Michigan lawmakers had $9 billion in expected surplus funds at their disposal in January 2023, but where did that money go? According to a March 31, 2026 report by the Mackinac Center for Public Policy, the answer is stark: lawmakers spent it all.
The question now is whether that spending was worth it for Michigan residents.
The Surplus Explained
The massive surplus in 2023 stemmed from two main factors. First, the Republican-majority Legislature could not agree on budget priorities with Democratic Governor Gretchen Whitmer during the 2022-2023 budget cycle. Second, revenue flowing into the state treasury during the pandemic was substantial.
State tax collections were strong before and during the pandemic: Michigan collected $31.5 billion in fiscal year 2018-19 before COVID, and $40.1 billion in fiscal year 2021-22. This created more money available for legislators to spend when budget negotiations stalled.
Schools: The Biggest Beneficiaries
Schools received the largest share of Michigan's surplus funding. 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.
That equals 40% of what the state collects from the income tax. Between state, local and federal sources of money, Michigan schools receive an average of $23,867 per student.
But as the Mackinac Center notes, it's worth asking whether that extra money has improved school performance. The state spends significantly more on education, yet Michigan public education quality falls behind that of other states.
Medicaid Spending Surges
Medicaid received the next biggest increase in annual spending. During the pandemic, the federal government decided not to enforce eligibility rules, and the number of Medicaid recipients in Michigan increased from 2.5 million to 3.2 million. Enrollment has since returned to 2.5 million people.
The accounting for Medicaid spending is complicated because there is no direct single line item for the program, nor even a simple accounting for how much of its spending comes from the state rather than the federal government.
However, the Department of Health and Human Services budget shows dramatic growth. Total spending at the department increased from $26.5 billion in fiscal year 2018-19 to $39.3 billion today.
The federal government pays the bulk of Medicaid costs, but total state spending on the department increased from $7.5 billion to $11.4 billion—a $3.8 billion increase.
Roads: A Priority That Paid Off
Roads were the next biggest priority. The transportation budget increased from $3.5 billion in fiscal year 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 now 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.
Higher Education and Other Areas
The state spends $788 million more on higher education, mostly on new scholarship programs. State police funding increased by $220 million, and the Department of Environment, Great Lakes and Energy received $215 million more.
The Dark Side: Business Subsidies and Pork Projects
While some spending has paid dividends, other areas don't seem to have delivered the promised returns.
Lawmakers authorized $6.8 billion in selective business subsidies since 2020, and $4.4 billion on pork projects—legislatively directed spending.
When Democrats took majorities in both chambers of the Legislature in 2023, corporate welfare became their top priority. They authorized $4.7 billion in selective subsidies over their two years of control. These authorizations included money for electric vehicle plants that got shifted into other things and site preparation for a semiconductor plant that was never built.
Legislators may have learned from their mistakes and authorized no new business subsidies in 2025.
Pork 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. Still, $360 million is roughly what it takes to operate a fifth of the state's community colleges for a year.
The Bottom Line
The Mackinac Center's analysis concludes that Michigan has experienced "a paltry return in public services for spending so much more money."
Other priorities don't seem to have paid off. 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.
Budget Work Ahead
The Michigan Legislature will kick its budget work into high gear after it returns from spring break on Tuesday, April 14. State law requires the Legislature to present spending bills to the governor on or before July 1 each year.
As the Michigan Association of Counties notes, the state is seeking an increase in statutory revenue sharing for counties at a rate equivalent to the state's gains on sales taxes, which are slated to increase by approximately 9.8 percent from fiscal year 2026 to fiscal year 2027.
But as the Mackinac Center's analysis makes clear, the question remains whether continuing the pattern of heavy spending without corresponding results serves Michigan's best interests.