LMich
05-19-2007, 08:58 AM
Holy budget deficit, Batman! :omg:
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070519/POLITICS/705190365&theme=Metro-State-Budget
State budget hole: $800M
No rebound until '09 for fiscal woes, economy
May 19, 2007
Mark Hornbeck / Detroit News Lansing Bureau
LANSING -- Michigan's limping economy has ripped an $800 million hole in the state budget, and economists said Friday that they don't expect a turnaround for two years.
That means even more red ink for next year, when the budget deficit will be twice that, state officials said.
"An optimist would say Michigan's economic outlook is meager," said Sam Kahan, senior economist for the Federal Reserve Bank of Chicago, Detroit Branch, during a semiannual review of state finances.
The revenue estimates for the current fiscal year, $195 million worse than forecast in January, gave clarity but no immediate relief in the state's budget crisis. Negotiators for Gov. Jennifer Granholm and Republican and Democratic legislative leaders don't plan to meet this weekend, although budget officials say they're in constant communication.
Schools, cities, universities and social service agencies all are waiting with growing uncertainty and concern for the outcome of talks. If a compromise isn't reached within two weeks, schools have been told to expect a $122-per-child cut in a promised increase in state funding -- a cut that many have said comes too late in their year to make up.
State Democrats say the outlook released Friday bolsters the case for a tax hike, but one policy analyst isn't so sure it favors any single approach.
"It compels Republicans and Democrats to look at all three sides of the financial stool -- revenue, reforms and cuts," said Craig Ruff, senior fellow for Public Sector Consultants Inc., a nonpartisan think tank. "And it compels them to see the crisis for what it is -- not short term, but long term."
High on the list of reasons for the moribund economy here: The domestic auto market share, which was at 65 percent only seven years ago, will fall to 49 percent next year, according to a University of Michigan report. It's at least the second forecast to call for the Big Three's share of the domestic auto sales to fall below 50 percent.
"It's hard to expect anything good coming to the Michigan economy from this," said Joan Crary, a U-M economist.
The state lost 53,300 jobs last year and can expect to lose 46,200 more this year and 32,000 next year, she said.
Michiganians' growing reluctance to buy homes, cars and appliances in the down economy has contributed to the state budget shortfall. Revenues are coming in $195 million under the modest estimates made only four months ago, fiscal experts said Friday.
The chief culprit: weak sales tax collections, said directors of the House and Senate fiscal agencies and the state treasurer. Sales tax revenue is $160 million under projections.
That's because consumers who are either laid off or anxious about their jobs aren't making the big-ticket purchases that keep the economy humming.
"Sales tax revenues, which fund public schools and public safety are expected to fall again this year," state Treasurer Robert Kleine said. "As a result, we face a sixth straight year where sales tax revenues will grow less than the rate of inflation."
The state's income from a tax on home sales is off $17 million, due to a depressed housing market and business tax receipts in the languishing economy that are down $60 million.
Combined with additional spending required for rising welfare and Medicaid caseloads and prison populations, plus unresolved deficits still on the books, the state's budget hole is now $804 million, the numbers crunchers decided.
As a result of next year's gloomy outlook, state fiscal experts also lowered their tax revenue estimates for the budget year that begins Oct. 1. Tax receipts will come in $338 million under January estimates, they decided. Kleine said the total shortfall will be roughly $1.6 billion -- even if lawmakers replace the expiring $1.9 billion Single Business Tax.
Democrats said the figures prove the budget can't be balanced without a tax increase.
"These numbers should be a reality check; we cannot cut our way out of this mess without sacrificing Michigan's future," said Senate Democratic leader Mark Schauer of Battle Creek.
Gov. Jennifer Granholm has called for a new 2 percent tax on services. The Republican Senate rejected her plan, which would take months to implement. Speculation leans toward an increase in the income tax -- partly because it could be put into place quickly.
The state's income tax rate is 3.9 percent. One bill introduced in the House would raise it to 4.6 percent.
But Republicans have refused to back a tax hike to erase the red ink and have passed packages that would cut the budget and drain $290 million from the governor's jobs development fund.
Senate Majority Leader Mike Bishop, R-Rochester, said in reaction to Friday's revenue conference: "House Democrats and the administration are insistent on new taxes to fix this year's deficit caused by overspending and government."
You can reach Mark Hornbeck at (313) 222-2470 or mhornbeck@detnews.com.
http://www.detnews.com/apps/pbcs.dll/article?AID=/20070519/POLITICS/705190365&theme=Metro-State-Budget
State budget hole: $800M
No rebound until '09 for fiscal woes, economy
May 19, 2007
Mark Hornbeck / Detroit News Lansing Bureau
LANSING -- Michigan's limping economy has ripped an $800 million hole in the state budget, and economists said Friday that they don't expect a turnaround for two years.
That means even more red ink for next year, when the budget deficit will be twice that, state officials said.
"An optimist would say Michigan's economic outlook is meager," said Sam Kahan, senior economist for the Federal Reserve Bank of Chicago, Detroit Branch, during a semiannual review of state finances.
The revenue estimates for the current fiscal year, $195 million worse than forecast in January, gave clarity but no immediate relief in the state's budget crisis. Negotiators for Gov. Jennifer Granholm and Republican and Democratic legislative leaders don't plan to meet this weekend, although budget officials say they're in constant communication.
Schools, cities, universities and social service agencies all are waiting with growing uncertainty and concern for the outcome of talks. If a compromise isn't reached within two weeks, schools have been told to expect a $122-per-child cut in a promised increase in state funding -- a cut that many have said comes too late in their year to make up.
State Democrats say the outlook released Friday bolsters the case for a tax hike, but one policy analyst isn't so sure it favors any single approach.
"It compels Republicans and Democrats to look at all three sides of the financial stool -- revenue, reforms and cuts," said Craig Ruff, senior fellow for Public Sector Consultants Inc., a nonpartisan think tank. "And it compels them to see the crisis for what it is -- not short term, but long term."
High on the list of reasons for the moribund economy here: The domestic auto market share, which was at 65 percent only seven years ago, will fall to 49 percent next year, according to a University of Michigan report. It's at least the second forecast to call for the Big Three's share of the domestic auto sales to fall below 50 percent.
"It's hard to expect anything good coming to the Michigan economy from this," said Joan Crary, a U-M economist.
The state lost 53,300 jobs last year and can expect to lose 46,200 more this year and 32,000 next year, she said.
Michiganians' growing reluctance to buy homes, cars and appliances in the down economy has contributed to the state budget shortfall. Revenues are coming in $195 million under the modest estimates made only four months ago, fiscal experts said Friday.
The chief culprit: weak sales tax collections, said directors of the House and Senate fiscal agencies and the state treasurer. Sales tax revenue is $160 million under projections.
That's because consumers who are either laid off or anxious about their jobs aren't making the big-ticket purchases that keep the economy humming.
"Sales tax revenues, which fund public schools and public safety are expected to fall again this year," state Treasurer Robert Kleine said. "As a result, we face a sixth straight year where sales tax revenues will grow less than the rate of inflation."
The state's income from a tax on home sales is off $17 million, due to a depressed housing market and business tax receipts in the languishing economy that are down $60 million.
Combined with additional spending required for rising welfare and Medicaid caseloads and prison populations, plus unresolved deficits still on the books, the state's budget hole is now $804 million, the numbers crunchers decided.
As a result of next year's gloomy outlook, state fiscal experts also lowered their tax revenue estimates for the budget year that begins Oct. 1. Tax receipts will come in $338 million under January estimates, they decided. Kleine said the total shortfall will be roughly $1.6 billion -- even if lawmakers replace the expiring $1.9 billion Single Business Tax.
Democrats said the figures prove the budget can't be balanced without a tax increase.
"These numbers should be a reality check; we cannot cut our way out of this mess without sacrificing Michigan's future," said Senate Democratic leader Mark Schauer of Battle Creek.
Gov. Jennifer Granholm has called for a new 2 percent tax on services. The Republican Senate rejected her plan, which would take months to implement. Speculation leans toward an increase in the income tax -- partly because it could be put into place quickly.
The state's income tax rate is 3.9 percent. One bill introduced in the House would raise it to 4.6 percent.
But Republicans have refused to back a tax hike to erase the red ink and have passed packages that would cut the budget and drain $290 million from the governor's jobs development fund.
Senate Majority Leader Mike Bishop, R-Rochester, said in reaction to Friday's revenue conference: "House Democrats and the administration are insistent on new taxes to fix this year's deficit caused by overspending and government."
You can reach Mark Hornbeck at (313) 222-2470 or mhornbeck@detnews.com.
