LANSING – More money is forecast for Michigan’s School Aid Fund, but lower collections in the Michigan Business Tax presage continuing troubles in the general fund, Senate Fiscal Agency Executive Director Gary Olson told the Senate Appropriations Committee.

The state and federal economy is growing after the major recession that hit in 2009, Olson said in giving a preview of some of the forecast the SFA will make before Friday’s Revenue Estimating Conference.

That improvement includes an estimated 5 percent growth in overall general fund revenues in the 2010-11 fiscal year, Olson said, and a projected surplus now in the School Aid Fund. That would cut the once estimated total $1.7 billion deficit for the next year, but still leave the state with about $1 billion to close.

Even with the increase in revenues, Olson said the 2010-11 general fund forecast is down from the January forecast and it is due entirely to a recalculation of revenues from the MBT.

The tax went into effect in 2008, replacing the Single Business Tax, but Olson said only now are officials able to estimate revenues from it.

And it appears businesses overpaid the tax initially, uncertain how it would be applied, and now businesses are getting refunds, he said.

Asked if a bad business cycle would account for the drop in revenues, Olson said it might account for a portion but that wouldn’t make sense since the sales tax revenues are showing a healthy increase as consumers are back to purchasing.

The SFA is now forecasting general fund revenues for the current fiscal year to be down $502.4 million from the January estimate, Mr. Olson said, and 89 percent of that decline comes from the MBT.

For 2010-11 general fund revenues are forecast to be down $249.9 million from January, he said, and 95 percent of that decrease is due to the MBT.

But in the School Aid Fund, the SFA is expecting a current year balance of $348.6 million. For the 2010-11, the SFA is projecting $563.7 million.

Economically, the state should see personal income increase by 3.1 percent in 2010 and by 3.5 percent in 2011. Personal income fell by 1.7 percent in 2009, the first year the state had seen such a decline since 1958.

Auto sales should increase by more than 1 million units from 2009 and increase another 1 million in 2011. Even though a 20 percent increase from 2009 that would still be 4 million fewer units sold on average from 2002 to 2007, he said.

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