05/17/2012 09:02 am ET

Michigan Revenue Increases More Than Expected In 2012, State Will Likely Hold Onto Money

Michigan fiscal analysts announced Wednesday the state would draw in millions more dollars in revenue than expected this fiscal year, but the additional money is unlikely to be spent shoring up previously cut programs.

Projected revenue for the General Fund this fiscal year is up $34 million from the January estimate to $9.034 billion. In total, the state will end 2012 with about $300 million more than expected, according to the Detroit News.

That extra revenue comes in part from collecting more taxes than expected and the Department of Human Services and Community Health spending less on Medicaid and cash assistance. DHS was able to cut spending since March, when the state began enforcing stricter guidelines for welfare recipients, eliminating benefits for 66,000 people.

Republicans in the Senate plan to use any surplus revenue to save money and pay down Michigan's debt, according to MLive.

But higher-than-projected revenue does not mean an overall increase in money coming into state coffers.

The following fiscal year, which begins in October, will see a decrease in General Fund revenue and a drop from previous estimates. Treasurer Andy Dillon and representatives from state departments agreed at the Consensus Revenue Estimating Conference that 2013's projected revenue for the General Fund will be $8.970 billion, down $65 million from the January estimate.

Like the General Fund, Michigan's School Aid Fund is expected to gain more revenue than projected next year, and will come out of fiscal 2012 with an additional $113 million, for a total of $10.876 billion. That's still a 3.3 percent decline for the SAF from 2011, according to the Detroit News, in part due to the elimination of the Michigan Business Tax.

Gov. Rick Snyder did away with the Michigan Business Tax in favor of a new system that went into effect in January of this year, reducing business taxes by 86 percent. The cuts sort out to a $1.7 billion loss for the state.

Democrats and social services agencies, including the Michigan League of Human Services, have said the loss of revenue from the business tax is detrimental to the state's citizens.

"While there is no evidence that the business tax cuts will create new jobs, we do know there will be less revenue for investing in public structures that will help grow the economy," MLHS Policy Director Karen Holcomb-Merrill said in a statement Wednesday. "Even more alarming is that this news comes at a time when the Legislature is looking to further reduce business taxes by cuts to the Personal Property Tax, reducing revenue for local governments and schools."

Snyder has pointed to the business tax cuts as a strategy to promote job growth, as some predict slow and steady economic upturn for the state.

Michigan's unemployment rate could drop to 7.5 percent from its current 8.3 percent by 2014, University of Michigan's George Fulton said at Wednesday's revenue meeting, according to the Detroit Free Press.

But a decline in the unemployment rate could be a misleading indicator of economic health -- or potential for state revenue. In recent months, national analysts have pointed to people leaving the workforce, rather than an increase in available jobs, as reason for continued drops in unemployment rates. Fulton, who heads up U of M's Research Center on Quantitative Economics, said Michigan will add between 51,000 and 67,000 private sector jobs annually through 2014, down significantly from the 91,900 jobs added last year.

Flickr photo by Michigan Muncipal League (MML).