Appropriations 26-02-18 [Source] Translate

The Senate Committee on Appropriations met with 15 members present, establishing a quorum. The minutes from previous meetings were adopted without objection. The Chair discussed the upcoming 2026 budget, noting it will be influenced by federal changes, a new roads funding package, and economic uncertainties. The committee is also focusing on the recently concluded economic development incentive package, SOAR, to ensure economic development tools are accessible for both corporations and small businesses. Challenges highlighted included fluctuating state revenues since COVID-19 and rising government operation costs. Increased investments in education and workforce development complicate budgetary decisions. The meeting aimed to align understanding of economic drivers affecting the state’s finances. David Zinn, the chief economist, presented on Michigan's tax burden and economic factors influencing revenue. He noted flat general fund revenue growth and a significant decline in inflation-adjusted buying power. The individual income tax and sales taxes are the primary revenue sources, with over 50% of state revenue derived from taxes. Zinn emphasized that Michigan ranks 38th in combined state and local tax burdens, with a shift in consumer spending from goods to services affecting sales tax revenue. The meeting addressed the decline in manufacturing jobs, particularly in the auto industry, despite increased productivity. Over the past 30 years, per worker output in the auto sector has tripled, but employment has decreased by about 25%. Michigan's manufacturing productivity exceeds the U.S. average, while service sector productivity lags behind. Wage growth has not kept pace with inflation, leading to cost-of-living-adjusted wages below the U.S. average. Concerns were raised about educational attainment, with Michigan ranking 34th in the percentage of workers with a bachelor's degree or higher, impacting the labor market's ability to meet demands for skilled workers. The meeting also discussed the implications of automation and an aging population on job availability and economic challenges. Demographic trends showed significant increases in older age groups, while the working-age population has declined by 2.2%. Senator Bayer noted the challenges of a declining population and income levels, particularly for highly educated individuals. The service sector struggles with low wages compared to other states. Budget discussions included a recap of the previous year's budget and the governor's recommendations for the upcoming fiscal year, highlighting an estimated $800 million shortfall in the general fund and a projected $1.7 billion surplus in the school aid fund. The governor's proposal includes investments and tax cuts to address the shortfall. The meeting also covered the status of the General Fund and School Aid Fund, particularly regarding the Supplemental Nutrition Assistance Program (SNAP) error rate, which is currently at approximately 9.5%. The potential financial implications of this error rate were discussed, with worst-case costs reaching $575 million. The long-term outlook for the School Aid Fund appears stable, while the General Fund faces constraints from revenue changes and caseload costs. Senator Huizenga raised concerns about long-term healthcare liabilities, and the meeting concluded with acknowledgments of the work ahead for the committee, followed by a motion to adjourn, which passed without objection.