By Craig Mauger, cmauger@detroitnews.com
Lansing — A series of major changes to Michigan tax law and slowing economic growth mean state lawmakers will have about $1 billion less than previously projected to work with for next year’s budget, according to revenue estimates released Thursday by the nonpartisan House and Senate fiscal agencies.
On Friday, the leaders of the two agencies along with representatives of Gov. Gretchen Whitmer’s administration were to convene in Lansing to develop a new set of official revenue predictions to guide the Legislature’s spending debates for the coming months.
Ahead of that meeting, both the House and Senate agencies released their own estimates, slashing back revenue amounts they had previously settled on in May.
“While there is some relatively mild weakening in revenues for economic reasons, the large downward revisions are primarily due to tax policy changes,” said the House Fiscal Agency in its Thursday report.
In the fall, Michigan lawmakers provided state-level income tax exemptions for Social Security benefits, overtime pay and tips to reflect federal tax changes championed by President Donald Trump. Likewise, lawmakers approved a road funding plan that exempted gasoline from the 6% sales tax, which had benefited the General Fund and School Aid Fund, and replaced the sales tax with a per-gallon gas tax increase, dedicated to transportation.
The legislation included a provision requiring the state’s General Fund to reimburse the School Aid Fund for any revenue losses resulting from the new sales tax exemption on fuel.
The House Fiscal Agency projected that baseline General Fund and School Aid Fund revenue will continue to increase year over year into the future. However, compared to the May 2025 estimates, the state’s General Fund will see $983 million less than previously projected this budget year and $1.3 billion less in the next fiscal year that begins Oct. 1.
Most of the change — $783 million this year and $1.1 billion next year — is because of the tax law changes, according to the House Fiscal Agency.
For next year, which begins Oct. 1, the General Fund would be $14.0 billion, instead of the previously projected $15.3 billion, according to the House Fiscal Agency estimate.
The House Fiscal Agency is projecting that the School Aid Fund will continue to grow, with $265 million more than previously projected available this year and $252 million more than previously projected available next year. The total School Aid Fund estimate would go from $19.4 billion for next year to about $19.7 billion.
Combined, across the two funds, the downward movement of the projections would be $717 million this year and $1.1 billion next year, according to the House Fiscal Agency.
The Senate Fiscal Agency’s projections are more negative. Across the two funds, the revenue estimates from May 2025 would drop $1.1 billion for this year and $1.5 billion for next year, driven by General Fund losses.
“Compared with the May 16, 2025, consensus revenue estimating conference forecast, economic growth is expected to be slightly stronger at the national level and slightly weaker in Michigan,” the new report from the Senate Fiscal Agency said.
After Friday’s meeting, the state officials will meet again in May to further revise their revenue projections.
Whitmer called on lawmakers Thursday to get a budget plan to her desk by June 30.
