State Budget Sent to the Governor for Signature After Marathon Session
By: John LaMacchia,
October 3, 2025
After a drama filled two weeks that included fraught negotiations and a continuation budget to avoid a government shutdown, the legislature finally sent a completed budget to the governor for her signature. The secrecy around budget details and tense discussions concerning cuts to local government were prevalent throughout negotiations.
While finer details of the $75.95B budget ($7B less than last year) still need to be reviewed, there are a few major items that we can provide an update on. Before that, we want you to know how thankful we are to all our members who have taken the time to reach out and help our lobbying efforts throughout this budget process. The strength of our voice has once again made a tremendous difference in the outcome. We were faced with a 12% ($40M) cut to statutory revenue sharing, a $95M reduction in constitutional revenue sharing from the elimination of sales tax being charged on gas, and an uncertain outcome for local roads as the size of the transportation package was cut in half.
Ultimately, we were able to hold statutory revenue sharing harmless and protect the three-factor formula, secure $70M in new public safety resources, and generate hundreds of millions in new revenue for local roads and transit. Unfortunately, as part of the final road package, we were unable to backfill a reduction in constitutional revenue sharing totaling an estimated $63M. In many cases, this will lead to small net reductions when factored along with statutory revenue sharing and new public safety resources. Fortunately, a substantial increase in funding for every local road agency was also included in the budget.
On roads, after several days of concern about the legislature’s ability to find the votes to raise new revenue, they were able to secure passage of a 24% wholesale tax on marijuana. They also voted to remove the 6% sales tax at the pump and replaced it with 20 cent gas tax increase considered revenue neutral. The wholesale tax will raise $420M in new money. When added to new gas tax revenue and encumbered resources from the Corporate Income tax, $1.5B in new revenue will be dedicated to roads. This will ramp up to $1.8B over the next 5 years.
Within this plan, we were able to secure several major wins including significantly more resources for local roads, a major investment in transit, and dedicated money for local bridges and rail grade separation. The new transportation funding plan takes effect January 1, 2026.
In the first year, funding for cities and villages will increase by approximately 33.4% and will reflect collection from three-quarters of a year’s revenue due to the proposal beginning three months after the start of the fiscal year. This will lead to another significant increase in year two before leveling off in years three through five. In year five, cities and villages will see about a 54% increase over current allocations.
Additionally, this plan will invest hundreds of millions of dollars in transit, which is a longstanding priority for League members. Over the next five years, $175 million will be put toward local bus operating needs and $325 million will be put into transformation transit projects. Over that same time period, $500M will be put into local bridges and $200M will be dedicated to rail grade separation.
This has been a hard and grueling budget season. It forced us to defend the value of investing in local government, speak to the importance of having quality local roads, and vigorously advocate on your behalf. The progress we made on our priorities, especially in the last few weeks, is proof of their importance to our cause.
On Monday we will host a special Live with the League to break the budget down in detail and give some insight into what was taking place behind the scenes. Click here to register.
Finally, here are three documents that include community by community numbers for constitutional revenue sharing, statutory revenue sharing, public safety resources, and transportation funding. The numbers are preliminary and a snapshot of the budget that are likely vary based on actual revenue collections and updated crime data. We will provide new numbers as they become available.
To determine you estimate net impact on revenue sharing, add your new public safety revenue sharing dollars to the change in your constitutional payment.
City and village 2025 Road package Model 10-2-25
Initial Estimates of FY 2025-26 Revenue Sharing Payments – Cities, Villages, and Townships
John LaMacchia is the League’s director of state & federal affairs. He can be reached at [email protected] or 517-908-0303.