Today, the directors of the House and Senate Fiscal Agencies came together with State Treasurer Rachael Eubanks and State Budget Director Chris Harkins to reach a consensus for projected state revenue for the upcoming fiscal year. At the biannual Consensus Revenue Estimating Conference (CREC) the principals heard testimony from various economic experts on the key aspects of the state and national economies that will impact revenues.

For the 2023 Fiscal Year, projected revenue to the General Fund-General Purpose (GF-GP) was increased by roughly $804 million from last May’s projections. Revenue earmarked for the School Aid Fund (SAF) was also increased from prior estimates by $439.8 million. However, both of those projections are a decline in growth from the 2022 Fiscal Year. Beginning in FY24, both the GF-GP and SAF are projected to experience year-over-year growth. Likewise, long term projections point to moderate growth in both revenue streams in FY26 and FY27.

All experts agree, a recession is forthcoming. However, it is expected to be mild, and Michigan shouldn’t be more negatively impacted than the federal economy, as is usually the case. Additionally, a mild recession should help inflation return to a more normal rate. Further key points from today’s conference include:

National

• • By 2024 the Feds are expected to cut rates
  • Mortgage rates should edge up to 7%, before declining to below 6% by the end of 2024
  • The unemployment rate is projected to peak at 4.5% in 2024
  • Inflation is expected to slow in the next three years, down to 2.7% in 2025
  • Real GDP is estimated to experience a 0.2% growth in 2023, 0.8% growth in 2024, and 2.2% growth in 2025

Michigan

• • 93% of the jobs lost during the pandemic were regained by the end of 2022
  • The state should have a full recovery of jobs in early 2024
  • Blue-collar industries lead the way in job growth and are projected to grow to 4% above the pre-pandemic level
  • The unemployment rate will temporarily rise to 4.7% in mid-2024 before declining
  • The state’s population will modestly grow, peaking in the mid 2040’s

Risks to the economic forecast includes a number of items, such as federal monetary policy, the housing sector, the ongoing pandemic, and the war in Ukraine. Additionally, inflation, and the uncertainty surrounding it, continues to remain a risk to the economy. In Michigan, experts will keep a close eye on how inflation and gas prices impact consumer spending as that directly correlates to state revenue.

The House, Senate, and administration will use the agreed upon numbers as they begin drafting the state budget for the upcoming 2023-2024 Fiscal Year. The next step in the process occurs when Governor Gretchen Whitmer presents her budget recommendations to the legislature next month, followed by the Appropriations Subcommittees beginning to meet on the budgets under their purview.

To read the full consensus report, please click here.

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