News Story

Politician's Loose Talk Paints Flawed Picture On Budget

Low-ball state revenue claims get some scrutiny

Politicians don’t always give the full picture when talking about government finances.

State Sen. Curtis Hertel Jr., D-East Lansing, provided an example recently when he pointed to the state’s General Fund account to claim that inadequate revenue has meant inadequate investment in infrastructure upgrades.

The news site MIRS reported: “Hertel said Michigan government has ‘not solved any problems in the last 20 years’ because Michigan’s General Fund is essentially the same size as it was 20 years ago, roughly $10.9 billion. Meanwhile, the cost of food is up 50%. Inflation has risen the prices of basically everything else, too.”

Hertel’s claim deserves a closer look:

The size of the General Fund – one of several state accounts or “funds” into which tax revenue is deposited and spent – has been relatively stagnant the past 20 years. According to the Senate Fiscal Agency, the balance in the fund has been about the same for the past 20-plus years. The fund held $10.68 billion in the 1999-2000 fiscal year, and it is projected to begin the 2019-20 fiscal year with a balance of $10.85 billion.

But the General Fund is not the sum total of state revenue: Michigan state government will raise and spend some $33.06 billion this year – not $10.85 billion. And that does not count $22.8 billion in federal money that’s also in the budget.

Moreover, state revenues are often fungible, meaning they can be moved between funds or accounts at lawmakers’ discretion. This is why the amount of revenue moving through the General Fund each year has changed so little: Lawmakers keep shifting various revenue streams from one fund to another, including new funds that get created.

For example, a road funding bill enacted in 2015 shifted more than $1 billion in future state income tax receipts that had been earmarked for the General Fund to go instead to a different account, the Michigan Transportation Fund. At the end of 2018, legislators tweaked this shift by earmarking even more income tax revenue in the current fiscal year away from the General Fund and into road repairs.

These and similar shifts over the past decade are the reason why the General Fund has barely grown, rising from $8.29 billion in 2008-09 to $10.85 billion in 2018-19.

Michigan state revenue from all state sources has increased from $26.31 billion in 2008-09 to $33.06 billion in 2018-19, according to the Senate Fiscal Agency. That’s $1.82 billion above the cost of inflation during that 10-year period. The amounts do not include billions in federal revenue that flow through the state budget each year.

Hertel’s office didn’t respond to an email seeking comment.