Michigan’s economy is still growing, but the general fund will remain essentially the same

The state got an idea Thursday of how much money it could have for the next two years.

Economists gathered for the earnings estimate consensus conference on Thursday. Michigan will not see a big economic rebound in the coming years. Economists told lawmakers it was more like a slow exploration.

Gabriel Ehrlich is an economic forecaster at the University of Michigan. He predicts — barring unforeseen national problems — that Michigan’s economy will continue to improve steadily. This includes an increase in income.

A good thing is that this is going to translate into increases in real purchasing power,” Ehrlich said. “So even taking inflation into account, we’re going to start to see healthier wage and income increases.”

Ehrlich says part of the reason wages will rise is that fewer people are looking for work. Companies must therefore increase wages to be more competitive.

But there is a simmering dispute between the legislature and the governor’s administration over whether this small but steady increase means the time is right for additional tax cuts.

The general fund of about $10 billion is unlikely to keep up with inflation, and the school aid fund is still smaller than it was a decade ago, if adjusted for inflation.

“Any discussion of tax cuts must be combined with additional spending cuts or revenue increases elsewhere,” said state treasurer Nick Khouri. “And until we can have that broader discussion and identify those other areas, tax cuts right now are a tough conversation.”

State Budget Director Al Pscholka said there was pressure on the General Fund, much of which was already affected.

But lawmakers could try to make more cuts anyway.

Representative Laura Cox (R-Livonia) serves on the committee that sets the state budget.

“There’s definitely an appetite in the House, and I think there’s some appetite in the Senate to give all Michigan taxpayers some kind of tax relief,” she said.

The governor’s administration will use the projections to offer budget recommendations for next year.

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—Cheyna Roth is a reporter for the Michigan Public Radio Network. Contact UEMOA news at 734.487.3363 or write to us at [email protected]