The Michigan House of Representatives held a meeting on May 16, 2025, focusing on economic forecasts and revenue estimates for the upcoming fiscal years. Key discussions revolved around the state’s economic outlook, tax revenues, and the implications of recent trends on budget planning.

The meeting began with an overview of economic forecasts, highlighting a shift from earlier optimism to a more cautious outlook. Economists noted a significant drop in growth expectations, with projections indicating a decline to approximately 1.5% growth in the near term, down from previous estimates of over 2%. Concerns about a potential recession were also raised, with the probability of recession now estimated at 45%, reflecting uncertainties in consumer and business responses to economic policies.

A detailed analysis of tax revenues followed, with particular emphasis on individual income tax (IIT) and sales tax. The IIT is projected to see modest growth, with estimates suggesting an increase of around $700 million from 2024 to 2025. However, this growth is tempered by rising refund rates, which are expected to exceed previous forecasts due to higher-than-anticipated refunds related to property tax credits and retirement income adjustments.

Sales and use tax revenues are anticipated to grow at a slower pace, with forecasts indicating that growth rates will lag behind inflation. This trend raises concerns about the sustainability of revenue from consumer spending, which is a critical component of the state’s financial health.

The meeting concluded with a summary of the general fund and school aid fund projections. All agencies involved in the forecasting process expect a slight decline in general fund revenues for fiscal year 2025, primarily due to increased IIT refunds and a decrease in cash balances. In contrast, the school aid fund is projected to experience stable growth, with estimates indicating nominal historic highs over the next three years.

Overall, the discussions underscored the challenges facing Michigan's economy and budget as state officials prepare for potential fiscal constraints in the coming years. The next steps will involve further analysis and adjustments to the budget as new data becomes available, particularly following the May Consensus Conference.