January 2021 Consensus Revenue Estimating Conference Summary

JANUARY 2021 CONSENSUS REVENUE ESTIMATING CONFERENCE SUMMARY Presented to the Board of Education January 27, 2021

Legislative Authority for the Consensus Revenue Estimating Conference (CREC) Public Act 72 of 1991 Requires the Director of the Senate Fiscal Agency, the Director of the House Fiscal Agency, and either the State Budget Director or the State Treasurer to hold at least two revenue estimating conferences each year Each January and May Allows any principal Conference member to call a conference at any time 2

Purposes of the Consensus Revenue Estimating Conference (CREC) To have the three agencies discuss their independent economic and revenue forecasts To reach consensus agreements on revenue forecasts to be used in preparing the State Government budget Specifically, January 2021 CREC: Provides revenue forecasts for State of Michigan fiscal years ending September 30, 2020 (FY20) September 30, 2021 (FY21) September 30, 2022 (FY22) Informs local school district budget planning 3

CREC Outcomes Increased revenue estimates over August CREC General Fund/General Purpose (GF/GP) School Aid Fund (SAF) Substantial year-end balances expected General Fund/General Purpose (GF/GP) School Aid Fund (SAF) All three fiscal years FY20, FY21 and FY22 4

CREC Revenue Projections Increases over August 2020 Projections General Fund/General Purpose FY20: + $473.8 M FY21: + $700.8 M FY22: + $504.6 M School Aid Fund FY20: + $288.0 M FY21: + $528.3 M FY22: + $370.2 M 5

CREC Revenue Projections, cont. FY20 increases Greater-than-expected income tax withholding revenues Job losses while withholding revenues rose Federal economic packages enacted in 2020 expanded unemployment benefits Generated greater withholdings Eligibility expanded to sole proprietors and contractors Greater-than-expected sales tax revenues Shift in consumer spending from services to goods Impact of legislation to collect sales tax from remote retailers and marketplaces FY21 & FY22 increases Expected positive impact of vaccine Projected improvements in retail sales, vehicle sales and job gains 6

Expenditure Forecasts Not a focus of the CREC Based on current law and current baseline expenditures and transfers Rolled forward, less any one-time allocations 7

Fund Balance Forecasts General Fund / General Purpose FY20: $2.5B FY21: $1.8B FY22: $1.7B School Aid Fund FY20: $1.2B FY21: $922M FY22: $1.1B Based on the annual revenue and expenditure projections 8

Revenue Forecast Risks Forecasts do not include the stimulus measures President Biden proposed on January 14 The House and Senate Fiscal Agencies noted their income tax revenue projections varied widely MCL 206.51(1) caps income tax revenue growth to 2021 levels starting in 2023 Economic impact of COVID-19 vaccines and variants 9

Expenditure Forecast Risks Based on current law and current baseline expenditures and transfers Rolled forward, less any one-time allocations Improvements in revenue projections may cause shifts in expenditures, such as: New funding for initiatives or unknown priorities Increased higher education funding from the School Aid Fund (SAF) Expenditure transfers from other funds into the SAF 10

School Funding Forecasts Revenue, expenditure and fund balance forecasts do not include any increased funding for schools Forecasts suggest a significant increase in school funding could occur, yet many unknowns remain Revenue and Expenditure Forecast risks State budget priorities 11

Conclusions Results of the January 2021 CREC project improved revenues and carryforward balances in both the GF/GP and School Aid Fund over the August 2020 CREC estimates The Governor s priorities will be disclosed the FY22 Executive Budget, anticipated in February The House and Senate will introduce their budget versions ~ March / April Consensus will likely occur after the May 2021 CREC 12