Lansing (AP) -- Michigan is doing better than many other states at staying in the black, but a state economist says budget cuts are likely next year.
House Fiscal Agency director Mitchell Bean says the state should have a slight surplus to carry over from the fiscal year that ended Sept. 30.
But Bean said Thursday he's "reasonably certain'' budget cuts will be needed in 2009.
Given the current state of affairs, pretty much everyone believes we're going to have to lower our (revenue) estimates in January,'' he said.
Both Bean and Senate Fiscal Agency senior economist Jay Wortley say the turmoil on Wall Street, troubles in the auto industry and the high number of home foreclosures could cause state income, sales and business tax revenues to come in lower than expected.
Revenue from the real estate transfer tax paid when a home is sold already has dropped significantly from year-ago levels, according to the Senate Fiscal Agency.
If business and consumer confidence continue to tumble or the national economy slips into - or already is in - a recession, the amount of money collected from even more taxes could drop off, Wortley said.
"The biggest driving factor for Michigan's economy is the U.S. economy. So if the U.S. economy slows down ... we'll definitely slow down,'' he said.
A report out this week from the Rockefeller Institute of Government at the State University of New York warned that "below the surface, great trouble is brewing.''
"Some states already have made midyear budget cuts, and more widespread cuts are virtually certain as revenues deteriorate further,'' report author Donald Boyd said in a release.
Bean said Michigan, while hard hit by the huge slowdown in auto sales and other troubles weighing down domestic automakers, is better off than other states because state economists had predicted earlier this year that revenues for the current budget year would be flat or down slightly.
"Many of our sister states hadn't felt the decline yet, so they had forecast increases,'' he said. "They've suddenly had to reduce their forecasts by hundreds of millions of dollars unexpectedly.''
Senate Majority Leader Mike Bishop said it's clear the nation's economic troubles will affect the state.
"Consumer confidence is down. We will definitely see a downturn in our revenues to state government. So it's going to force us back to the table and we're going to have to figure out how we address it,'' the Rochester Republican said.
As it stands now, the state budget is balanced, although it's likely some adjustments will be needed in spending for everything from K-12 schools to universities and prisons if revenues fall farther than expected.
The state also faces a $300 million to $600 million potential shortfall in the budget that starts next Oct. 1, depending on whether the state sees modest growth in revenues.
Despite the fiscal uncertainty, both Senate Republicans and House Democrats have been pushing tax-cutting proposals that could result in less money for state and local governments.
Copyright 2008 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
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