next fiscal year, Weiss said.

Over 1 million people have filed for unemployment benefits, more than a quarter of the state’s workforce.

A University of Michigan Economic Outlook study estimated the state’s unemployment rate will hit 23 percent this quarter.

Michigan’s reserves of unemployment funds may run out in 12 weeks, the Tax Foundation estimated.

The UM outlook projected “combined General Fund and School Aid Fund revenues to be $2.6 billion lower in fiscal year 2020, $3.2 billion lower in fiscal 2021, and $2.2 billion lower in fiscal 2022,” the researchers wrote.

Whitmer and the Legislature already repurposed $35 million from the Michigan Reconnect program, $16 million for Pure Michigan, and $37 million in “enhancement grants.”

The state enacted a hiring and spending freeze, and last week temporarily laid off 2,903 employees, Bridge reported. The state employs about 48,000 people.

But there’s some federal help.

Michigan is slated to receive about $3.8 billion from the Coronavirus Aid, Relief and Economic Security (CARES) Act.

About $800 million of that $3.8 billion will fund local governments with populations greater than 500,000; namely, the city of Detroit, and Oakland, Wayne, Macomb, and Kent counties.

Local government groups have asked for $1.1 billion of that money to make up for an expected drop in state revenue sharing to fund services for local governments with populations smaller than half a million.

The CARES Act currently doesn’t allow states to spend federal money on existing budget items that could be hurt by COVID-19.

Gov. Gretchen Whitmer and other governors had asked President Donald Trump and Congress for unrestricted fiscal support to states of $500 billion.

“Without this leadership, the damage to our state economies will be exacerbated by the cuts we know we will be forced to make,” The National Governors Association said in a letter earlier this month.

Senate Majority Leader Mike Shirkey said Monday on a conference call with the Detroit Regional Chamber that Michigan will have to make budget adjustments.

“There’s no line item, there’s no project, and there’s no department, and there’s no person who’s immune” from budget adjustments, Shirkey said.

Lawmakers must balance the state budget by Sept. 30.

“These kinds of changes over a short period of time are really difficult to do,” Shirkey said.

The Clarklake Republican said Michigan’s $1.2 billion rainy day fund should be used “surgically” because it could lower the state’s bond rating, which raises the cost of borrowing money.

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Scott McClallen is a staff writer covering Michigan and Minnesota for The Center Square





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