State officials have reduced their expectations for tax revenue growth, which will require austerity budgeting heading into the next fiscal year. A panel made of Whitmer administration and legislative budget officials formally adopted revenue projections Friday that assume growth in the state’s economy is slowing
down heading into 2026.
The revenue projections show a net $780 million revenue reduction for this fiscal year and $1.1 billion for the new one before revenue rebounds. The culprits are inflation, state-level policy changes that offered new tax breaks for overtime pay and tips and federal budget cuts to health care and food assistance.
“The federal government is passing the buck and handing the tab to states across the country, including Michigan,” said Jen Flood, Governor Gretchen Whitmer’s budget director. “And we’ve taken some important steps to mitigate the damage here in our state, but it’s going to continue to apply pressure to the state budget.”
State Treasurer Rachael Eubanks said Michigan’s overall economic footing is solid and the prospects for robust revenue growth following a soft patch are promising.
“And that means that we can keep investing in essential services and infrastructure while planning responsibly for the future and, of course, the key will be navigating those federal uncertainties as they develop,” she said. “The bottom line: Michigan’s economy is stable. Our foundation is strong.”
House Speaker Matt Hall (R-Richland Township) said his caucus will insist on more cost-cutting to match the revenue slowdown.
“And, as I predicted, we now have to keep doing what House Republicans did in this last budget. Eliminate more ghost jobs,” he said in an emailed statement. “Stop the Democrat pork spending. And slash even more waste, fraud, and abuse.”
Senate Appropriations Committee Chair Sarah Anthony (D-Lansing) said a slowdown was expected and the state is already well-positioned to manage the new reality with a healthy “rainy day” reserve. “As revenue growth flattens, we will remain committed to governing with discipline and maturity, always keeping the needs of the people and the financial health of the state top of mind,” she said in a written statement.
The negotiations to wrap up the current budget were contentious as a deadlock dragged past the July 1 statutory deadline as well and six days past the October 1 start of the fiscal year.
