Following the passing of the Oct. 1st deadline to approve a Fiscal Year 2026 budget, Michigan lawmakers approved a one-week continuation budget to keep the state government open while negotiations continue.

At the heart of the delay is balancing constrained revenues with competing demands in education, infrastructure, health care, workforce, and local government. A major sticking point is the sales tax/gas tax swap. Without a backfill, schools and municipalities could face significant funding shortfalls. Meanwhile, the House has approved a series of tax increases aimed at shoring up revenues and avoiding the steepest spending cuts. Large reductions are rumored to impact other areas such as higher education, workforce development and human services.

A possible deal is expected by Thursday or Friday this week. While the House and Senate Appropriations Committees are meeting, the observance of Yom Kippur midweek complicates scheduling before the continuation measure expires.

For K-12 and local government advocates, the risk of inadequate backfill could force cuts to staff, services, or programs. While most observers expect a budget deal by week’s end, advocacy and engagement are critical in shaping the final budget.

Click on the link below for full details in the Oct. 1, 2025 Karoub Alert.