The Legislature and Governor Gretchen Whitmer face tough choices now that the federal One Big Beautiful Bill Act has reset the state’s budget picture.
An independent study released Wednesday suggested Michigan will need to come up with $1.1 billion heading into the new fiscal year to balance its budget.
The nonpartisan Citizens Research Council of Michigan study said the looming shortfall is led by spending on health care, food assistance and other safety net programs. Also, that Michigan will need to increase spending or reduce services in future years to keep pace with the effects of the federal cuts.
“We’re going to need even more austerity and budget-cutting to get this budget done and those impacts are going to come very quickly,” said Senior Research Associate Bob Schneider. “I don’t think we’ve seen anything in terms of the size of the cost shifting mandated by the Big Beautiful Bill anytime in the last several decades.”
This news arrived as the Republican-led House and the Senate, which is controlled by Democrats, are at an impasse over the new budget. This also complicates negotiations over road funding and fulfilling Governor Gretchen Whitmer’s marquee campaign promise.
Schneider said the economic effects will be sweeping.
“You’re going to lose a bunch of Medicaid reimbursements, that may put some hospitals over the brink and you may have hospitals shut down,” he said. “And then that doesn’t only affect access for Medicaid clients, but also everybody who lives in a certain area.”
It would take a formal meeting of representatives of Whitmer and the House and Senate to officially revise the current revenue numbers being used to craft the budget. The last Revenue Estimating Conference was in May and there are no plans yet to reconvene the group.
“The federal reconciliation bill is hundreds of pages long and we’re still evaluating what the full impact is for the State of Michigan,” said Michigan Budget Director Jen Flood in an email.
“The State Budget Office will continue working with department and agency partners to fully understand the impacts of this legislation on the state and our residents. We look forward to working with the Legislature to pass a balanced and bipartisan budget that prioritizes the core services that Michiganders rely on each day.”
