The state House Fiscal Agency recently released its Economic Outlook and Revenue Estimates for Michigan for fiscal year 2024 through fiscal years 2026-27.  The report forecasts positive, yet modest, economic growth that will increase state revenue collections. These revenue collections are important in maintaining a balanced budget with state expenditures. However, there are some uncertainties noted in the report that may lead to budgetary challenges for lawmakers in the coming years. These uncertainties include the impact of inflation in providing government services, the national economic outlook, geopolitical differences and other global economic conditions. This includes a trade war with Canada – Michigan’s top trading partner according to the Consulate General of Canada in Detroit.

The Trump administration’s actions to reduce government bureaucracy, lower government spending and provide less federal oversight of public health and education could affect the intergovernmental relationship between the state and the federal government and could result in a reduction in funding from Washington to support state programs. The challenge for Michigan is reflected in the Pew Charitable Trusts’ “Where States Get Their Money,” which reports that 39.3% of state revenue comes from federal transfers or funds.

These uncertainties will be a challenge for lawmakers in predicting revenue collections to meet expenditures. Any revenue shortfall or deficit for the state will lead to either a reduction in expenditures or increased revenue collections from higher taxes and fees on commercial real estate and the private sector.