Updates About Budget

The House Fiscal Agency’s June 2025 Revenue Report brought positive short-term news, with major tax revenues and lottery earnings totaling $3.3 billion—an 8.3% increase from June 2024 and $64 million above the May 2025 Consensus Revenue Estimating Conference (CREC) projections. General Fund revenues were bolstered by stronger-than-expected individual income and corporate tax collections, contributing to a $71.8 million surplus above forecasts. Individual income tax revenue alone totaled $1.5 billion (up 15.5% year-over-year), and corporate income tax revenue exceeded estimates by more than $30 million. However, revenues dedicated to the School Aid Fund missed projections by $17 million, with an additional $9.2 million redirected to other earmarked funds.

Looking ahead, however, the recently enacted federal One Big Beautiful Bill Act of 2025 (OBBBA) may substantially alter Michigan’s fiscal landscape over the next decade. The act introduces sweeping federal tax changes that are expected to reduce Michigan’s business tax base and, consequently, state revenue. The House Fiscal Agency now anticipates Michigan could lose $677 million in FY 2025-26, $613 million in FY 2026-27, and $444 million in FY 2027-28 due to provisions such as expensing for research and experimental costs, Section 179 expansion, and limitations on business interest deductions. While some of these losses will taper off by FY 2030-31, Michigan is expected to forgo billions in revenue over the long term unless it decouples from the affected federal tax provisions.

As lawmakers head into the next phase of FY 2026 budget negotiations, they will need to balance the strong performance of current revenues with the looming structural changes driven by OBBBA. These federal changes, combined with upcoming reductions in Medicaid and SNAP cost-sharing adjustments, will likely place additional pressure on the state’s General Fund in the years to come.

Review previous revenue estimates and CREC reports here.

State Attorney General Dana Nessel recently joined 16 other state attorney generals in filing a lawsuit against the U.S. Department of Education over its decision to halt funding for mental health services in K–12 schools. The legal challenge asserts that the Department’s action to discontinue congressionally allocated grants violates federal law, including the Administrative Procedure Act and constitutional protections. These funds were initially approved to support the hiring of school-based mental health professionals in response to growing student needs.

The lawsuit highlights the significant impact of these grants, which helped serve hundreds of thousands of students and expand access to school counselors, social workers, and psychologists. In Michigan, the Department of Education, Grand Valley State University, and Lansing School District were among those affected. Attorney General Nessel emphasized that revoking these resources could worsen the mental health crisis facing schools and deprive students of essential support. The suit seeks to restore the funding and prevent further disruptions to these critical services.

Michigan celebrated a milestone in maternal and infant health this year, reporting its lowest infant mortality rate on record. In 2023, the state recorded 607 infant deaths—down from 650 the year before—bringing the overall rate to 6.1 per 1,000 live births. While disparities remain, there was notable progress among Black infants as well, with the mortality rate falling to a historic low of 11.9 per 1,000 live births. The Michigan Department of Health and Human Services (MDHHS) attributes this encouraging trend to continued investment in programs that strengthen community-centered care, expand access to resources, and support new parents throughout pregnancy and early childhood.

Through its Healthy Moms, Healthy Babies initiative, MDHHS has expanded postpartum Medicaid coverage and invested in evidence-based care models like doula services and CenteringPregnancy. Doulas, particularly those serving with organizations like the Black Mothers Breastfeeding Association, have played a vital role in improving outcomes for women of color by providing trusted emotional and educational support. Meanwhile, programs such as the Michigan Perinatal Quality Collaboratives and MI AIM are working at the hospital and community level to improve access to prenatal care, promote safe sleep practices, and implement safety protocols to reduce complications.