Inside 208

After missing the July 1 statutory budget deadline, the Legislature worked into the early hours of July 3 to finalize the state budget. In a rare move, dozens of policy bills also advanced alongside the budget, as some lawmakers viewed this as possibly the last opportunity to send legislation to the Governor before the November election.

This concluded several contentious weeks of negotiations between legislative leaders, ultimately producing a $75.2 billion budget (General Omnibus: SB 878), including a general fund total of $14.1 billion and a school aid budget (HB 5630) totaling $19.8 billion. The final budget is smaller than last year’s, does not include tax increases, and does not tap the state’s rainy-day fund. All three were major priorities for the Speaker and represent significant wins for his caucus.

Despite facing a budget shortfall of more than $1 billion, we were able to hold statutory revenue sharing flat this year. Total funding is $333 million for cities, villages, and townships, while counties will receive $291 million. Constitution continues to feel the effects of last year’s transportation funding proposal and is down about 2%. We also successfully ensured that the $50 million in ongoing funding for public safety remained in the budget. Individual community estimates are not yet available, but we will share those as soon as they are provided by Treasury.

Unfortunately, the Revenue Sharing Trust Fund was not included in the final budget. We will need to continue our advocacy efforts on this issue, and we appreciate the Senate’s efforts to try and move this forward and their unanimous support for the legislation.

The budget also included $125 million to fund 135 legislatively directed spending items, many of which will directly benefit cities and villages across Michigan.

Budget Highlights

Beyond the issues most critical to local government, several additional budget highlights are included below as outlined by the governor’s office.

Saving Michiganders Money

• $200 million to continue free school meals for all 1.4 million public school students, saving families around $1,000 per year.

• Continuing the Working Families Tax Credit, sending an average of nearly $3,900 in tax relief to 665,000 families.

• Rolling back the retirement tax completely, saving 500,000 seniors an average of $1,000 a year.

• Continuing tax exemptions on:

• Tips (saving 300,000 workers $400 a year),
• Overtime (saving 500,000 workers $500 a year),
• Social Security (saving 40,000 seniors $500 a year)

• $5 million for water affordability, helping families pay their bills and avoiding water shut offs.
• $5 million for weatherization to help families lower their utility bills.

Every Kid Reads, Eats, and Succeeds 

The budget includes targeted funding to help every child read. Additionally, the budget continues record investments in education.

Literacy

• $502 million to support student literacy and achievement:
• $96.1 million to make free pre-K for all available to an estimated 68,000 children through the Great Start Readiness program.
• $135 million to support students and parents with expanded before- and after-school programming.
• $50 million for high-impact tutoring to provide students with individualized, structured, evidence-based interventions, helping them catch up and get back on track.
• $50 million to provide grants to school districts, helping them purchase and implement high-quality literacy
• $75 million to continue implementing LETRS training, which trains educators in the “science of reading”—including strategies like phonics— as an instructional method for use in classrooms
• $33 million to fund regional support for families of young children and expand the Michigan Learning Channel.
• $10.5 million to hire additional regional literacy coaches who assist teachers in developing and implementing instructional strategies for pupils in grades pre-K to 5. With this increase, total funding for literacy coaches is $52.5 million which supports 420 coaches across the state, an increase of 327 coaches since the Governor took office.
• $7.6 million to support Literacy Essentials and comprehensive professional learning about the science of reading for educators at all grade levels.
• $9.6 million to support adult education.

K-12 Education

• $325 million to support school operations through a 2.5% increase in base per-pupil funding—an additional $250 per student, for a total of $10,300 per pupil.

• $123 million to continue expanded support for special education students.

• $278 million, to provide a 20% increase in funding to support academically at-risk students and English language learners, and a 10% increase in funding to support career and technical education students, and students in rural school districts. This budget moves to a true weighted foundation allowance formula that recognizes that higher-needs students require more resources.

• Up to $321 million to support student wellness through continuation of mental health and safety grants to districts.

• $125 million to reimburse districts for transportation costs.

• $30 million to support early learning partnerships.

• $40 million to reimburse eligible districts for dual enrollment costs, incentivizing districts to encourage more students to pursue college credit while still in high school.
• $2.4 million increase for Early On services.

Higher Education 

• $2.2 billion to sustain university and community college operations—advancing Michigan’s Sixty by 30 goal of having 60% of working adults with a degree or skills certificate by 2030.

• $532 million for the Michigan Achievement Scholarship, which provides a tuition free pathway for full-time community college students through the community college guarantee, and up to $27,500 for full-time students at public or private 4-year universities.

• $25 million to support expanding Michigan Reconnect to adult learners ages 21 and older, giving adult learners a tuition-free pathway to earn an associate degree or skilled trades certificate.
• $1.3 billion in total capital outlay project authorizations for 27 of the state’s higher education institutions, with a state cost participation of $524.3 million.

Protecting Medicaid 

The budget funds initiatives to protect access to health care and ensure the future sustainability of Medicaid, including:

Protecting Medicaid

• $185 million to stabilize Medicaid funding, protecting access to health care for eligible Michiganders through efficiency savings identified in collaboration with stakeholders to address costs, increase accountability and align resource effectiveness while maintaining sustainability of services.

Implementing H.R. 1

• $184.3 million general fund to prepare our state to meet new federal requirements:
• $94.3 million in increased SNAP administrative cost-sharing, which increased from 50% to 75%.
• $40 million for staffing, administration, and implementation oversight efforts.
• $31.5 million in workforce investments to help Michiganders maintain access to healthcare and SNAP, including funding for workforce training and expansion of registered apprenticeship opportunities.
• $20 million, in a supplemental, for community health navigators to help individuals who are subject to new eligibility requirements demonstrate compliance and maintain coverage.

Supporting Healthy Communities

• $351.9 million to maintain direct care worker wages, consistent with the Jan. 1, 2027, and prior year statewide minimum wage increases and provide paid sick leave.

• $31 million general fund–$25 million ongoing and $6 million one-time–to expand behavioral health care and capacity through the new state psychiatric hospital, which is anticipated to open in October 2026.

• $116.2 million in funding to continue the Healthy Moms, Healthy Babies program which helps new and expectant mothers receive the care they need and reduce racial disparities in infant and maternal mortality.

• $10 million to support nursing home staffing and improve care for nursing home residents.
• $1.3 million investment in the autism navigator program to help individuals with autism and their families.

Fixing Michigan’s Roads

The budget continues fixing state and local roads across Michigan, powered by the roads deal signed into law last fall alongside the FY26 budget. This budget includes:

• $52.7M additional for roads and bridges.

• $123.8 million increase in state and federal support for transit and rail programs, including a $33.4 million increase in Local Bus Operating assistance for local transit agencies.
• $16.5 million to support a critical highway rail grade crossing project in Trenton.

Creating Jobs & Growing the Economy 

The budget makes investments to create good-paying jobs, continue to grow and diversify Michigan’s economy, and build stronger, more vibrant communities, including:

Growing Our Economy

• $68.5 million in funding for Michigan small business, community growth, and entrepreneurship.

• $9 million in continued funding for the Pure Michigan campaign.

• $2 million to promote Michigan as a destination for special events, including national conventions, conferences, and major sporting competitions.

• $5.3 million to coordinate port activity, administer grants, and position Michigan to attract federal and private investment through the establishment of a Maritime and Port Facility Office.

• $2.3 million for the Office of Rural Prosperity to support economic growth and infrastructure projects in rural communities.
• $4 million for the Rural Development Fund Grant Program to expand grant opportunities that enhance rural community infrastructure.

High-Tech Jobs

• $15.9 million to support Michigan science, technology, engineering, and mathematics (MiSTEM) programs.

• $1 million investment supporting the Office of Future Mobility and Electrification, advancing aviation and drone initiatives.

• $3.5 million to grow the maritime manufacturing sector and strengthen the state’s defense industry.
• $3.5 million to support the Michigan Office of Defense and Aerospace Innovation.

Workforce Development

• $35 million to attract, recruit, retain, and support high-quality professionals in our early childhood education workforce.

• $14.5 million for Going Pro to help Michigan employers train and retain workers.

• $152.2 million in continued support for Michigan Rehabilitation Services, to help individuals with disabilities prepare for, obtain, and maintain employment.
• $2.3 million to continue the Community and Worker Economic Transition program.

Vibrant Communities

• $50 million for the Michigan Housing and Community Development Fund to continue supporting the affordable housing needs of low-income households and revitalization of neighborhoods and downtowns.

• $8 million to support arts and cultural institutions that make Michigan communities unique and desirable places to work, live and raise a family.

• $1.5 million to preserve and enhance Michigan’s designated museums, ensuring educational opportunities and public access to the state’s cultural and historical treasures.
• $750,000 for the Rural Heritage Partnership Program, which repairs and improves qualified historic buildings in small, rural communities statewide.

Keeping Communities Safe 

The budget funds initiatives to keep families and communities safe, improve veteran services, and protect and preserve Michigan’s air, water, and land, including:

Protecting Public Safety

• $1.6 billion for constitutional and statutory revenue sharing to help counties, cities, villages, and townships ensure public safety and improve the quality of life for residents.

• $50 million to fund public safety revenue sharing grants to counties, cities, villages, and townships to enhance public safety and prevent violent crime.

• $20.4 million support trial court programs.

• $23 million for county prosecutors to reduce the caseload per attorney.

• $11.3 million to support in-service training for more than 18,700 law enforcement officers.

• $10 million deposit into the Disaster and Emergency Contingency Fund to support immediate response and recovery activities in the event of a disaster or emergency.

• $10 million for a public safety academy assistance grant program, providing police academy scholarships to train new recruits.

• $1 million increase for Michigan’s Public Safety Communications System.

• $1.9 million to maintain the Victim Support Program.
• $1.7 million to support the OK2Say student safety program.

Veteran and National Guard Support

• $80.1 million to operate Michigan’s veteran homes.

• $11 million to the Michigan National Guard Member Benefit Fund.
• $4.2 million in support of county veteran service grants.

Safeguarding Our Air, Land and Water

• $42.4 million for drinking water and environmental health programs to safeguard public health.

• $45.8 million to update and maintain the Michigan Department of Natural Resource’s fisheries system, invasive species controls, and expand outdoor access.

• $69.9 million investment in off-road trails improvements, and harbor and waterway upgrades and development.

• $217.9 million to clean up contaminated sites.

• $24 million for dam safety improvement grants and increased oversight of Michigan’s 2,552 dams.

• $10.6 million for environmental stewardship through the Michigan Agriculture Environmental Assurance Program to promote sustainable farming practices.

• $2.3 million for the qualified forest program.

• $6.5 million to acquire property in the Upper Peninsula, preserving 22,649 acres of forestlands in the Keweenaw Heartlands as a public resource.

• $3 million for local conservation districts, supporting technical assistance and conservation programs in communities.

• $1.9 million for agriculture preservation easement grants to protect farmland.

• $4 million to support the Double Up Food Bucks program.
• $850,000 to support the Nature Awaits program.

Effective & Efficient State Government 

To ensure government effectively and efficiently serves all residents, the budget includes funding to modernize state government, including:

• $35 million for continued investment in the Information Technology Investment Fund (ITIF) to modernize state systems and improve service delivery.

• $15.3 million for the statewide judicial case management system, as trial courts continue to join the system.

• $29.4 million for the Department of Civil Rights to investigate alleged discrimination, secure the equal protection of civil rights, and promote voluntary compliance with civil rights laws.
• $509,000 to enhance the state’s firefighter training and storage tank safety inspection programs.

Policy Highlights

Over 50 policy bills were passed by the House and Senate and sent to the Governor. Several of the bills we were tracking were passed and are listed below.

• SB 423: Modifies sunsets on certain delinquent tax payment reduction and foreclosure avoidance programs.
• SB 721: Modifies the commercial redevelopment act. (Sunset extension)
• SB 722: Modifies the commercial rehabilitation act. (Sunset extension)
• SB 723: Modifies the transformational brownfield plan.

• SB 966: Provides for a low-income housing tax credit.

• HB 5570: Allows single exit stairway in multiple-family dwellings under certain conditions.
• HB 5571: Allows single exit stairway in multiple-family dwellings with not more than 6 levels under certain conditions.
• HB 5806: Creates the housing opportunity tax credits.
• HB 5807: Provides for housing opportunity credits against the retaliatory tax.
• HB 5232: Modifies local unit of government’s option to provide paid leave for military active service to reflect mandatory paid leave for certain members of law enforcement agencies and fire departments.
• HB 5233: Provides paid military leave for certain members of a fire department or law enforcement agency.

A couple of weeks ago, we issued a statement expressing our opposition to including major property tax reform and zoning preemption legislation as part of the budget negotiations. We are pleased to report that neither of these proposals was included in the final agreement. However, both issues are likely to continue receiving attention throughout the remainder of the year, and we must remain vigilant in our advocacy efforts.

What’s Next?

With the budget now complete, the Legislature will shift its focus to the campaign trail. The August primary is roughly one month away, and the November general election will be here before we know it. Michigan will once again be a key state to watch, as several federal and state races could determine the balance of power in both Washington, D.C., and Lansing.

John LaMacchia is the League’s director of state & federal affairs. He can be reached at [email protected] or 517-908-0303.