Michigan lawmakers approved a nearly $81 billion state budget on Oct. 3, narrowly avoiding a government shutdown, with Gov. Gretchen Whitmer signing the Fiscal Year 2026 budget into law on Oct. 7.

The FY 2026 budget increases funding for roads and schools, trims vacant government jobs, and omits some controversial items, including funding a proposed Upper Peninsula mine and new hunting and fishing fees. It passed the State House 101–8 and the Senate 31–5.

With almost $2 billion for roads, this is Whitmer’s biggest bipartisan win in her effort to “fix the damn roads.” About $1 billion is earmarked for local roads this fiscal year, with additional funding for rail grade separation, local transit, and airport improvements. A new 24% wholesale marijuana tax, which takes effect in January 2026, is anticipated to raise about $420 million per year for roadwork, with corporate income taxes providing another $688 million in transportation funding.

K–12 schools will receive a record $10,050 per pupil, a $442 increase, and all students will continue to receive free meals. Legislators approved $321 million for K-12 mental health counselors, secure facilities, and school safety initiatives, including continued support for the state’s anonymous reporting system for potential threats.

Removed from the budget is the $500 million annually to Whitmer’s Strategic Outreach and Attraction Reserve (SOAR) Fund corporate incentive program. Funding is also reduced for 1,700 vacant state jobs, cuts $22 million from the Going PRO Talent Fund, and another $9 million from the Pure Michigan campaign.

Other highlights include:  

• $160 million in community grants, which includes $10 million for flood mitigation in Midland and $10 million for a Trenton bridge project.
• $26 million for a new fighter mission at Selfridge Air Base.
• $14 million for northern Michigan ice storm recovery.
• Over $12 million to maintain Michigan’s Arts and Cultural Program despite calls to eliminate it.
• Funding increases between 1.9% and 4.7% for all 15 public universities. 

Nearly $8.9 billion in state funding (excluding federal aid) was appropriated for MDHHS, with over $2 billion going directly to local units of government. The budget sustains funding for core safety-net services such as public assistance, child welfare, and behavioral health with new investments in opioid recovery, community mental health, and local public health capacity.

Medicaid mental health services were allotted over $1.05 billion and $33.7 million is set aside for Medicaid substance use disorder services. Michigan’s public health infrastructure was strengthened with $75.9 million for essential local public health services, including additional resources for cancer prevention, AIDS testing and care, immunizations, and PFAS contamination response.

For complete details about the FY 2026 state budget, click here for the October 2025 Karoub Report.