10/03/2025

Michigan Legislature Passes FY 26 Budget

In the early hours this morning, the Michigan State Legislature approved a state budget for Fiscal Year 2025-2026 (FY 26). Following the approval of a stop-gap funding bill that was signed by Governor Gretchen Whitmer on October 1 to fund the state’s full-time employees and essential services while a General Omnibus and School Aid budget were negotiated, the Democratic-led Senate and Republican-led House came to an agreement on spending for FY 26 two days after the start of the fiscal year.

The final FY 26 budget totals $75.95 billion. The General Omnibus budget, House Bill 4706, appropriates $51.8 billion ($12.5 GF/GP). Savings to the state were realized through programmatic lapses from FY 25, programmatic reductions and eliminations, as well as the reduction of 2,000 unfilled full-time employee positions. For the School Aid budget, Senate Bill 166, it appropriates $24.12 billion ($1.56 GF/GP) for K-12 schools, community colleges, and higher education. The K-12 portion of the budget saw a 2.5% increase in funding from FY 25.

Passed alongside the FY 26 budget includes legislation to provide new revenue streams for the state, most notably to fund the state’s road plan. Some of the bills passed include:

• House Bill 4968 modifies requirements for collecting Insurance Provider Assessment revenue.
• House Bill 4961 modifies Michigan’s tax policy and allocates a portion of income tax revenue to fund roads.
• House Bills 4180, 4181, 4182, and 4183 make changes to the Motor Fuel Tax Act by exempting fuel at the pump from the sales tax and instead increases the per gallon tax on gasoline and diesel.
• House Bill 4951 imposes a 24% excise tax on the wholesale price of marijuana.

Below are some highlights included in the FY 26 budget, but we have also linked all budget materials for you at the end of this email.

FY 2026 Budget Highlights

The Health and Human Services budget allocates $30 billion Gross ($7.1 GF/GP), $7.62 billion less than FY 25. Notable items include:

• $250 million Gross in FY 25 supplemental appropriations for RxKids– prenatal and infant support program for expectant mothers and households with a child less than one year in age
• $250 million federal assumed from the Rural Health Transformation Program Grants (Michigan application not yet submitted or approved)
• $55 million Gross from the Opioid Healing and Recovery Fund to support recovery investments ($15 million), harm reduction ($13.5 million), substance use disorder treatment ($10.25 million), primary prevention activities ($9.75 million Gross), informed decision-making and evaluation of investments ($4.5 million Gross), and for standalone investments ($2.0 million Gross)
• $50 million Gross for Meals on Wheels
• $39.3 million Gross for utilization and cost adjustments for the certified community behavioral health clinics (CCBHCs)
• $16 million Gross ($8 million GF/GP) requiring DHHS to adopt chip card technology and other security upgrades for Michigan Bridge cards with a January 1 implementation date
• $4 million GF/GP for increased Safety Net Dental Payments
• $3.6 million Gross to support 30.0 additional FTE positions for processing of prior authorization requests within 7 days per January 2026 CMS requirements
• $2.9 million Gross to include free-standing birthing clinic and licensed midwives as reimbursable Medicaid providers
• $2.8 million Gross to provide Medicaid eligibility phone renewal services
• $800,000 GF/GP for blood pressure monitors for mothers on Medicaid

Other notable highlights include:

• $26 million for Selfridge Air National Guard base
• $14 million for ice storm recovery in Northern Michigan

The School Aid budget allocates $24.12 billion Gross ($73.15 million GF/GP), which includes:

• Funding increase for the per-pupil allowance, now at $10,050 per pupil
• $626.2 million Gross for the Great Start Readiness Program to increase the per-pupil rate and remove income eligibility requirements for GSRP
• $528.1 million Gross to increase the special education foundation payment
• $321 million Gross for school safety and mental health grants – a $62.5 million increase from FY 25
• $201.6 million Gross ($1.6 million GF/GP) for universal breakfast and lunch

You can access all final budget materials here.