Updates About Appropriations

After a lengthy session day that took place over the course of 30 hours, the Michigan legislature passed a budget for the 2026-2027 (FY 27) Fiscal Year on July 3. Following the passage, significant questions have emerged about the overall spending total of the budget. On paper, the FY 27 budget totals $75.2 billion. However, the budget authorizes $86.4 billion in spending after federal Medicaid taxes and federal K-12 appropriations were shifted into boilerplate and not included in the topline.

The budget reduces Medicaid appropriations by approximately $479.2 million, ($185 million GF/GP), mostly coming from pharmaceutical program restructuring. About $87 million in savings was assumed by using restricted funds, instead of general fund dollars for certain programs.

Much of the 30 hour marathon session was spent voting on legislation unrelated to the budget, likely part of negotiations with fellow lawmakers ahead of campaign season. Before concluding with the budget bills, the Legislature first passed 66 policy bills that were largely uncontroversial. Highlights include establishing a two-year lobbying ban for certain former elected officials and department heads (HB 4062, 4063 and HB 4064), a bill prohibiting large corporate entities who already own 100+ Michigan homes from purchasing more (HB 6074), and legislation requiring Michigan Medicaid to cover evidence-based group prenatal care services (SB 415).

A full list of the legislation passed alongside the FY 27 budget can be viewed here.

After a slight delay in finalizing budget targets, a recent late night negotiation session has resulted in a framework agreement for the 2026-2027 (FY 27) fiscal year.

With broad targets reached, lawmakers remained in Lansing through the weekend to continue their negotiations. Latest reports indicate negotiations are moving along in department funding but have not yet reached funding for Legislatively Directed Spending Items (LDSIs). In total, lawmakers have requisition over $4.3 billion in these special projects. Under a law passed last November, all LDSIs must now be made public at least 45 days before the budget is approved by the Legislature. Due to this new law, any requests submitted after May 18 cannot be included if the budget passes by July 1.

The budget is expected to be smaller than last year’s and will reportedly not include new revenue streams or tax increases, meaning spending cuts are likely in some areas. Though Speaker Hall has made property tax cuts a top priority, indications show it is unlikely to be packaged in with the budget.

Another item that could be negotiated as the budget moves along are the House or Senate version of medical debt relief bills. Both chambers introduced identical legislation, HB 5254 and HB 5255, equivalent to SB 701 and SB 702 would cap the maximum interest rate on medical debt and prohibit wage garnishment or home foreclosure due to medical debt.

While many were hopeful that the budget would be done by July 1, it is becoming more likely that we will see a completed around July 3, just ahead of Independence Day weekend.

A settlement between Governor Whitmer and House Republicans has been reached regarding the over $370 million in work project funds canceled by House Republicans last year. The settlement, which was resolved in the Michigan Court of Claims, removed the designated funds for all work projects and instead put them mostly back into the State’s General Fund.

The litigation started when Attorney General Dana Nessel issued an opinion, at the request of Senate Democrats, that the original funding blockage was unconstitutional. After this opinion, Governor Whitmer directed the departments to spend the money as appropriated, causing House Republicans to sue in order to block the spending.

The ruling also upheld the rule that allowed a single appropriations committee to act alone in canceling the work project. However, Senate Democrats are interested in working on legislation that would ban this authority.

Both Republican House Speaker Matt Hall (Richland) and Democratic Senate Appropriations Chair Sarah Anthony (Lansing) claimed victory in their statements on the court’s outcome. Hall pointed to the $370.8 million returned to the General Fund as restoring budget flexibility, while Anthony emphasized that only $370 million of the $645 million total they had argued was blocked.

Read past newsletter articles on the work project funding developments here:

Unexpected House Action Shifts Spotlight to Work Project Funding

AG Issues Formal Opinion on Legality of Work Projects, Judge Issues Preliminary Injunction