LANSING, Mich. (AP) — Michigan’s budget outlook is not as bad as was thought — thanks to federal pandemic relief aid, higher consumer spending and tax payments than expected, and a quicker recovery by the manufacturing and auto industries, officials said Monday.
In May, Gov. Gretchen Whitmer’s administration and legislative economists projected a combined $6.3 billion shortfall in the state’s two main funds over this fiscal year and next. They were poised to revise that hole downward, to $3.4 billion, in a rare third revenue-estimating meeting on Monday.
That means the situation is not as dire as the Democratic governor and Republican-led Legislature work to pass a budget to start Oct. 1. Fiscal experts said their economic forecast was on target in the spring, but they underestimated the impact on income and sales tax revenues.
One reason is people are spending more on taxable goods — home improvements, computers and cars — and less on services that are not taxed and remain closed: athletic events, concerts and movie tickets. Another factor is the federal government’s supplemental $600 weekly benefit for residents who are out of work or temporarily furloughed. Michigan taxes unemployment payments.