(The Center Square) – Michigan will need to tighten its purse strings over the coming fiscal years or generate more revenue as new projections show it could face a $2 billion budget shortfall.
Republicans in the state legislature say this is something they have seen coming, but that state Democrats have been slow to act.
“These numbers confirm what we have been preparing for: tighter revenues and the need for continued fiscal discipline,” said State Rep. Ann Bollin, R-Brighton Township. Bollin serves as the chair of the House Appropriations Committee.
“Last year, we made the tough but responsible decisions to rein in spending, cut waste, and refocus taxpayer dollars on core priorities like roads and essential services,” she added. “We reduced pork projects, eliminated ghost employees, and began restoring fiscal discipline to state government after years of reckless spending by Democrats. That work matters now more than ever.”
January kicked off the beginning of the annual budget-making process for the state of Michigan. July 1 is the legally mandated statutory deadline for the finalization of the entire budget for the 2026-2027 fiscal year, including the separate School Aid budget. This past year, the legislature blew by that deadline, not passing a finalized budget for the 2025-2026 fiscal year until Oct. 7.
With the state Senate and governorship held by Democrats, and the state House held by Republicans, any movement on the budget requires lengthy negotiations. Lawmakers from both sides of the aisle hailed that budget as a win.
Republicans were happy it lowered the state spending by $1.1 billion, but the budget still totalled $53 billion. In the wake of Michigan losing federal COVID-19 funding, that cut to the budget will not be enough to address the drop in revenue.
Yet, not everyone was happy with it at the time. Senate Republican Leader Aric Nesbitt, R-Porter Township, was one of five Republicans who voted against it.
Now, he warns the next budget must make even more cuts.
“It’s time to make government smaller and put a stop to the waste, fraud and abuse of tax dollars by Lansing Democrats,” Nesbitt said. “We must ensure our next state budget focuses on what matters most—helping our students succeed, keeping our communities safe and making transformational investments in our infrastructure.”
State Democrats have not yet released statements on the budget shortfall. In the wake of the last budget, they applauded the legislature for maintaining many of its services, including protecting Medicaid, providing free school meals, and lowering taxes.
This all comes after the state agencies reached a consensus on revised economic and revenue figures for the remainder of fiscal year, as well as forecasts for the coming two fiscal years.
That report found that more than $2 billion in budget savings will need to be found in the next two fiscal years, largely due to a drop in state revenue. This comes just a few years after the state boasted a $9 billion surplus due to COVID-19 funding.
Despite the looming shortfalls, State Treasurer Rachael Eubanks remained positive.
“Michigan’s economy continues to demonstrate resiliency and stability despite federal uncertainty,” she said. “Revenue collections are meeting expectations, and our long-term economic outlook remains positive with steady unemployment and job growth. Michigan’s foundation is strong, and we remain cautiously optimistic as we look ahead to the coming years.”
