Michigan's stronger revenue prompts tug of war for money

Fri Jan 10, 2014 4:54pm EST

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Jan 10 (Reuters) - Projections on Friday that Michigan's revenue will top a previous forecast for the current budget and will steadily climb over the next two fiscal years is setting up a fight over how that money should be used.

Revenue for the current general fund and school aid fund budgets should be $216 million higher than forecast in May for a total of $21.13 billion, legislative and state treasury and budget officials said in their consensus estimate.

For fiscal 2015, which begins Oct. 1, the officials increased their revenue projections from May by $325 million to nearly $22 billion, a 4.1 percent increase over fiscal 2014. And an initial forecast for fiscal 2016 pegged revenue at $22.87 billion.

The brighter revenue picture has sparked talk of tax cuts in the Republican-controlled legislature.

House Speaker Jase Bolger "would like to see some kind of individual tax relief," said his spokesman, Ari Adler.

Senate Majority Leader Randy Richardville, is also interested in tax relief, according to his spokeswoman Amber McCann.

"The majority leader would like to continue to invest in education, especially early education, and he would like to see if there is more the state can do to improve the roads, as well," she added.

Governor Rick Snyder said the state must invest strategically to benefit everyone. The Republican governor added that the new revenue forecast, which will be used to develop the fiscal 2015 budget, was evidence "that our policies are working and Michigan is the comeback state."

Michigan's economy, with its heavy reliance on the auto industry, was hit hard by the 2007-2009 recession, leaving the state with dwindling revenue and budget deficits that led to severe spending cuts.

Some of those cuts hit local governments, like Detroit, which filed the biggest municipal bankruptcy in U.S. history in July in order to deal with more than $18 billion of debt and other obligations.

Utica, Michigan, Mayor Jacqueline Noonan, who also heads the Michigan Municipal League, said local governments were stripped of $6 billion in revenue over the last decade.

"Now that Michigan has a budget surplus created in part by the state taking local revenues from local communities, we strongly urge the legislature to restore funds to local governments, and to fix Michigan's broken municipal finance system," Noonan said in a statement.

State Treasurer Kevin Clinton said 2013 marked Michigan's fourth straight year of economic growth.

"Based on what we heard from economic experts today, we should see continued improvement in the critical automotive and housing industries, which will help push economic growth in our state," Clinton said in a statement.

Michigan Budget Director John Nixon cautioned that "fiscal responsibility must be priority No. 1" when it comes to possible uses of additional forecast revenue.

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