consensus revenue estimating conference overviewestimating conference estimates of: constitutional...

Mary Ann Cleary, Director

House Fiscal Agency

Consensus Revenue Estimating Conference

Overview

House Appropriations Committee

January 22, 2020

1/22/2020House Fiscal Agency2

Consensus Revenue Estimating Conference

University of Michigan

Economic Outlook

AGENCY FORECASTS:

House Fiscal Agency

Senate Fiscal Agency

Administration

State

Economic Forecasts

National

Economic ForecastsCONSENSUS

REVENUE

ESTIMATING

CONFERENCE

Estimates of:

Constitutional

Revenue Limit

School

Foundation Index

Total

School Aid Fund

Revenue

Total

GF/GP Revenue

Budget

Stabilization Fund

Pay-in/Pay-out

FORECAST INPUT FORECAST OUTPUT

Revenue Estimates

House Fiscal Agency3 1/22/2020

Net Individual Income Tax


$10,278 $10,402$10,693

$10,431 $10,579$10,907

$11,235

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22

May 2019 January 2020

(Dollars in Millions)

Sales and Use Taxes


$9,651 $9,967 $10,194

$9,602 $10,042

$10,352 $10,567

$0

$2,000

$4,000

$6,000

$8,000

$10,000

$12,000

FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22



Combined Business Taxes(Corporate Income Tax / Michigan Business Tax / Insurance Company Premiums Taxes)


$890

$831 $854

$1,014

$931 $915 $955

$0

$100

$200

$300

$400

$500

$600

$700

$800

$900

$1,000

$1,100

FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22



State Education Tax (SET)


$2,100 $2,167

$2,219 $2,113

$2,171 $2,223

$2,276

$0

$500

$1,000

$1,500

$2,000

$2,500

FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22



Lottery Transfer


$982 $990 $1,000

$1,071

$1,010 $986 $992

$0

$200

$400

$600

$800

$1,000

$1,200

FY 2018-19 FY 2019-20 FY 2020-21 FY 2021-22



January 2020 Consensus Revenue Estimates(Dollars in Millions)

9 1/22/2020House Fiscal Agency

FY 2018-19

January 2020

Consensus

Change From

FY 2017-18

Change from

May 2019

Consensus

General Fund/General

Purpose (GF/GP) $11,108 $91 0.8% $256

School Aid Fund (SAF) 13,560 258 1.9% 78

Total Revenue $24,668 $349 1.4% $334

Note: Numbers may not add due to rounding.



FY 2019-20

January 2020

Consensus

Change From

FY 2018-19

Change from

May 2019

Consensus


Purpose (GF/GP) $11,012 ($96) (0.9%) $235


Total Revenue $24,938 $270 1.1% $321




FY 2020-21

January 2020

Consensus

Change From

FY 2019-20

Change from

May 2019

Consensus


Purpose (GF/GP) $11,195 $182 1.7% $274


Total Revenue $25,512 $574 2.3% $412




FY 2021-22

January 2020

Consensus

Change From

FY 2020-21

Change from

May 2019

Consensus


Purpose (GF/GP) $11,519 $324 2.9% --

School Aid Fund (SAF) 14,640 323 2.3% --

Total Revenue $26,159 $647 2.5% --


Constitutional Revenue Limit-$

2.2

-$3.

0

-$3.

7

-$3.

2 -$2.

2

$0.1

-$0.

2

-$1.

0

-$0.

6

$0.0

$0.2

-$2.

4

-$3.

9

-$4.

2

-$4.

4

-$4.

2

-$5.

0

-$5.

3 -$4.

7

-$8.

0

-$7.

6

-$5.

6

-$5.

2

-$7.

0

-$8.

5 -$7.

4

-$8.

1

-$9.

2

-$8.

7

-$9.

9

-$11

.5

-$12

.5

-$13

.4

Am

ou

nt

be

low

/ab

ove

lim

it

*Jan. 2020 Consensus Estimates

Total state tax and other revenue collections are $11.5 billion lower than the limit set in the State

Constitution (9.49% of adjusted state personal income) for FY 2020.

13 House Fiscal Agency 1/22/2020

(Dollars in Billions)

January 2020 Consensus Forecast


Budget Stabilization Fund (BSF) Calculation

FY 2019-20: No pay-in or pay-out required



Budget Stabilization Fund Balance

House Fiscal Agency15

$1

,26

4.4

$9

94

.2

$1

45

.2

$0

.0 $8

1.3

$2

.0

$2

.0

$2

.1

$2

.2

$2

.2

$2

.2

$2

.2

$3

65

.1

$5

05

.6

$3

86

.2

$4

98

.1

$6

12

.4 $7

10

.0

$1

,00

6.0 $1

,14

8.6

$1

,18

9.1

$1

,23

1.4

$1

,27

5.3

FY00

FY01

FY02

FY03

FY04

FY05

FY06

FY07

FY08

FY09

FY10

FY11

FY12

FY13

FY14

FY15

FY16

FY17

FY18

FY19

FY20*

FY21*

FY22*

* HFA Estimate

Dollars in Millions

The estimated FY 2020 BSF balance is 4.8% of combined GF/GP and SAF revenues. With interest and

payments tied to the Detroit Bankruptcy, it will increase by about 3.5% a year absent deposits or withdrawals.

1/22/2020

Balance Sheets


General Fund Balance Sheet


FY 2019-20

Baseline

FY 2020-21

BEGINNING BALANCE $838.0 $591.8

REVENUE

General Fund (GF/GP) Revenue $11,012.1 $11,194.5

Revise the income tax earmark to SAF (HB 4125) ($173.2) ($179.4)

Misc. Revenue $2.4 $0.0

Revenue Sharing ($490.1) ($490.1)

TOTAL REVENUE $10,351.3 $10,525.0

EXPENDITURES

Initial Ongoing/Baseline Est. $10,002.6 $10,019.9

One-time Appropriations $310.8 $0.0

Economics/DHHS caseload $158.6 $534.0

GF to School Aid $62.7 $45.0

State Psych DHS penalty $62.8 $59.2

TOTAL EXPENDITURES $10,597.5 $10,658.1

TOTAL ENDING BALANCE $591.8 $458.7

1/22/2020

Medicaid Spending Pressures

Medicaid Program

The 23% enhanced federal match rate increase for Children’s Health Insurance

Program (CHIP) will phase out and the last phase down of the Healthy Michigan

Plan federal match to 90% will occur. Projected FY 2020-21 GF/GP funding

increase of $55 million.

Medicaid cost adjustments for medical utilization, inflation, and actuarial

soundness are projected to increase 3% annually. Projected FY 2020-21 GF/GP

funding increase of $175 million.

One-time GF/GP replacement of restricted funds totaling $45 million.

Medicaid Psychiatric Disproportionate Share Hospital

Disallowance

Possible federal repayment for psychiatric hospital claims made on Medicaid from

FY 2000-01 to FY 2008-09 – Total $195 million with repayment over 3-years.

Additional federal audit “look back” costs related to other Health and Human

Services programs could total $23 million.


Additional Spending Pressures

Baseline Costs for FY 2020-21

Full year funding Indigent Defense Standards 1-4 additional funding increase of

$36 million.

Employee economics includes salary increase and retirement costs estimated

increase of $90 million.

Annualizing MSP trooper school $10 million.

Unknown Potential Costs

Legal settlements:

Department of Corrections

Unemployment Insurance Agency (UAI)

Flint water

Adopted Legislation

Raise the Age (FY 2021-22)

Indigent Defense Standards 5-8


School Aid Fund Balance Sheet


FY 2019-20

Baseline

FY 2020-21

BEGINNING BALANCE $212.3 $262.7

REVENUE

School Aid Fund (SAF) Revenue $13,925.5 $14,317.5

Revise the income tax earmark to SAF (HB 4125) $173.2 $179.4

General Fund/General Purpose (GF/GP) $62.7 $45.0

Other Restricted Funds $77.3 $72.0

Federal Funds $1,749.6 $1,749.6

TOTAL REVENUE $15,988.3 $16,363.5

EXPENDITURES

School Aid (Adj for lapses/consensus revisions) $15,173.8 $15,307.6

Community Colleges $414.7 $425.7

Higher Ed $349.4 $356.1

TOTAL EXPENDITURES $15,937.9 $16,089.4

TOTAL ENDING BALANCE $262.7 $536.8

1/22/2020

Major School Aid Budget Issues

Baseline Costs for FY 2020-21

Baseline costs are expected to decline by $59 million based on declining

pupils, growing local property tax values, and rising special education costs.

MPSERS experience study revised mortality and other assumptions which will

increase costs by an estimated $189 million.

A foundation allowance increase ranging from $100-$200, would cost

approximately $250 million.


Summary


Projected FY 2019-20 ending balance

$592 million General Fund balance

$263 million School Aid Fund balance

Projected FY 2020-21 resources above/below baseline budget

$459 million General Fund

$537 million School Aid Fund balance

www.house.mi.gov/hfa

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