Michigan's $9 Billion Surplus: Where Did the Money Go and Was It Worth It?
LANSING — Michigan lawmakers had $9 billion in expected surplus funds at their disposal in January 2023. Many people today wonder what happened to that money. The short answer: legislators spent it. The better question: whether the spending was worth it.
The story of Michigan's massive surplus begins with a breakdown in negotiations between the Republican-majority Legislature and Democratic Governor Gretchen Whitmer during the 2022-2023 budget process. When those talks fell through, the state was left with unprecedented revenue reserves that would eventually be deployed across Michigan's budget.
But the surplus wasn't just a result of budget impasse. The state's various taxes collected $31.5 billion in fiscal year 2018-19, before COVID, and they collected $40.1 billion in fiscal year 2021-22. So it wasn't just disagreement that led to more money available in 2024; tax levies collected more revenue for legislators to spend.
Schools Got the Biggest Share
Schools were the biggest beneficiaries of Michigan's surplus. The school aid budget increased from $13.0 billion before the pandemic to $18.9 billion in the current budget, a $5.8 billion gain. The increase equals 40% of what the state collects from the income tax.
Between state, local and federal sources of money, schools receive an average of $23,867 per student. But would that extra money have improved school performance? The answer isn't clear. Michigan continues to lag behind other states in education quality despite the massive investment.
Medicaid Spending Expanded
Medicaid received the next biggest increase in annual spending. The federal government decided not to enforce eligibility rules during the pandemic, and the number of recipients in Michigan increased from 2.5 million to 3.2 million. Enrollment has since returned to 2.5 million people.
How much was spent is a more complicated story. There is no direct single line item for Medicaid, nor even a simple accounting for how much of its spending comes from the state rather than the federal government. But there is a budget line for the Department of Health and Human Services, of which Medicaid is the largest and most expensive program.
Total spending at the department increased from $26.5 billion in 2018-19 to $39.3 billion today. The federal government pays the bulk of Medicaid costs, and total state spending on the department increased from $7.5 billion to $11.4 billion, a $3.8 billion increase.
Roads Got Historic Funding
Roads were the next biggest priority, and the transportation budget increased from $3.5 billion in 2018-19 to $5.4 billion in the current budget. Part of the extra spending comes from a marijuana tax hike, but 80% of the money came without tax hikes.
Road funding is at historic levels and should be sufficient to repair roads faster than they deteriorate. Motorists may see long-term improvements in road quality after all the increases in spending on repairs.
Other Budget Increases
The state spends $788 million more on higher education, mostly on new scholarship programs, $220 million more on the state police, and $215 million more on the Department of Environment, Great Lakes and Energy.
Lawmakers have also spent on various expensive but nonrecurring priorities. Lawmakers authorized $6.8 billion in selective business subsidies since 2020 and $4.4 billion on pork projects.
When Democrats took majorities in both chambers of the Legislature in 2023, corporate welfare was their top priority. They authorized $4.7 billion in selective subsidies over their two years of control. Authorizations included money for electric vehicle plants that got shifted into other things and site preparation for a semiconductor plant that was never built.
Lawmakers may have learned from their mistakes and authorized no new business subsidies in 2025. Legislators are now spending less on pork projects, or "legislatively directed spending," as some call it. This type of spending ballooned to $1.8 billion in fiscal year 2023-24, but it has since come down to $360 million in the current fiscal year.
The Debate Over Spending
The spending of Michigan's surplus has ignited a heated debate about whether the state government is spending too much money for the results it delivers.
State Sen. Mallory McMorrow, who will run for a United States Senate seat this fall, has argued that Michigan's government is operating with flat revenue despite population growth. "Adjusted for inflation, the state of Michigan is operating with the same revenue we had in 1968 despite gaining more than 3 million people from then until today," McMorrow claimed in a March interview.
But the numbers don't support that claim. Michigan's population increased from 8.7 million in 1968 to 10.1 million in 2025, an increase of 1.4 million, not 3 million. And state revenue was $2 billion in the 1967-68 fiscal year. If the state government revenue trend were flat, state revenue, adjusted for inflation, would be $18.9 billion. Instead, it was $48.9 billion in 2024-25, an increase of 2330%.
This means the state spent $2,178 per person in 1967-68 but $4,832 in 2024-25, for a 122% increase.
James Hohman, a fiscal policy expert at the Mackinac Center for Public Policy, told Michigan Capitol Confidential: "The state's revenue and population numbers do not align with the senator's claims."
What Was the Return on Investment?
Other priorities don't seem to have paid off, according to critics. Lawmakers spend more on education but the quality of public education here falls behind that of other states. The state also spends much more on Medicaid to chase federal matching funds. Expensive business subsidies have not paid off. And there's been an explosion of pork spending that is being reassessed.
It's a paltry return in public services for spending so much more money, critics argue.
The Mackinac Center for Public Policy is a nonprofit research and educational institute that advances the principles of free markets and limited government. Through its research and education programs, it challenges government overreach and advocates for a free-market approach to public policy that frees people to realize their potential and dreams.
Looking Ahead
As Michigan faces new budget decisions in 2026 and beyond, the debate over whether the state should continue to spend at current levels or restrain spending will likely intensify. The legacy of the $9 billion surplus will continue to shape discussions about Michigan's fiscal priorities for years to come.
The question remains: was Michigan's massive spending spree worth it, or did lawmakers squander billions that could have been saved for future generations?
Sources
- Where did Michigan's surplus go? — https://www.mackinac.org/blog/2026/where-did-michigans-surplus-go
- McMorrow budget figures don't add up — Michigan Capitol Confidential — https://www.michigancapitolconfidential.com/news/mcmorrow-budget-figures-dont-add-up