The State of Michigan, widely credited with righting its financial ship since 2011 after years of crisis, is again facing potential deficits that could be aggravated by a raft of bills passed in the lame duck session that ended Thursday, officials warned.
A variety of factors -- including state tax cuts and the possibility that the federal government could go over the fiscal cliff at the end of the year, triggering massive automatic spending cuts and tax increases that will affect state governments -- are creating the potential for shortfalls, officials cautioned.
"I passed out yesterday a Christmas stocking to members of the Appropriations Committee," state Sen. Roger Kahn, R-Saginaw, the committee's chairman, told the Free Press on Thursday.
"It contained a lump of coal and a document that shows the concerns for the next year."
The document details potential losses of $362 million in state revenue and $102 million in local revenue related to various tax bills pending or already passed in the Legislature. Some of the bills cited in the document, compiled with records from the State Budget Office and the Office of Revenue and Tax Analysis, were passed in the lame-duck session. But in some cases, they had amendments that lessened their impact. Others were inactive.
The document also identifies about $2.1 billion in other revenue issues unrelated to the lame-duck session, including $1.4 billion in additional money needed to fix roads and a $145-million shortfall in the Health Insurance Claims Assessment tax, a 1% tax on certain health insurance claims that took effect this year, replacing an earlier health tax that was eliminated.
The document says the amount of revenue that the state will lose if the federal government breaches the fiscal cliff is still to be determined.
Congressional leaders and President Barack Obama are working on a deal to avert the cliff, but Kahn said there are real state budget concerns, even if there is a deal.
"We have to be very careful," Kahn said.
State Rep. Vickie Barnett, D-Farmington Hills, said no one should be surprised that the state is facing possible fiscal shortfalls.
After cutting corporate, personal property, sales and income taxes, "it seemed pretty clear that we were going to be running out of money," she said. "This is something that most of us have been concerned about all session. They're moving bills without any fiscal analysis.
"You can't tax-cut your way to prosperity," said Barnett, a financial planner.
State Budget Director John Nixon was at a conference and unavailable for comment Thursday. But his spokesman, Kurt Weiss, said: "Anytime the Legislature passes legislation which increases state expenditures or reduces state revenues, outside of the budget process, we run the risk of seeing expenses outpace revenues."
However, "the administration is strongly committed to ensuring that Michigan does not return to the days of routine, ongoing structural problems in the budget" and is monitoring the situation closely, Weiss said.
The latest revenue figures from the House Fiscal Agency show general-fund revenues are up between $70 million and $130 million from what was estimated in May, but School Aid Fund revenues are down about $50 million from the May estimates. The changes called for in lame-duck bills would mostly affect revenues next year and later.
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