Budget Crisis Grows Deeper
Revised Revenue Estimate Places General Fund, School Aid Shortfalls at $800 Million in '07; $1.6 Billion in '08 if SBT fully replaced
State Treasurer Robert J. Kleine, Senate Fiscal Agency Director Gary S. Olson, and House Fiscal Agency Director Mitchell E. Bean today reached a Consensus Agreement on economic and revenue figures for the remainder of fiscal year 2007 and projections for fiscal year 2008, which begins October 1st. According to their consensus, the current 2007 budget shortfall has grown to $803.2 million, $599.6 million in the General Fund (GF) and $202.8 million in the School Aid Fund (SAF).
At the conclusion of today's revenue estimating conference, net fiscal year 2007 GF-GP revenue was forecast to be $8.188 billion, $43 million below estimates from January, with net fiscal year 2007 SAF revenue estimated at $11.077 billion, down $153 million from January.
"We continue to experience little to no growth in major tax revenues," said Treasurer Kleine. "Sales Tax revenues, which fund public schools and public safety through revenue sharing, are expected to fall again this year. As a result, we face a sixth straight year where Sales Tax revenues will grow less than the rate of inflation."
During today's conference, fiscal year 2008 GF-GP revenue was estimated at $6.92 billion, which does not assume a replacement for the Single Business Tax that expires at the end of the year. Even if the SBT revenue is fully replaced, GF-GP revenues would fall by 1 percent in fiscal year 2008. Adjusted for inflation, GF-GP revenues have dropped 30 percent since fiscal year 2000. On the School Aid Fund side, revenue is forecast to grow by less than the rate of inflation -- or 1.9 percent -- in fiscal year 2008, to $11.285 billion.
Due to the declining revenue numbers and increased spending pressures, the combined fiscal year 2008 shortfall is now $1.6 billion if a full replacement for the Single Business Tax is assumed. That results from a shortfall of $1.5 billion in the GF and $76.8 million in the SAF.
"We must remain committed to protecting education, health care and public safety from devastating funding cuts," said Treasurer Kleine. "Governor Granholm has proposed a comprehensive budget solution that allows us to invest in Michigan and continue diversifying our economy. We are seeing signs of job-creation and growth in some sectors and need to continue to push forward in the face of continuing struggles in the auto industry, the housing market, and a slowdown in the national economy."