LANSING – Governor Whitmer unveiled a record-breaking $83.5 billion budget proposal for the 2025-2026 fiscal year on Wednesday, aiming to increase spending on education, public safety, parks and IT infrastructure for state agencies. The budget also seeks to bolster the state’s financial reserves, leveraging higher-than-expected revenues.

Despite no significant increase in funding for road repairs and maintenance, Whitmer’s proposal calls for higher taxes on e-cigarettes and landfill waste disposal, a move expected to generate new revenue for the state treasury. The Democratic governor is now preparing for a political showdown with Republicans, who are likely to push back on her spending priorities and fiscal approach.

The proposed budget for the upcoming fiscal year, which starts on October 1, represents a 1.2 percent increase from the current year’s $82.5 billion budget. However, it is 3.5 percent higher than Whitmer’s initial $80.7 billion proposal, which lawmakers later expanded with additional district-specific expenditures.

In recent years, Whitmer’s administration benefited from higher-than-expected revenues and generous federal aid following the COVID-19 pandemic. This allowed for unprecedented record-breaking budgets, supported by new tax revenue sources, including the legalization of sports betting, online gambling and recreational marijuana.

Republican opposition claiming fiscal concerns

However, with political shifts in Washington and Lansing following the November elections, analysts predict that Whitmer’s latest budget will undergo significant modifications before receiving approval in the Republican-controlled State House and narrowly Democratic-led State Senate. Unlike the past two years — when Democrats controlled both chambers — Whitmer now must negotiate with Republicans, who regained a 58-52 majority in the Michigan House of Representatives. The State Senate remains Democratic-controlled by a slim 19-18 margin, following the vacancy left by State Senator Kristin McDonald Rivet, who won a seat in the U.S. House of Representatives last fall.

According to the State Budget Office, Whitmer’s proposal would leave only an $11 million surplus in the state’s general fund, down from $854 million this year. Republicans have criticized this as a sign of financial irresponsibility, particularly given the administration’s ongoing failure to provide long-term solutions for Michigan’s deteriorating road system. The state will need to find alternative funding sources next year to address a $3.9 billion shortfall in infrastructure financing.

Budget presentation and legislative process

State Budget Director Jen Flood presented the budget plan to lawmakers in Lansing on Wednesday, while Governor Whitmer was in Grand Rapids attending a graduation ceremony for Michigan residents who earned degrees through a state-funded tuition assistance program for adults over 25.

The budget proposal will now go through a series of public hearings and closed-door negotiations, a process that typically extends into the summer or early fall. Given the political shift in Lansing, major revisions to the budget are expected, as Republicans are unlikely to approve Whitmer’s spending plans without significant adjustments.

Federal funding and economic uncertainty

Beyond Republican opposition in Lansing, Whitmer’s budget faces additional challenges tied to federal funding uncertainty. With President Trump preparing to cut federal spending, Michigan’s budget could take a hit, as 42 percent of Whitmer’s proposed budget — equivalent to $34.8 billion — comes from federal sources.

Additionally, Trump’s threats to impose tariffs on Canadian imports could negatively impact Michigan’s auto industry and overall economy, further complicating the state’s fiscal outlook.

Education funding and free school meals

Whitmer’s budget prioritizes education, allocating $21.2 billion to the School Aid Fund, which represents about a quarter of the state’s total budget.

Key education funding highlights include:

• A 4.1 percent increase in per-student funding, raising the per-student allocation from $9,608 to $10,000 annually.
• $200 million to continue providing free breakfast and lunch to all K-12 students in Michigan.
• $676 million to expand free preschool programs for 4-year-olds.
• A 4 percent funding increase for public universities and community colleges, but shifting $496.7 million in funding for community colleges from the School Aid Fund — a departure from current funding methods.

Road and infrastructure funding

Whitmer’s proposal sets aside $5 billion from state and federal funds for road construction and maintenance, maintaining current spending levels. The total Department of Transportation budget would rise to $6.8 billion, reflecting a minor 0.5 percent increase.

The budget also includes:

• $10 million for new electric vehicle charging stations, offering grants to local communities.
• $28 million to explore alternative road funding options, including a mileage-based user fee system as a potential replacement for Michigan’s current gas tax.

Whitmer is expected to release a more detailed road funding plan next week, as Republicans express concerns over potential new tax burdens on Michigan residents.

New taxes and fees

Whitmer’s budget includes several tax and fee increases to boost state revenue:

• Higher e-cigarette taxes, raising the wholesale tax rate to 32 percent starting in 2026, which is projected to generate $57 million annually (half of which will fund public health awareness campaigns).
• Higher landfill fees, increasing waste disposal taxes to $5 per ton, up from the current $0.36 per ton. The new revenue will support environmental cleanup efforts and recycling initiatives.
• Mandatory state park access fees, automatically adding the “Recreation Passport” fee to vehicle registration renewals (with an opt-out option). Currently, drivers must opt in to pay for the pass.

Additional budget highlights

Other notable allocations in Whitmer’s proposed 2025-2026 budget include:

• $17.2 million to upgrade state-owned parks.
• $15.2 million to open a new 264-bed psychiatric hospital near Northville.
• $24.4 million to support children removed from their homes by placing them with relatives.
• $96.4 million to expand Medicaid eligibility for seniors and disabled residents.
• A 4.1 percent increase in Michigan State Police funding, reaching $992 million, including funding for 120 new troopers and $32.4 million for pay raises for corrections officers.
• $50 million to increase the state’s “Rainy Day Fund” reserves, bringing the total to $2.3 billion. Another $50 million will be added to the School Aid Reserve Fund, raising its balance to $550 million.
• $25 million to remove hazardous electrical wires in Detroit, addressing 1,300 miles of outdated streetlight wiring.
• $43.6 million to support communities impacted by severe storms in August 2023.
• $297,300 to upgrade Michigan’s liquor tracking system, after a 2024 audit revealed nearly $1 million in missing alcoholic beverages.
• $26 million to develop Selfridge Air National Guard Base in Macomb County.
• $42.6 million for state government IT infrastructure upgrades, including improvements to unemployment insurance systems, education data, HR management and payroll processing.
• $2 billion investment in affordable housing, funding the construction or renovation of 11,000 housing units.

With negotiations set to continue through the summer, Whitmer’s record-setting budget is expected to face revisions and pushback from Republican lawmakers, as Michigan grapples with competing fiscal priorities and political shifts.