Last week, in the early hours of the morning on Friday, October 3, the state legislature passed a balanced budget for the 2026 fiscal year. This budget is the first in recent history that reduced the State of Michigan’s overall spending from previous years.
This budget focuses on pushing allocating state dollars towards road funding and education, while making significant cuts to corporate incentives and economic development programs. Key details are below:
Education Impact
The legislature increased per pupil funding in this year’s budget to $10,050/student, which is an increase of $442/student, or 4.6%. The education budget included increases to notable programs such as At-Risk funding, the Great Start Readiness Program, the Special Education Foundation Payment, and Bilingual Education Programs, which are a significant boost to public education funding.
Additionally, the legislature included funding for the free school meals for all program and or virtual charter schools. $321 million in mental health and safety grant funding was also made available for both private and public schools.
There is concern from school districts across the region that all funding was removed from the Great Start Collaborative program, which works across communities to align services for children from birth to age eight. Additionally, the MPSERS cost offset was removed in the state budget, meaning local school districts must now budget additional funding toward employee retirement if they wish to cover the reduction.
Roads Plan
One of the key elements of this budget is a projected $1.85 billion allocation to the legislature’s roads plan. This plan will increase road funding by appropriating funds directly to local road agencies rather than directing funding through the Michigan Department of Transportation (MDOT).
As noted in the House Fiscal Analysis, cities and villages will receive approximately a 33.4% increase, while counties will see about a 35.5% increase. This allows local agencies to focus more funding on county roads.
The plan also eliminates the state sales tax on gas and increases the gas tax by the same amount, with the additional revenue allocated to road funding.
The Northern Michigan Chamber Alliance would like to thank Representative Tom Kunse for leading the effort to ensure equitable increases across all counties and securing more funding overall for Northern Michigan.
Economic Development Impact
To fund the increases to roads and education, many cuts were made to previously funded programs. While this budget was transformative for infrastructure and education, the business community will see increased taxes and a loss of several impactful resources:
- Permanent Marijuana Wholesale Tax: Increased from 0% to 24%.
- Decoupling from H.R. 1.: The state now diverges from the tax breaks for businesses under H.R.1. Businesses will not see the federal breaks reflected in their state filings.
- Going PRO Talent Fund: Reduced by $22.3 million, funded at approximately $32 million.
- SOAR Fund: The Strategic Outreach and Attraction Reserve Fund received no funding.
- Business Attraction & Community Revitalization: Reduced by $40.7 million.
- Pure Michigan: Reduced by $9 million, funded at approximately $17 million.
- Revitalization and Placemaking (RAP) Program: Eliminated entirely, along with Site Readiness funding.
- 21st Century Jobs Trust Fund: Funds previously allocated to programs such as RAP, were reallocated to this fund totaling approximately $59 million.
- Employer-Assisted Housing Fund: Removed entirely from MSHDA.
- Michigan Reconnect: Decreased by $10 million, now funded at $42 million.
- Michigan Growth Office: Did not receive its proposed $10 million appropriation.
- Office of Rural Prosperity: Received $350,000 as a legislatively directed spending item, as well as $697,000 for operations, totaling a little over $1 million. It was also authorized to apply for federal grants up to $1.6 million.
Other Highlights
- $14 million appropriated for ice storm recovery efforts in northern Michigan counties.
- Temporary tax exemptions for tipped wages, overtime wages, and Social Security income for three years.
- The Copperwood mine in the western Upper Peninsula did not receive the $50 million state investment many northern Michigan legislators advocated for.
- $35 million allocated for domestic violence prevention agencies statewide.
- Tri-Share Child Care Program: Received $3.4 million to continue operations and allows individuals living in Wisconsin but working in Michigan to access Tri-Share benefits.
While the Northern Michigan Chamber Alliance is disappointed with the reduction in supports for economic development and Michigan business in this budget, we thank the legislators of the Northern Caucus who worked closely with us to secure resources for our region during this difficult budget negotiation.