Updates About Appropriations

In a recently released report by the Citizens Research Council (CRC) of Michigan, they outlined how both Michigan schools and local governments took a significant revenue hit during the state budget process. Due to the fuel exemption from sales tax, funding for K-12 schools is set to lose $680 million per year. To offset this loss, included in the budget is an ensured additional sales tax revenue equal to the School Aid Fund revenue estimated loss that will be placed directly in the School Aid Fund. The budget also increased the School Aid Fund appropriations given to colleges and universities by $400 million, therefore reducing the amount given to K-12 schools by that amount. Around $280 million of the $680 million reduction to the School Aid Fund was backfilled for schools. Local governments will also lose $93 million because of the fuel sales tax exemption, though no funds were added in the budget to offset this loss in revenue sharing money.

Lawmakers resolved the roughly $1.1 billion budget gap projected over the summer by the CRC, which stemmed from federal tax and spending changes. They averted a $450 million loss in Medicaid funding by preserving insurance provider assessments and codified federal business tax updates at the state level, preventing an additional $670 million hit to revenues.

Also included in their report is an outline of the new revenues for road infrastructure in the budget. With the 6% sales tax on fuel no longer in effect, a flat 20 cent per gallon increase in the motor fuel tax rate was introduced. The revenue difference is minimal, as will be the effect on consumers at the pump. This approach shifts approximately $1 billion to transportation infrastructure. The budget also includes a 24% tax on the wholesale price of marijuana, which is projected to generate $420 million in road infrastructure. The $600 million annual income tax earmark for roads was also replaced with a new corporate income tax earmark, starting at $688 million in FY26 and growing to $1 billion by FY30. Although road funding in FY26 will dip due to delayed tax reform implementation, the plan is expected to generate a total of $2 billion in new annual transportation revenue starting in FY30.

On July 4, 2025, the One Big Beautiful Bill Act of 2025 (OBBBA) was signed into law. As a result, Michigan is facing significant and concerning updates to its Medicaid and SNAP programs that will have wide-reaching effects on residents’ health and access to essential services. These changes are expected to reduce coverage and support for many vulnerable populations.

The Supplemental Nutrition Assistance Program (SNAP) supports over 1.7 million Michigan households, helping prevent food insecurity. Key changes include:

• Low-Income Home Energy Assistance Program (LIHEAP) deduction may reduce SNAP benefits
• Internet Expense Deduction removed
• Work Requirements: Waiver for Able-Bodied Adults Without Dependents (ABAWDs) is being rolled back, requiring more individuals to work or face SNAP loss
• Changes to Immigrant Eligibility: Certain refugees and asylees previously considered eligible may have benefits reduced or terminated
• Enrollment Frequency: Enrollment for SNAP may now occur every six months, instead of annually
• Error Rate-Based Funding Cuts: States will be required to pay a portion of SNAP benefits based on their Payment Error Rate (PER), effective FY28
• Administrative Cost Shift: Federal funding for SNAP administration will decrease from 50% to 25% starting FY27, requiring Michigan to cover 75% of administrative costs

Medicaid currently provides coverage for roughly one in four Michiganders and is a critical lifeline for low-income residents. Major updates include:

• New work requirements for Healthy Michigan Plan (HMP):
  • Applies to enrollees ages 19-64
  • Must work, train, or volunteer at least 80 hours per month to maintain coverage
  • Many exemptions and exceptions
  • Effective January 1, 2027
• Six-month redeterminations instead of renewing eligibility annually
• Retroactive eligibility Limits (previously 90 days prior to application):
  • HMP: Coverage now only 30 days prior to application
  • Other Medicaid programs: Coverage now only 60 days prior to application
  • Effective January 1, 2027
• Fewer coverage pathways for non-citizens
  • Some lawfully present non-citizens may receive Emergency Services Only (ESO) coverage
  • Lawful permanent residents remain eligible
  • No longer eligible: Refugees, asylum grantees, trafficking victims, and more
  • Effective October 1, 2026
• Financing and Provider Changes:
  • Insurance Provider Assessment (IPA) tax to be discontinued
  • Gradual reduction of provider tax cap
  • State Directed Payments (SDP) to providers now capped at Medicare rates (replacing prior commercial-rate cap)

For a full review of the projected impacts of these changes on Michigan residents, see this Medicaid and SNAP Impact presentation by MDHHS shared during a Senate Appropriations committee hearing.

Michigan parents, health providers, and advocates came together at the Capitol last week urging legislators to safeguard Medicaid in the face of proposed federal funding cuts. During a Senate Health Policy Committee hearing, members of the Protect MI Care — a coalition of 240+ organizations working to preserve access to health care — shared personal stories illustrating how essential Medicaid has been to their families’ survival and stability. Two mothers from Grand Rapids spoke about how Medicaid coverage made it possible to care for their medically complex children, one born with a serious heart defect necessitating open heart surgery, the other living with cerebral palsy and epilepsy. Both emphasized that Medicaid was not a “handout,” but a vital safety net that filled gaps private insurance did not cover. Coalition leaders and health experts warned that the proposed cuts would threaten access to care across Michigan, particularly in vulnerable and rural communities.