Feb. 13, 2026 | This Week in Government: Whitmer Wants to Address Budget ‘Challenges’ With New Taxes, Rainy Day Fund Withdrawal; Republicans Balk

Gov. Gretchen Whitmer’s budget recommendation proposed Wednesday attempts to balance what her administration called “uncertainties” stemming from federal actions with unspecified cuts, $800 million in new revenue from tax increases and $400 million pulled from the rainy day fund.

The $88.1 billion budget ($13.6 billion General Fund) includes limited tax relief, some tax and fee increase requests, a pull from reserves, and limited new spending, mostly targeted at education programs. The new revenue would come from new or increased taxes levied on tobacco, vaping devices, digital advertising, and changes to the online gaming tax structure.

Even before the budget presentation began at 1 p.m. in the House Appropriations Committee room, House Speaker Matt Hall, R-Richland Township, told reporters he was not on board with any tax increases or pulling funding from the Budget Stabilization Fund – also known as the rainy day fund.

Along with some tax increase proposals, Whitmer is proposing additional funding for K-12 schools with a focus on literacy, property tax relief for seniors, and a sales tax holiday on school supplies. Funding for universities, community colleges, and local governments remains flat in the proposal.

The $21.4 billion School Aid budget ($45.3 million General Fund, $18.55 billion School Aid Fund) includes a 2.5% increase in the foundation allowance, bringing spending to $10,300 per pupil. It also includes funding for literacy improvements.

“Michigan is open for business and on the move, and this budget will deliver on the kitchen-table issues that make a real difference in people’s lives,” Whitmer said in a statement.

“My balanced budget proposal will build on our strong record of bipartisan success. It doubles down on shared, long-term priorities to create good-paying jobs, fix roads, save Michiganders money, and ensure every child can read, eat, and succeed. Let’s work together to deliver another balanced, bipartisan budget on time and keep moving Michigan forward.”

The 2026-27 fiscal year budget officially kicked off on Wednesday as Budget Director Jen Flood presented before a joint meeting of the House Appropriations Committee and the Senate Appropriations Committee.

Whitmer did not attend the final budget presentation of her tenure and did not address the proposal to reporters on Wednesday.

Entering the 2026-27 fiscal year, Flood said the state is facing a $1.8 billion gap due to declining revenues, rising health care costs, federal changes in the One Big Beautiful Bill Act, persistent inflation, and “critical investment needs that we cannot responsibly ignore.”

Heading into the next fiscal year, the state is facing new requirements outlined by the federal government: Medicaid and Supplemental Nutrition Assistance Program work requirements, twice-yearly redeterminations for Medicaid, and an increase in the cost share for SNAP from 50% to 75%. The Whitmer administration said it will cost the state $186.6 million to meet the “burdensome” new requirements, citing proposals or policies already enacted in other states similarly responding to the federal changes.

“As you can see here, we’re proposing a responsible mix of new revenue, reductions and efficiencies, and drawing from reserves to deliver a budget for the next fiscal year that benefits all Michiganders,” Flood said. “In short, we’re confronting the numbers strategically and making deliberate choices to preserve what matters most. By focusing our resources thoughtfully, we can protect core services, strengthen infrastructure and make targeted investments that help our communities thrive even in the face of ongoing fiscal pressures.”

After a protracted budget process in 2025 – the budget was not finalized until after the 2025-26 fiscal year began – there already appeared to be broad disagreement on Wednesday between the Democrats, who control the administration and the Senate, and Republicans in charge of the House.

The dynamic heading into the 2026-27 fiscal year is different than a year ago, however, with the Legislature up for reelection along with the governor’s office, secretary of state, attorney general and the open U.S. Senate seat.

Senate Appropriations Chair Sen. Sarah Anthony, D-Lansing, said she is recommitting herself to being professional ahead of upcoming budget negotiations, which may involve some difficult conversations.

“We have 140 days to pass a bipartisan budget, to get it to the governor’s desk, within the allotted time that the law requires,” Anthony said. “While we did pass a bipartisan budget last year … I think we would be kidding ourselves if we thought last year was a successful process. We did not meet our statutory deadline. We left local governments, we left school districts, we left nonprofits and the business community with uncertainty, with chaos, with unprofessionalism, sometimes with name calling, that was below the institution. That was beneath us as professionals and as lawmakers.”

Republicans argued Whitmer is being irresponsible and officials weren’t prudent with dollars they received from the federal government during the COVID-19-era. Democrats said the federal government has left states holding the bag with changes to Medicaid and food benefits along with tariff policies.

The $800 million in new revenue from tax increases under the proposal would come from increasing taxes on tobacco ($232 million), vapes and non-tobacco nicotine products ($73.6 million), and digital advertising ($282 million). The budget also proposes updating the state’s internet gaming, sports betting, and online gaming tax structure ($192.8 million).

House Appropriations Chair Rep. Ann Bollin, R-Brighton, said she was not excited about all the increases, but looks forward to working together.

“I absolutely think it’s premature to think we need any kind of revenue increases,” Bollin told reporters. “I think what we have to do is set our priorities and make sure that we are looking … where the excesses are.”

Sen. Jon Bumstead, R-North Muskegon, minority vice chair of Senate Appropriations, said residents are working hard to stretch every dollar and the state should do the same. Bumstead said he welcomed the openness on tax relief, but that he has “never been a fan of offering relief to only specific groups.”

“Tough conversations are needed on how we balance the budget,” he said in a statement. “Taking money from the budget stabilization fund to support her liberal agenda instead of taking a deeper look at what can be cut or offset in other places is bad for all Michiganders.”

The budget also includes proposals from recent budget cycles that Whitmer has been unable to see across the finish line: an increase in tipping fees, an increase in Game and Fish fees, and reducing the foundation allowance for cyber schools.

The conservative Michigan Freedom Network also panned the budget proposal, saying the governor’s solution to revenue shortfalls is to increase the overall spending plan.

“After seven years of bad budgets, our expectations could not have been lower,” Gabe Butzke, a spokesperson for Michigan Forward Network, said in a statement. “Still, Gretchen Whitmer managed to disappoint us. She is either wholly unaware of the problems Michigan families are facing, or she simply doesn’t care.”

Americans for Prosperity Michigan and the National Federation of Independent Business Michigan also criticized the budget proposal.

Michigan League for Public Policy President and Chief Executive Officer Monique Stanton in a statement said Whitmer’s final budget recommendation includes several “important priorities that will help lift up Michiganders, safeguard them from financial strain, and mitigate the harm caused by reckless federal cuts to important programs.”

“The Governor’s proposal to strengthen Medicaid funding through tax increases on gaming as well as vaping and tobacco products is a win-win for the health and well-being of Michiganders,” she said. “It’s a smart solution that will help close this year’s $1.8 billion hole created by last year’s federal megabill, and it will help protect access to health care for families, children, seniors, and people with disabilities across the state at a time when that protection is very much needed due to the federal funding cuts. At the same time, we hope the new tax on vaping and tobacco products will reduce consumption of these products that have caused significant harm to the health of our state’s people, including Michigan youth and young adults.”

Whitmer is also proposing $351.8 million to increase direct care worker wages to $18.40 per hour for the lowest paid workers and to remain in line with the state’s minimum wage and paid sick leave requirements.

The state will see more spending on roads under the budget proposal after lawmakers and the governor enacted a new funding plan last year. The budget includes $100 million to repair local bridges, $100 million for transit, and $481 million for general road improvements.

Finally, the budget proposal included requests for a 2025-26 fiscal year supplemental, including $150 million for strategic site readiness, $450,000 in federal funds for arts programming, $1 million to kickstart work by the office of Future Mobility and Electrification, $750,000 for qualified historic buildings in rural communities, and $6.5 million to acquire forest land in the Keweenaw Peninsula.

President Donald Trump said Monday night he will “not allow” the opening of the new Gordie Howe International Bridge connecting Detroit with Windsor, Ontario, dramatically escalating tensions with Canada.

The announcement, on Trump’s social media platform, Truth Social sent immediate shockwaves throughout Michigan and Canada as the bridge – more than 20 years in the making – finally nears opening.

“I will not allow this bridge to open until the United States is fully compensated for everything we have given (Canada), and also, importantly, Canada treats the United States with the Fairness and Respect that we deserve,” he said. “We will start negotiations, IMMEDIATELY. With all that we have given them, we should own, perhaps, at least one half of this asset.”

Trump falsely claimed that Canada owns “both the Canada and United states side.” In fact, the bridge is jointly owned by Canada and the State of Michigan, similar to the Blue Water Bridge connecting Port Huron, with Sarnia, Ontario, and the International Bridge connecting Sault Ste. Marie and Sault Ste. Marie, Ontario. It was unclear if Trump was advocating having the United States acquire or take over Michigan’s half of the bridge or how the federal government could do so.

Opposition from Michigan Republicans in the late 2000s and early 2010s to the use of any state funds for the bridge, which would become a competitor with the privately owned Ambassador Bridge connecting Detroit and Windsor, led to Gov. Rick Snyder in 2012 reaching a deal with the Canadian government in which Canada would pay for the full cost of the bridge. An interlocal agreement between the Michigan Department of Transportation, Michigan Strategic Fund and the Canadian government was used to set up the authority to oversee the bridge project.

The day the pact was announced, Snyder profusely thanked the Canadian government “for your generosity and thoughtfulness in this project.”

Efforts to build a new bridge began in the early 2000s to create a smoother route for trucks – the Ambassador drops vehicles onto surface streets in Windsor with a slew of traffic lights before reaching the 401 expressway – reduce congestion on those streets and reduce pollution in the neighborhoods. There also was concern about the aging Ambassador bridge and longtime tensions between the Ambassador’s owners and the Canadian government.

Trump has been attacking Canada for almost a year, suggesting the nation should become the 51st state and imposing tariffs that business leaders in Michigan have said harmed manufacturing in this state. The president listed a new set of grievances in his Truth social post, complaining that the U.S. government allowing the bridge to open would provide nothing in return to the United States.

He claimed Ontario is prohibiting U.S. spirits, beverages, and other alcoholic products from Canadian shelves, and that Canada’s tariffs on U.S. dairy products have harmed U.S. farmers.

A representative for the Consulate General of Canada in Detroit did not immediately respond to requests for comment Monday evening.

The mayor of Windsor told CBC Trump’s comments were “just insane.” He also told the network that U.S. steel was used on the U.S. side of the bridge.

Exactly what steps Trump would have the U.S. government take to prevent the opening of the bridge were unclear. U.S. Customs and Border Protection, which operates on the U.S. side of border crossings, presumably would be one way the president might attempt to bar the use of the bridge for entry into the United States.

The U.S. Department of Homeland Security published an administrative rule on Jan. 30 establishing the bridge as an official port of entry for immigration purposes and classifying it as part of the port of Detroit, with an effective date of March 2. The rule publication said CBP would notify the public when the bridge is fully operational for use.

Stacey LaRouche, spokesperson for Gov. Gretchen Whitmer, told The Associated Press that Detroit and Windsor is the biggest trade crossing in North America and that the bridge is good for Michigan workers and Michigan’s auto industry.

“It’s going to open one way or another, and the governor looks forward to attending the ribbon-cutting,” she said.

Both of Michigan’s U.S. senators moved swiftly to condemn Trump’s remarks and emphasize the damage not opening the bridge could do to Michigan’s economy in Monday evening statements.

“This statement from the President is completely backwards. Michigan’s economy is highly integrated with Canada, and the Detroit-Windsor corridor is one of the busiest border crossings for trade in our entire country,” U.S. Sen. Gary Peters, D-Bloomfield Township, said in a post on X, formerly Twitter. “We’ve wanted this bridge for years because it will be a boon for our economy. This is another case of the president undermining Michigan businesses and workers.”

U.S. Sen. Elissa Slotkin, D-Holly, said tanking the bridge project would be “awful for our state’s economy” and have “serious repercussions,” including higher costs for businesses at home, less secure supply chains and unfulfilled job growth.

“With this threat, the president is punishing Michiganders for a trade war he started. The only reason Canada is on the verge of a trade deal with China is because President Trump has kicked them in the teeth for a year,” Slotkin said in a statement. “The president’s agenda for personal retribution should not come before what’s best for us. Canada is our friend – not our enemy. And I will do everything in my power to get this critical project back on track.”

The Detroit Regional Chamber, one of the foremost supporters of a new bridge, was diplomatic in a statement from President and Chief Executive Officer Sandy K. Baruah but called attention to the circumstances of how the “most consequential infrastructure project in the state and region of this generation” came to be under the leadership of officials, governments, and states of differing viewpoints.

“We … cannot lose sight of the facts of how this project came about and its importance to our economy as part of one of the strongest cross-border trade relationships in history,” Baruah said in his statement. “Thanks to multiple Canadian national governments, U.S. presidential administrations of both parties, and both Democratic and Republican governors of Michigan, the new bridge is close to becoming a reality and will advance international commerce and accelerate business growth, particularly in automotive, manufacturing and agriculture.”

Baruah went on to say that the bridge project would not have been possible without the Canadians and their financial support for the bridge after the U.S. took the lead on the Blue Water Bridge to continue a relationship meant to last “for the long term, not for the political dynamics of any given moment in time.”

“Canada is more than a neighbor; it is critical to our economic future,” he said. “There is no greater example of that than the international bridge.”

Members of Michigan’s congressional delegation representing metro Detroit, all Democrats, echoed Slotkin and Peters in their responses to Trump’s post, pledging to do whatever they could to make sure the bridge opens as planned and accusing the president of playing politics with the Great Lakes region’s economy.

“The Gordie Howe Bridge was built by union workers on both sides of the border. This border is the busiest crossing between our two countries and has been critical for not only Michigan jobs but also American jobs,” U.S. Rep. Debbie Dingell, D-Ann Arbor, said in a post to X. “Not to mention Canada paid for this bridge. This bridge was negotiated by a Republican Governor, and in 2017 Trump endorsed the bridge calling it a ‘vital economic link between our two countries.’ Nothing has changed. We cannot forget Canada is our friend and ally. We have to stop these cheap shots. It helps no one, and it especially hurts our economy. I look forward to the ribbon cutting.”

U.S. Rep. Haley Stevens, D-Birmingham, said Trump will “stop at nothing to undermine Michigan’s economy” and that threatening the bridge is the latest action in a string of trade decisions made since he retook office which have harmed the state.

“Trump’s trade war hurts Michigan, plain and simple. Canada is our longtime partner. Our manufacturing economy depends on the Detroit–Windsor corridor, and the Gordie Howe International Bridge is essential to our future,” Stevens said in a statement. “We must move this project forward. I will always stand up for Michigan. Trump needs to drop this threat, let the bridge open, and stop playing games with our jobs and our economy.”

If President Donald Trump follows through on his threat to prevent the Gordie Howe International Bridge from opening, it could come at the cost of several million dollars per week to the budget authority and taxpayers, according to an analysis released Thursday.

Anderson Economic Group released an initial analysis stating that the price tag for not opening the bridge could reach about $7 million per week.

The cost breakdown of not opening would total about $5 million for the bridge authority and bridge operator, while up to $2 million in weekly costs could affect taxpayers for the facility’s customs plazas.

“These are direct and unavoidable costs of delay, and not the full amortized cost of the bridge and related facilities, nor the foregone tolling revenue, and will be spread among multiple parties,” the analysis states. “Much of the burden will fall on Canadian lenders, businesses, and taxpayers. However, taxpayers in the United States and residents of the state of Michigan (which under the International Crossing Agreement will own a 50% interest in the Bridge) will also bear part of the cost.”

On Monday night, Trump announced on social media that he would “not allow” the opening of the new bridge connecting Detroit and Windsor, Ontario, unless his demand that Canada begin negotiations over grievances he has over trade between the two countries.

The threat caused a stir over a project that has been more than 20 years in the making.

Since the president’s threat, reports emerged that recent lobbying efforts by the Moroun family, owners of the nearby Ambassador Bridge connecting Detroit and Windsor, may have sparked the move by Trump. The Moroun family has long opposed the new span between Michigan and Canada, which would likely cut into the revenues generated from the Ambassador Bridge.

“While the direct costs to the bridge operator and authority are significant, it bears repeating that these are only a fraction of the costs to the automotive industry, as well as to the agricultural, tourism, and other industries dependent on efficient crossing of the US-Canada border,” the analysis states.

The Windsor-Detroit Bridge Authority said it will continue to make progress on the bridge, which is on track to open this year.

Several factors led to the $7 million figure in the AEG analysis.

The analysis estimated the largest cost to be $4.25 million per week in interest as well as about $500,000 in unavoidable operating and maintenance costs.

Another $250,000 in costs on average would likely occur from additional managerial, legal and related costs weekly.

The costs to taxpayers for operating the customs plazas on each side of the border were estimated at $900,000 each week for each side of the border.

AEG said its analysis comes from multiple sources, including automotive industry and economic data as well as information from the international crossing agreement and Windsor-Detroit Bridge Authority’s public reports through September 2025.

The analysis is not perfect, AEG added, pointing out that the bridge opening has not yet been halted, and no tolling figures have been set. An operating plan for the bridge has also not yet been made public, and there could be delays or forgiveness of interest payments by lenders if there is a short delay in beginning bridge operations.

A digital advertising tax meant to support the state’s Medicaid program was part of Gov. Gretchen Whitmer’s budget proposal, but opponents say it lacks specifics and won’t hold up in court.

The governor’s proposal, released Wednesday, would add a new 4.7% excise tax on digital advertising based on revenue from Michigan viewers. There would be exceptions for broadcast and news media.

The tax is forecasted to bring in $282 million in the 2026-27 fiscal year and go to  the Medicaid Benefits Trust Fund.

This is not the first time this tax has been introduced, Whitmer floated a digital advertising tax as a new revenue option for roads last year. The proposal floated Wednesday, however, is different from a previous version.

HB 4142, sponsored by Rep. Alabas Farhat, D-Dearborn, was first introduced in February 2025 to create a tax on digital advertisements. The legislation would have taxed annual gross revenue from digital advertising services for individuals making at least $100 million from advertising. The system in the bill is tiered, starting at a 2.5% tax for companies with at least $100 million, up to 10% for those making above $15 billion on the price of each ad.

The Mackinac Center for Public Policy has been critical of the tax system. James Hohman, director of fiscal policy for the center, wrote in an article opposing the legislation that the system set up “an unfair penalty” for one kind of advertiser compared to others.

While the new proposed tax does not have a tiered system, that only clears up one issue with the policy for Hohman.

Hohman told Gongwer News Service the change only addresses one of the legal questions surrounding the policy, but not the other stronger questions of the federal prohibition on treating internet businesses  separate from other businesses on tax policy.

Maryland has been in a legal battle for a similar tax since 2021. Washington also enacted a digital advertising tax in 2025 and has been sued by Comcast.

Legal battles could be antithetical to the purpose of funding Medicaid for Michigan, Randy Gross, senior director of the legislative affairs and associate general counsel for the Michigan Chamber of Commerce said. He argued if the tax were enacted – and Republicans have balked at the new revenue options – the funds would be tied up in litigation.

However, the overall issue for Gross is the lack of details, leaving the tax up to broad interpretation.

It seems like anyone who purchases digital advertising may have to cover the cost without extra guardrails on the policy, even the exception of news seeming vague, Gross said.

Another issue with the tax, Hohman said, is the idea that the state seems to want to just “tax the unpopular,” whether “it’s smokers, papers, gamblers, people who throw trash away, or digital advertisers.”

“Last year, they tried to make the claim that the digital advertisers really need to pay their fair share for the roads,” Hohman said. “That seemed inappropriate, because it’s not like digital advertisers are going over the pavement.”

Gross also worried about the benchmark of creating taxes for an activity that is unrelated to the other.

The tax would not just affect big advertisers either, who Hohman believes the tax is targeting, but also small businesses needing effective ways to spread the word across the statewide market.

Before the tax could reach Michigan courts though, Hohman simply doubts it will get through the House. Republicans, who control the chamber, rejected the tax increase last year and blasted the digital tax and others proposed by Whitmer’s budget.

Hohman said there isn’t the same sort of “ultimatum” like the roads deal to come to an easy agreement on a tax hike. Last year, the Legislature did pass a tax increase on marijuana as part of a road funding deal. He said making Medicaid numbers work could come with fungibility elsewhere within the state budget.

Instead, Gross said the Legislature may have to look at efficiencies and where to cut rather than taking their first swipes at business every time.

“I’m not envious of the position that policymakers have to be at to come to those positions, but always going to we’re going to tax something in the business community and make things more expensive and make it more uncompetitive for Michigan businesses and consumers doesn’t seem to be the solution,” Gross said.

Gross said the tax, if implemented, could actually generate more than $282 million because of how many advertisers it would affect.

The governor’s office declined to comment and referred questions to the State Budget Office on where the forecast stemmed from and who the tax was intended to target. The State Budget Office referred to the Department of Treasury.

Ron Leix, spokesperson for the Department of Treasury, said there is nothing in current law “that would provide a precise tax base,” but that the base used in revenue projections was an estimate of national online advertising revenues.

The largest sellers of digital advertising make up 75% of the market, according to Leix, and applying the 4.7% rate would produce the $282 million per year estimate.

A data center boom could mean thousands of new jobs and up to $5.5 billion in net new economic impact for Michigan, according to a new report.

The report, commissioned by Consumers Energy and analyzed by the Anderson Economic Group, found through fiscal impact analysis of three hypothetical scenarios in data center development, that construction could generate $121 million to $5.5 billion in total net new economic output.

Construction spending could directly and indirectly support 806 or 30,278 jobs in Michigan during the construction period as well. Operational expenditures could support 2,500-180,000 jobs in the state.

One criticism of data center development as an economic output developer is the lack of jobs after the construction period.

Overall, the report found in the next 20 to 40 years that one data center could generate $624 million to $55.5 billion in net new economic output through operational expenditures.

“When we approach economic impact analysis, we carefully consider each dollar that is going to be invested or spent due to the event or action being taken. We also carefully consider the power of that dollar in the region and industry of study as it is re-spent,” Tyler Theile, vice president and director of economic analysis and public policy at Anderson Economic Group, said in a statement. “It is important for developers seeking data center projects in Michigan to be transparent and forthcoming regarding parameters, investors, long-term operations, and ownership, and this analysis serves as a resource to all parties seeking to learn more about potential community benefits and impacts.”

Another aspect of the analysis is the possibility of “Good Neighbor” payments to households or businesses near a new facility to offset inconveniences during construction resulting in millions of dollars. Lease payments for power use could also add to the economic benefits by offsetting fixed costs of a property owner around a new data center.