Economists in the state Legislature are projecting continued slow but steady growth for Michigan's economy and tax revenues amid a leveling off of Big Three auto sales.
Projections released late Tuesday by the House Fiscal Agency ahead of Thursday's revenue estimating conference at the Capitol suggest the projections made at the last revenue conference — in May — remain roughly on track.
The House Fiscal Agency projections also roughly mirror those made by the Senate Fiscal Agency in a December report.
But there's a major note of caution in both reports. Neither takes into account the federal tax cut package recently passed by Congress and signed into law by President Donald Trump, other than to assume that an unintended personal income tax windfall of about $1.5 billion resulting from the federal plan will be corrected and returned to taxpayers.
Thursday's conference — which brings together economists, the state treasurer and key lawmakers — is an important step in setting the 2019 budget, which Gov. Rick Snyder will present in early February.
"Even after accounting for potential revenue growth resulting from the (federal) tax cuts, the (U.S.) Joint Committee on Taxation estimates that the total revenue loss over the upcoming 10 years will exceed $1.1 trillion," says the House Fiscal Agency report.
"How this shortfall is financed will affect interest rates, investment and federal spending, and impact the economy in a number of ways."
The report estimates that combined general fund and School Aid Fund tax revenues for 2017 will come in about $156 million higher than estimated in May, while those revenues will be about $8 million higher than forecast for 2018 and about $17 million below forecastfor2019.
Since the projections deal with about $25 billion in combined state revenues, those variations amount to little more than a rounding error.
Earlier, the Senate Fiscal Agency issued a report Dec. 20 that said economic growth will continue in Michigan, but job growth will be muted and "Michigan is generally expected to grow more slowly than the nation as a whole."
Combined general fund and School Aid Fund revenue will continue to grow during the forecast period, but by less than 2% each year, the report said.
Inflation-adjusted personal income, which is estimated to have increased 1.2% in Michigan in 2017, would increase 2.7% in 2018, 2.5% in 2019, and 2.4% in 2020, the report said.
But payroll employment, estimated to have increased 1.5% in 2017, would edge up only 0.9% in 2018, 0.8% in 2019, and 0.9% in 2020, the report said, with the unemployment rate remaining relatively stable and declining to 4.2% in 2020.
Light vehicle sales will decline, but remain high by historical standards, providing Michigan with some economic cushion, the report said.
Compared with the May 2017 estimates, combined general fund/School Aid Fund revenue is expected to be up $158.5 million for 2017, down $70.9 million for 2018, and down $116.5 million for 2019, the report said.
Another major wild card in the forecast is the outlook for automobile companies headquartered in Michigan, the Senate Fiscal Agency report said.
"If profitability increases for vehicle manufacturers, the prospect for the Michigan economy to be better than forecasted is significant," the report said.
"On the other hand, if a company were to undergo a major restructuring, the Michigan economy would likely experience a significant negative impact."
Contact Paul Egan: 517-372-8660 or firstname.lastname@example.org. Follow him on Twitter @paulegan4.