News - Advocacy
Thursday, May 30, 2024 12:00 AM

FY25 Budget Recommendations for Libraries

In the Governor’s Version – no additional support has been allocated to libraries – the budget remains flat based on FY24

In the House Version - $500,000 has been allocated to State Aid for Libraries.

In the Senate Version - $25M has been allocated to School Libraries in the School Aid Fund.

In the Senate version of the budget, there is $15.5 million allocated for “Community Revitalization and Municipal Support.” The list of permitted recipients of these grants includes “municipal library improvements.”

State Revenue Estimates are Way Down, but Budgets Won’t Need Fixing

Below is an edited and condensed version of a Citizens Research Council of Michigan (CRCM) blog post – used with permission and as reported by the CRCM:

In a Nutshell

  • Updated state revenue forecasts suggest GF/GP revenue will decline by more than $4.3 billion across FY2023, FY2024, and FY2025.
  • Those revenue downgrades are almost entirely attributable to the major tax reductions enacted in March and April.
  • The revenue adjustments will be “much ado about nothing” for state lawmakers as they finalize the state’s budget in the coming months. The budgets that have passed the House and Senate are already largely in line with these new estimates.

Both the House and the Senate have already passed their own spending plans for the Fiscal Year (FY)2024 state budget, paving the way for conference committees to iron out the differences between the two chambers’ proposals over the coming months.

A critical first step in that process was taken last Friday [May 17, 2024] when state economists gathered to revise state revenue estimates on which that final budget will be based.  At first blush, those revisions seemed ominous, with the state’s discretionary General Fund/General Purpose (GF/GP) revenue down more than 10 percent in both FY2024 and FY2025.

However, these downgrades in the revenue forecast were very much expected, and virtually all of the revenue adjustments can be tied to tax reductions implemented in recent months. The good news for those with a stake in state budget decisions: those revenue downgrades are already built into the legislative budgets that have been passed to date.  Thus, the projections won’t force any extra budget trimming while the House and Senate work on resolving their budget differences.

Large Decline in GF/GP Revenues is Projected

As noted, the major revisions to the revenue forecasts were concentrated within GF/GP revenue. The consensus estimates from last week expect GF/GP revenue to decline by $883 million in FY2023, a drop of 6.7 percent from the estimate from January 2023. The revenue decline then grows to $1.8 billion in FY2024 (12.3 percent drop) and $1.6 billion in FY2025 (10.5 percent drop) from the January estimates.

Summary of Revenue Revisions

Source: Consensus Revenue Estimating Conference Executive Summary, May 2023

Revisions were much more muted for the state’s other major revenue fund – the School Aid Fund (SAF). Revenue forecasts for the SAF, which is used to finance K-12 school spending as well as some community college and university operations, were virtually unchanged from January. Forecasts for FY2022, FY2023, and FY2024 were revised upward, but by less than a half-percent overall.  Those small revisions will have little overall impact on budget decision-making related to the $17.9 billion in School Aid Fund revenue available for FY2024.

Revised Revenue Forecasts Are Already Built into Legislative Budgets

Most of the tax changes were first proposed as part of Governor Whitmer’s February Executive Budget proposal. As such, her budget proposal largely assumed that these revenue reductions would occur.  There are two exceptions: the Governor’s budget did not assume the implementation of the one-time Individual Income Tax rate cut ($647 million one-time revenue loss) or the exemption of delivery and installation charges from the state’s Sales Tax and Use Tax (annual revenue loss of about $64 million). However, her budget proposal did assume the loss of $800 million in revenue tied to a recommended one-time income tax rebate; a proposal that’s now off the table.  In the end, then, the revenue outlook on which the Executive Budget was based mirrors the new projections from last week.

Like the Governor’s budget, the budgets passed by both the House and Senate also factored in the revenue impact of the tax policy changes. On the whole, then, budget plans coming out of both chambers already align with the new revenue projections.  Enacting any of the budget plans offered by the Governor, House, or Senate can be accomplished within the updated revenue estimates without creating an unsustainable “budget cliff” for FY2025. 

GF/GP revenue for FY2025 is now estimated at $13.9 billion.  If the final FY2024 budget contains ongoing GF/GP appropriations in the range of the three existing budget proposals, ongoing revenue would be sufficient to grow the FY2025 budget by between $440 million to $690 million (or between 3.3 and 5.2 percent).  

In short, while the budget outlook for FY2025 will not be as rosy as the outlook in February, the state’s budget remains in structural balance even after the significant revenue declines tied to recent tax relief plans. The large downward revision in GF/GP revenue should pose little challenge to the legislative appropriators in wrapping up their work on the FY2024 budget.

https://www.michigan.gov/treasury/-/media/Project/Websites/treasury/Uncategorized/2024/May-2024-Consensus-Documents/Consensus-Executive-Summary-May-2024.pdf?rev=4c518039058c475e810f818d57c59abe&hash=6DE9DD747395E19B80F1F3894D8D91B5

 


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