Paul Egan

Detroit Free Press

LANSING — Michigan lawmakers, already grappling with mounting costs from the Flint drinking water crisis and considering a huge financial rescue plan for Detroit Public Schools, learned late Friday from legislative fiscal agencies that the state likely will have hundreds of millions of dollars less than expected to work with over the next three years.

The Senate Fiscal Agency and House Fiscal Agency said Michigan tax revenues mostly continue to rise as the state extends its slow but steady recovery from the Great Recession that ended in 2009. However, those revenues are not projected to increase as much as officials expected when they last held a consensus revenue estimating conference at the Capitol in January.

Both fiscal agencies now are projecting a combined general fund/School Aid Fund negative year-end balance for the 2016-17 fiscal year. That's the budget lawmakers are now working to finalize, and the projected shortfall "will need to be resolved" quickly, the Senate Fiscal Agency said.

The Senate Fiscal Agency said that combined general fund and School Aid Fund revenues for the current fiscal year, 2015-16, are expected to be down $200.7 million from the January estimates. Projections also are down $305 million for 2017 and down $266.2 million for 2018, the agency said in a report.

A report released minutes earlier by the House Fiscal Agency was somewhat more upbeat. It said that, compared to January projections, combined revenues will be down $149 million for 2016, $177 million for 2017, and $162.3 million for 2018.

The House Fiscal Agency said individual income tax receipts are up from January projections, but that's more than offset by weaker-than anticipated corporate income tax and sales tax collections.

The reports were released ahead of Tuesday's revenue-estimating conference at the Capitol. At the twice-yearly exercise, the state treasurer and budget director meet with the heads of the Legislature's two fiscal agencies and lawmakers who sit on appropriations committees to reach a consensus on how much tax revenue the state can expect over the next few years.

House Speaker Kevin Cotter, R-Mt. Pleasant, issued a statement downplaying the significance of the revised estimates.

“Temporary fluctuations in statewide tax collections are normal, and the House Republicans have spent six years budgeting responsibly to prepare for situations just like this," Cotter said.

"We have reduced unnecessary spending, saved money and made strong investments in key priorities like schools, roads and public safety. We are prepared to handle this with minimal impact on state programs and services."

Tuesday's session at the Capitol is a critical one in finalizing the 2017 budget, which begins Oct. 1, and which lawmakers hope to complete by June 1. On Tuesday, officials also will consider a third set of projections, prepared by the state Treasury Department, and hear from public and private economists.

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4.