- Associated Press - Thursday, January 12, 2017

LANSING, Mich. (AP) - Continued economic growth will ease the ability of Gov. Rick Snyder and lawmakers to enact a new state spending plan, which will have nearly $330 million more than previously expected.

The administration and legislative experts agreed Thursday that tax revenues in Michigan’s two biggest accounts will grow by about 2.8 percent this fiscal year and 2.5 percent the next budget year. Factoring in a balance carried forward from last year and slightly higher tax collections than estimated eight months ago, the state is projected to have about $330 million that is not already accounted for and can be spent on a one-time basis.

The figures were welcomed as positive news. But officials also cautioned that job gains - which have occurred for seven straight years after a decade-long slide - will slow and there is uncertainty over what policy changes could be coming under President-elect Donald Trump.

The Republican governor will use the consensus numbers to propose his budget in February.

“While it’s good news, (there is) just a cautionary tale about some of the out years,” said former Rep. Al Pscholka, who will become Snyder’s budget director on Feb. 8.

This year, the state is starting to contribute toward the cost of the Medicaid expansion. It will pay more in future years, though the program’s future is unclear because Trump and a GOP-led Congress plan to repeal the federal health care law. And in nearly two years, general funds will be shifted again toward road and bridge improvements under a prior transportation-spending deal, squeezing the budget further.

But overall, both the administration and Republicans who control the Legislature were pleased.

Employment is estimated to grow by an average of 45,000 jobs annually in the next three years, less than in recent years. Unemployment should hold steady below 5 percent. And both personal incomes and wages are projected to rise.

The school aid and general funds will increase by $613 million, to $22.7 billion, this year and another $559 million, to $23.3 billion, next year, according to leaders of the legislative fiscal agencies and the state Treasury Department. The accounts will grow by a smaller amount, 1.8 percent, in the 2018-19 budget year.

“The state budget from a revenue standpoint is steady. I think that’s good,” said Senate Appropriations Committee Chairman Dave Hildenbrand, a Lowell Republican. “There’s continuing to be slow growth. We should be optimistic about that. I think there’s a lot of uncertainty still. We just need to be cautious on the decisions we make as we go forward.”

Majority Republicans have begun pushing for the phase-out of the state income tax, which at the very least could prompt discussions with Snyder about some sort of tax cut for individuals.

But House Minority Leader Sam Singh, an East Lansing Democrat, said little revenue growth is anticipated in coming years and instead of considering proposals to dramatically reduce revenue, legislators should be cautious and focus on paying for schools, job training, public safety, deteriorating infrastructure and ending Flint’s water crisis.

“Michigan’s economy is modestly improving, but everyday working families still aren’t feeling it,” he said in a statement. “We need to invest taxpayer dollars in ways that will benefit taxpayers the most.”

Gabriel Ehrlich, director of the University of Michigan’s Research Seminar in Quantitative Economics, estimated that by 2020, Michigan will have gained back 664,000, or 77 percent, of the 858,000 jobs lost between 2000 and 2009.

Slowing job growth is expected because of a tightening labor market and the state’s aging population, Ehrlich said.

“Absent any major policy errors at the national level or unforeseen external shocks, we expect more growth in store for Michigan’s economy over the next three years,” he said.

While the outlook is positive, the opinion of Michigan residents is split.

In an October poll by EPIC-MRA, 41 percent of likely voters said the state’s economy had either bottomed out and not yet begun to improve or had not bottomed out and would still worsen. Fifty-five percent said the economy was improving.


This version of the story corrects the last sentence to begin with Fifty-five percent.


Follow David Eggert at https://twitter.com/DavidEggert00 . His work can be found at https://bigstory.ap.org/author/david-eggert

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