Wednesday, May 14, 2008

Budget '09: Will Republicans still call for more tax cuts?

Excuse me a moment while I go find a new place on the sidewalk to beat my head on. Revenue forecasts for '09 are starting to emerge - and it ain't pretty, but it should stop the call for more tax cuts. How can you call to reduce revenue when you are looking at almost a half a billion shortfall?

Knowing the Republicans, they will find a way. Fiscal responsibility isn't their strong suit.

Despite predictions that Michigan's economy would begin to recover in 2009, fiscal experts now believe state revenues will be more than $400 million short of their forecast.

The state Treasury will take in $19 million less than initially forecast this year and $434 million less in the fiscal year that starts Oct. 1 -- even after last year's increases in income and business taxes, according to a report Tuesday by the House Fiscal Agency. That means lawmakers will have less to spend as they debate next year's budget, but overall spending still will be about $50 million more than this year.

Which lawmaker wants to step up and cut schools, safety, health care, etc and so on, in an election year? Remember, what you do can and will be used against you this fall - and that puts these guys between a rock and a hard place, unless they can come up with some more magical one-time fixes and shifts in book keeping. Which they probably will.

The state's general fund and school aid fund total $20.6 billion this year, so the $19 million shortfall won't drastically impact current year spending. But lawmakers, who haven't yet adopted a 2008-09 spending plan, will have to scale back their expectations for that budget. Original projections for next year's revenues totaled $21.06 billion, compared to the revised $20.63 billion.

The lower revenue projected for this year would reduce the anticipated surplus from $259 million to about $240 million. Most of that surplus, state officials say, has already been spoken for.

Thank the Bush economy for our shortfall - the national recession is going to pull us under just as we started to get our head above the water.

The state's gloomier financial picture is chiefly due to:

• A languishing national economy further dragging down Michigan's.

• The federal tax break received by businesses as part of President Bush's economic stimulus package. Because the new state business levy is linked to federal business income, the state will lose about $100 million in revenue.

• A new, 40 percent credit to spur film production in Michigan that will cost the state's general fund about $100 million.

• Reductions in state property tax receipts for school aid due to declining home values, and a drop-off in the tax on home sales attributable to the dead housing market.

"Yeah, it's tight. It'll be difficult to do new programs, difficult to fund increases," said Mitchell Bean, director of the House Fiscal Agency.

Stay tuned to see how we work out of this one; they are chomping on the bit to get out and campaign, so I bet they pull the rabbit out of the hat sooner rather than later. Or we can have another big 'ol budget brawl that makes everyone look bad.

Good luck everyone.