CHICAGO -- Michigan's Senate Fiscal Agency has projected a $172 million yearend deficit in the state's $7.5 billion general fund budget for fiscal 1992.
In a budget status report released last week, the agency said the deficit was based on a new and lower estimate of fiscal 1992 revenues, as well as projected increases in appropriations.
The agency decreased its revenue growth forecast for fiscal 1992, which began Oct. 1, to 4.4% from 5.4%, according to Jay Wortley, a senior economist at the agency. It had based its original revenue estimate on increased consumer confidence following the Persian Gulf war, the report said. However, the agency now expects a sustained recovery, but "at very weak levels."
The budget submitted by Gov. John Engler and passed by the Legislature was based on 5.1% revenue growth.
Also contributing to the deficit are nearly $70 million in additional appropriations for schools, as well as almost $63 million in veto restorations and supplemental spending currently being considered by the Legislature, according to the report.
How much spending the Legislature will actually adds to the budget is still up the air. According to an appropriations summary from the Republican-controlled Senate, the Senate version of an omnibus supplemental spending and veto restoration bill would add $30.4 million in additional general fund spending, while the House version would dd $144.8 million.
Guy Gordon, a spokesman for Senate Majority Leader Richard Posthumus, R-Alto, said the two versions would be sent to a conference committee to work out a compromise. He said if a compromise is reached, it could be considered by both houses tomorrow.
Mary Dettloff, a spokeswoman for House Speaker Lewis Dodak, D-Birch Run, said the House's revenue estimates for fiscal 1992 are "a lot more optimistic" and would be sufficient to cover the higher spending level included in the House version of the bill. She added that the House was no longer calling for the use of budget stabilization funds to pay for a $90 million job training program eliminated from the state's general assistance program on Oct. 1.
A budget status report from the House Fiscal Agency will be released in early January.
A spokesman for Budget Director Patti Woodworth said the director indicated that the Senate agency's projections were not "unreasonable" and that the budget office was looking at possibly revising its budget figures after the new year.
Officials from Moody's Investors Service and Fitch Investors Service pointed out that the state took action to preserve budgetary balance in fiscal 1991 and was expected to do the same in fiscal 1992. Moody's rates Michigan's general obligation debt A1, while Fitch rates it AA.
Joe O'Keefe, a vice president at Standard & Poor's Corp., said the state's potential for a weaker performance in revenues was a reason the agency affirmed a negtative outlook for the state's AA general obligation rating earlier this month.
At that time, all three rating agencies reviewed the state's finances in conjunction with a $700 million general obligation cash-flow note issue that the state priced last Monday, as well as a $296 million Michigan State Building Authority refunding issue and $198 million of new lease-backed debt also priced by the authority last week.