This article originally appeared in the Lansing State Journal September 18, 2025.
While both the Michigan House and the Michigan Senate have passed budgets for the upcoming fiscal year — which starts in less than one month — what they’ve approved may have little to do with what will be in the final budget. The Senate proposal was voted on before updated revenue estimates, and the House budget assumes that legislators will pass other laws, which may not happen.
So what will lawmakers’ priorities be? What are the disputes that need to be resolved? Here are some of the things we will learn when legislators conclude their negotiations.
Total amount of spending
The state constitution requires lawmakers to balance the budget, which means that legislators can spend as much as they expect to collect in revenue plus anything that has been saved in the past. The Senate budget spends $49.1 billion in state revenue — more than current expected revenue — while the House budget allocates $2 billion less. The House budget would increase spending by 0.5%, which would grow the budget at sustainable rates and ensure that state government stays affordable to taxpayers. House members kept spending down through some savings ideas that they’ll have to convince senators to adopt if they want to keep spending down.
The amount of money the state collects in taxes and spends in the state budget has increased by more than a third since the COVID-19 lockdowns. Spending has grown from $34.4 billion in the year prior to $46.8 billion in today’s budget, 8% more than even the rapid inflation that occurred over that period. This excludes the bump in federal revenue coming to the state.
Lawmakers were able to spend more without raising tax rates thanks to an unexpectedly large haul of revenue from Michigan taxpayers. But it’s not wise to spend every penny you get. With a little bit of restraint, lawmakers can be better prepared for the next recession, pay off public debt, or even return some of that money to the people who earned it.
Road repair
Administrators expect road quality to deteriorate without more revenue or lower costs. The Senate budget does neither. The House budget increases transportation spending by $3.4 billion, and it does so without raising taxes. This road funding plan drops the practice of earmarking the fuel sales tax on fuel to schools and instead commits the fuel tax to roads, meaning that taxpayers shouldn’t notice a difference at the pump. Even with that change, schools see an increase in spending through savings elsewhere in the budget and the growth of state revenue.
The House budget is based on tax changes that House members have approved but that have not been approved by the Senate. Senators would have to agree to change tax policy and approve budgets based on the tax switch.
Business subsidies
One reason why House members can afford to spend more on roads and schools is because they save money in other places. The House budget gets rid of the state’s ineffective and expensive business subsidies. Democratic-majority legislators last session authorized $4.7 billion in business subsidies. That’s a lot of money to spend chasing headlines that fail to result in job growth. I found that the state’s major business subsidy deals from 2000 to 2020 delivered just 9% of the jobs that were announced when lawmakers made the deals. Lawmakers have a chance to put this money to better use.
Who decides how to spend extra school funding
Both the House and Senate budgets spend more money on schools. The House, however, offers more money in funding for each student, while the increase in Senate money comes with strings attached. Senate spending includes grants for more infrastructure spending, smaller class sizes, mental health and other outside priorities. By transferring some of this money to the general education grant, the House budget lets school district officials figure out what their priorities are. If school officials feel that better school libraries or subsidies for teachers’ rent — grant programs included in the Senate budget — are the best way for the schools to improve, they’d have extra money from the House budget to do it.
There are many other decisions to be made, like how many district grants will be part of the final budget. It’s a big budget, and it’s on a tight deadline. Lawmakers are going to have to decide on some substantive policy changes.
