Updates About Budget

Governor Gretchen Whitmer recently presented her Fiscal Year 2025-2026 Executive Budget Recommendations, kicking off Michigan’s budget season. With a total proposal of $83.5 billion—the largest in state history—the budget reflects a $1.2 billion revenue surplus and prioritizes lowering costs for residents, creating jobs, investing in education, supporting seniors, and strengthening public safety. Key highlights include continued tax relief through the Working Families Tax Credit, expanded universal pre-K, free school meals for all public school students, and increased investment in workforce development. Additionally, the proposal allocates billions toward infrastructure improvements, child care support, and special education funding.

Other notable investments focus on public health and safety, including $46.8 million in opioid settlement funds, increased Medicaid access for seniors and individuals with disabilities, and a $42.8 million tax on vaping and nicotine products (see Governor Recommends New Tax Targeting Youth Nicotine Consumption for more info). The budget also includes major investments in Michigan’s defense industry, cybersecurity, and government modernization. As the legislature begins negotiations, these proposals will shape the final state budget ahead of the July 1 deadline.

Governor Gretchen Whitmer has introduced a proposal to tax vaping products and nicotine pouches at the same 32% wholesale rate that currently applies to non-cigarette tobacco products like cigars and chewing tobacco. Named in the governor’s executive budget recommendation, her administration argues that this change would close a loophole in state law that allowed these nicotine products to avoid taxation. The executive office estimates the new tax could generate approximately $57 million annually, with funds earmarked for programs focusing on smoking prevention, expanded healthcare access, and adolescent mental health initiatives.

Thirty-two states already tax vaping products in some form, due to studies that link higher tobacco taxes to reduced consumption. With a CDC survey indicating that 14% of Michigan high schoolers have used vapes in the past month, all can agree that action is necessary. However, Whitmer’s proposal is expected to face opposition in the Michigan Legislature, where the House Republican majority has historically resisted new taxes.

The House Fiscal Agency’s (HFA) August revenue report indicates that both Michigan’s General Fund and School Aid Fund revenues are exceeding earlier projections from the May Consensus Revenue Estimating Conference.

General Fund revenues reached an estimated $1.15 billion in August, $12.1 million higher than previous forecasts, with year-to-date revenues increasing by $319 million. Similarly, the School Aid Fund brought in $1.4 billion, surpassing projections by $59 million, and showing a $128.4 million year-to-date increase compared to the previous fiscal year.