Janurary 2020 Budget Analysis

Tuesday, February 4, 2020

Hello friends,

On Jan. 22, the House Fiscal Agency reported to the Appropriations Committee a Consensus Revenue Estimating Conference Overview. Every January and May, the House Fiscal Agency reports on the tax revenue our government collected and forecasts how much future revenue the state may receive. They also show how these taxes fund certain government functions such as the School Aid Fund, General Fund, Budget Stabilization Fund, and more. Below I have outlined some of the areas from the overview that I find to be most pertinent to our district, but I have also included a link to the full presentation at the end for anyone who wishes to see the full presentation for themselves.

During the overview presented by the House Fiscal Agency, estimates of the total dollars appropriated to the School Aid Fund were shown. There were two estimates: one from May 2019 and one from January 2020. Both estimates projected the total money available for the School Aid Fund in Fiscal Year 2020-21. In the January 2020 estimate, the House Fiscal Agency reported that the School Aid Fund would be $138 million higher than in the previous estimate. The $138 million number represents the total additional amount available for the 2020-2021 School Aid Fund, not the total amount budgeted. Having such a large increase in total funds available will be beneficial for the children whose education is funded by the School Aid Fund.

Another important development in the way our government is prioritizing our budget balance is the change in the Budget Stabilization Fund (also known as the rainy-day fund). The fund provides a safeguard to protect critical programs for Michigan's citizens when the state experiences an economic downturn. The fund is accounted for as a sub-fund of the General Fund. Since the recession, many past government budgets were focused on building up this fund to improve the state’s credit rating. Although I firmly support budgeting for an economic downturn, I believe with the state our education and infrastructure is in we should prioritize budgeting for the problems of today. The current budget projections, as of January 2020, show a 3.5 percent annual increase to the budget. This ensures that the rainy-day fund stays north of $1 billion (a far cry from the $2 million during the recession), but also leaves room for General Fund money to be appropriated towards other areas of concern. I expect during future budget negotiations that these figures will change, but I will advocate for General Fund money to be dedicated to solving current problems as well as saving for unfortunate economic circumstances.

Understanding the Michigan budget is a tedious activity and requires a lot of dry reading. If you have any questions regarding the budget, please contact my office at (517) 373-1771 or email me at RonniePeterson@house.mi.gov. My staff members or I will be happy to answer your questions.

https://www.house.mi.gov/hfa/PDF/Alpha/CREC_Recap_Presentation_Jan2020.pdf