Michigan lawmakers have approved a nearly $81 billion state budget for fiscal year 2026, ending a months-long budget stalemate with significant cuts to vacant positions across state agencies, a controversial new wholesale marijuana tax, and substantial increases for road infrastructure and education.

The final budget was approved in late October after the Legislature missed the constitutional July 1 deadline, passing a short-term stopgap measure to avoid a state government shutdown. The budget includes a general government spending bill that passed the House 101-8 and the Senate 31-5, alongside a separate education spending bill approved 104-5 in the House and 31-5 in the Senate.

Vacant Job Cuts Across State Agencies

The budget eliminates funding for thousands of vacant government positions, the bulk of which represent positions that were never filled in the first place. According to a nonpartisan analysis, the cuts include:

  • 870 positions in the Department of Health and Human Services
  • 373 positions in the Department of Corrections
  • 243 state police post operation positions

State Police will receive 280 fewer full-time positions than in 2025, though most of these cuts represent the elimination of vacant positions rather than layoffs of existing employees. Training, professional development, and the Safe Cities Partnership are among the areas affected by these reductions.

The Michigan Department of State would be cut by $69.3 million down to $222.4 million and lose 240 full-time employees, with 186 of those being vacant positions.

House Republicans had targeted these cuts as part of a broader strategy to eliminate what they called "ghost employees" — funded but unfilled positions that drain state resources.

New Wholesale Marijuana Tax

The budget includes a controversial 24 percent wholesale tax on marijuana sales, generating approximately $420 million annually for road funding. The tax is set to begin in January 2026.

Marijuana industry advocates have strongly opposed the measure, arguing it will drive customers out of the legal market and benefit illegal operators.

"This is going to drive Michigan customers out of the legal market," said Sen. Jeff Irwin, D-Ann Arbor, who opposed the bill. "This is telling customers from other states, 'Stop bringing your money to Michigan.'"

The Senate approved the tax measure at 3:15 a.m., giving final approval to a key component of the broader budget deal.

Road Funding Boost

Despite criticism from business groups, the budget includes significant increases for the Michigan Department of Transportation. The MDOT receives a $7.9 billion budget, up from $6.8 billion in 2025.

The increase includes:

  • $474.2 million in Michigan Transportation Fund distributions to county road commissions
  • $255.8 million in extra MTF distributions to cities and villages
  • $233.3 million for the State Trunkline Road and Bridge Capital Program

Governor Gretchen Whitmer, who campaigned on a promise to "fix the damn roads," called the investment a "significant, bipartisan investment to fix state and local roads for decades to come, creating and protecting thousands of jobs in the process."

The deal is expected to eventually generate more than $1.8 billion annually for roads, including approximately $1 billion in the first fiscal year as it takes effect.

Most of the road funding will go to local roads, with the following breakdown for fiscal year 2026:

  • State trunkline: $179.7 million
  • Cities/villages: $246.1 million
  • Counties: $456.7 million
  • Rail grade separation fund: $40 million
  • Local bus operations: $42.4 million
  • Infrastructure protection authority: $65 million
  • Airport improvement program: $6.8 million
  • Detroit airport: $6 million

Education Funding

The budget maintains free school meals for all PreK-12 public school students, with more than $200 million allocated to the universal school meals program. The 2026 budget would also allocate funding to allow nonpublic schools to participate in the meals program.

The state provides a record $10,050 in per-pupil funding for Michigan schools, up from $9,608 in 2025, an increase of $442 per pupil. The budget also provides full funding for cyber charter schools.

These education changes cost the state $593.5 million and include an additional $321 million for mental health and safety grants available to both public and private schools.

Education groups expressed relief but criticized the lack of transparency. "Educators were left watching the news alongside the general public for details of the budget's contents, which were released only hours before the vote on a bill more than 400 pages long," said a coalition of school groups. "This lack of transparency erodes and undermines the partnership that schools should be able to rely on with their state leaders."

Corporate Incentive Program Dead

The budget does not include the annual $500 million deposit into the Strategic Outreach and Attraction Reserve Fund (SOAR), Whitmer's flagship corporate incentive program that has received over $2 billion in large-scale subsidies.

The absence of this funding effectively kills the program, according to critics. Business groups opposed the broader measure that eliminated some state tax breaks, arguing it amounts to a tax hike on job creators.

Revenue Sharing Cuts

The budget includes a $63.2 million cut in constitutional revenue sharing to cities, villages and townships, which are projected to receive a total of $1.1 billion in constitutional revenue sharing in 2026.

Legislatively Directed Spending

The budget includes more than $100 million in "legislatively directed spending" items, often referred to as earmarks, ranging from $1 million for a firetruck for the city of Flat Rock to $500,000 for the Detroit Police Athletic League to $85,000 to improve heating, ventilation and cooling at city offices in Huntington Woods.

Budget Figures

The final budget totals nearly $81 billion when counting approximately $5 billion in Medicaid provider tax revenue that was moved into contingency funds. This is:

  • Less than the $82.5 billion budget Whitmer signed last year
  • Less than the $84.5 billion proposed by Senate Democrats
  • More than the $78.5 billion proposed by House Republicans

The budget was finalized at 1:47 a.m. on Friday, two days after the Legislature missed the constitutional deadline but passed a stopgap bill to avoid a state government shutdown.

Reactions

House Appropriations Chair Ann Bollin, R-Brighton, said: "This budget proves government can be responsible with taxpayer dollars while still delivering the resources our families, students, and communities depend on."

Rep. Alabas Farhat, D-Dearborn, told reporters: "It looked like this was out of reach, getting a budget that made sense for Michigan … but I'm really proud that we were able to come together and get that done."

What's Next

Both budget bills were sent to Governor Gretchen Whitmer for her expected signature. The Democratic-led Senate gave final approval to the wholesale marijuana tax measure at 3:15 a.m., completing the legislative portion of the deal.

The budget takes effect on October 1, 2026, with the wholesale marijuana tax set to begin in January 2026.

Sources

  • https://bridgemi.com/michigan-government/michigan-gets-a-new-state-budget-winners-losers-in-the-81b-deal/
  • https://www.freep.com/story/news/politics/2025/10/03/michigan-budget-2026-highlights/86490545007/
  • https://www.michigan.gov/budget/budget-documents/final-signed-budget-bills