July 24, 2026 | This Week in Government: Budget Will be Balanced Once SOAR Fund, COVID Contingency Dollars are Lapsed

The State Budget Office refuted new analysis on Wednesday that indicated the newly signed state budget may overdraw the General Fund, arguing the administrative framework agreed to alongside official bills will free up funding to ensure a balanced budget by the end of this year.

A report published by the Citizens’ Research Council Wednesday illustrated the possibility of an unbalanced budget, which could pass on a depleted or in-the-negative General Fund to the next Legislature and governor in 2027. On a press call, CRC fiscal analyst Bob Schneider said decisions by lawmakers during the budget drafting process left the General Fund in a precarious position unless year-end revenue estimates indicate otherwise – or if the Legislature and administration take steps to rectify the imbalance.

“The executive budget is much smaller than the enacted budget,” Schneider said. “And it’s important to remember the governor’s budget is much smaller because (it) was based on some really significant tax proposals that were going to increase revenue and allow her to offset about $780 million in General Fund expenditures, so (GF discretionary revenues) would be $780 million higher had those tax proposals come to fruition.”

Other factors affecting the budget’s balance against the General Fund, Schneider said, included a supplemental which ended up being $278 million larger than the one Gov. Gretchen Whitmer proposed; lawmakers nixing the idea to draw from the budget stabilization fund and plans to reprioritize one-time spending being left out of the final documents.

Schneider said a seemingly unbalanced budget shortly after passage in July would not be cause for concern in previous years, given the larger stores of General Fund dollars.

“(It’s) not an automatic problem, because in many years recently, we’ve had really significant general fund balances sitting in the bank,” he said. “And if and if a general fund balance exists at the beginning of fiscal year 2027 that’s above $672 million, then we don’t have a problem. We still have a balanced budget.”

The problem, Schneider said, is how lawmakers have told the public this year’s budget constitutes a reduction in spending from last year and would leave the General Fund in good shape.

“If you account for all these adjustments that are known and expected, we get a fund balance at the beginning of fiscal year 2027 that’s in the negative by about $42 million, but the reality is it could be (up to) $150 million worse, or even slightly better, because we’re making those assumptions,” he said. “We’ll get more information as we get the book closing for fiscal year 2026. What’s clear is it’s not (a) $627 million shortfall. The fund balance is probably zero or negative, and so we have an issue.”

Schneider said he believed there were plans in place to carry out the remainder of the budget work via administrative action versus in the Legislature, a theory confirmed by the State Budget Office.

SBO said the budget is balanced, and the solutions to the potential overdraw mentioned by Schneider will be carried out as part of an administrative framework agreed to alongside the budget bills .

“Any implications that the budget is not balanced are simply false. Michigan law requires a balanced budget, and Governor Whitmer has signed a balanced budget every year of this administration – including this one,” an SBO spokesperson said. “The budget framework reflects standard accounting practices, including reflecting known lapses, the expiration of unspent COVID contingency funding that was scheduled to sunset this year and a lapse of uncommitted SOAR funding.”

House Speaker Matt Hall, R-Richland Township, made a similar assessment of what budget work is left to do in a Wednesday post to X, taking shots at Democrats as he did so.

“I negotiated a great budget deal that was signed into law yesterday. As part of that deal, we are finally defunding and draining the governor’s ‘SOAR’ fund, which gave out hundreds of millions of dollars in corporate welfare with no accountability and was a complete failure. We’re also taking money back from the COVID-19 slush fund that shouldn’t exist,” Hall wrote in the post. “We were smart and used that money to save Medicaid, hand out record school funding and increase public safety instead of raising taxes or raiding the rainy day fund like the Democrats wanted to do. We made better use of the money state government already has so we could pass a balanced budget smaller than last year and give taxpayers better value for their dollars.”

Although the SOAR Fund was created by an act of the Legislature, it can be lapsed under a provision of the Management and Budget Act, which allows the state budget director to cancel unencumbered funding for work projects.

Schneider said despite the likelihood of the 2027 budget’s fiscal wrinkles being smoothed out by the end of the year, he remains worried about an emerging pattern of elected officials obfuscating or mischaracterizing the size of state budgets.

“When we restructure the budget in very significant ways and (ways that) sometimes seem designed to sort of make it look smaller than it is, that’s a problem,” he said. “It’s a problem for the public and for understanding how big the state budget is compared to two or three years ago. It’s a problem for us as budget wonks and analysts trying to baseline the budget over time. You lose the apples-to-apples connection year in and year out, so yes, I’m concerned about that.”

Gov. Gretchen Whitmer signed legislation on Wednesday that will expand local abatement and transformational brownfield programs to allow more businesses and communities to redevelop blighted sites.

The bill package was among several pieces of legislation the governor signed on Wednesday that were passed alongside the budget earlier this month.

The brownfield program – SB 721 (PA 34), SB 722 (PA 35), and SB 723 (PA 36) – enables owners of development companies to keep the income tax withholdings of employees at new job sites instead of remitting them to the state.

In a press release, the governor highlighted the bills delivered on the promises she made in her State of the State Address to expand housing opportunities across Michigan.

“Together, we’re making communities across Michigan even better places to live, work, and invest,” Whitmer said in a statement. “I’m proud to sign these bipartisan bills that will expand our ability to transform abandoned or blighted sites into affordable homes and thriving commercial spaces, all while creating new, good-paying jobs and boosting our economy. These renewed spaces will attract new investments that keep our state competitive. These bills are just one of the many tools we have that make Michigan the best place to invest. I’m proud of the work we’ve done to develop Michigan neighborhoods and open doors for businesses.”

Detroit Mayor Mary Sheffield praised the legislation in a statement on Wednesday, saying it would help the city.

“These pieces of legislation restore and help provide Detroit and other cities and municipalities across the state with tools that are vital for creating more jobs, fostering more development and improving the quality of life for Detroit residents and all Michiganders,” she said. “I look forward to the continued partnerships between our great city and leaders in Lansing to accomplish greater initiatives.”

There has been a big push to reauthorize the program after it expired a few years ago, and it has been eyed to defray the cost of demolishing a portion of the Renaissance Center.

The revamped transformational brownfield program includes some new safeguards to avoid abuse of the credit. Employers would not be able to receive income tax withholdings from employees if the employer has more than 50 employees in Michigan or is receiving an economic incentive from the Michigan Strategic Fund and is not in a new job. The relocation of a job from elsewhere within the state to the property cannot be counted as a new job.

Additionally, entities that relocate a facility from one location in the state to another that don’t expand the size of the relocated facility, employ more individuals after the relocation, or have another valid business reason for the relocation are ineligible for withholding.

A new definition for affordable housing is added – residential housing units rented or sold to income qualified households.

“These new redevelopment tools are an investment in Michigan workers,” said Tom Lutz, executive secretary-treasurer for the Northern Midwest Regional Council of Carpenters. “Turning blighted properties into thriving businesses and community assets means more good-paying union jobs in construction today and stronger local economies for years to come. When we invest in rebuilding our communities, we create opportunities for working families and ensure Michigan’s economic growth is built to last.”

Whitmer signed 10 other bills on Wednesday related to healthcare costs.

The bills include SB 415 (PA 37), SB 105 (PA 38), HB 4072 (PA 41), SB 301 (PA 39), SB 501 (PA 40), HB 4101 (PA 42), HB 4103 (PA 43), HB 4104 (PA 44), HB 4309 (PA 45), and HB 4746 (PA 46).

They address a wide range of policy issues, including insurance coverage for group prenatal care under Medicaid, requiring health insurers to provide at least one payment method for dentists and dental therapists that don’t incur extra fees, joining licensing compacts and incentivizing companies to offer paid organ donation leave for employees.

One of the bills signed into law, HB 4746, requires the Department of Health and Human Services to issue chip-enabled Michigan Bridge Cards to recipients of food or cash assistance benefits.

“Getting sick or injured shouldn’t mean going broke,” Whitmer said in a statement. “I’m proud to sign these bills that will lower healthcare costs and make it easier for Michiganders to receive the care that they need. Over the last seven and a half years, we’ve done a lot to save you money on care; we lowered the cost of prescription drugs, codified the Affordable Care Act in our state, protected Medicaid, and erased nearly $200 million in medical debt. Let’s keep working together to build a healthier, more affordable Michigan.”

Gov. Gretchen Whitmer signed several bills on Tuesday, including legislation requiring elementary school teachers to complete LETRS training.

HB 5697 (PA 26), sponsored by Rep. Nancy DeBoer, R-Holland, was signed by Whitmer during the same event where she signed the education omnibus budget.

The new law requires preK-5 public school teachers to receive science of reading training by the 2030-31 school year. The bill lays out specific parameters for the type of training that must be completed and assigns the task of selecting such a training program to the Department of Education, which would almost certainly select Lexia’s LETRS model after advocating for it to be made mandatory for several years now.

“Today, we celebrate for the students of Michigan,” DeBoer said in a statement. “Learning to Read will unlock their futures. We have come together to support our families, our dedicated educators, and our innovative business community. Michigan is worth it.”

Nearly 7,200 educators have already completed LETRS training, and more than 5,700 are enrolled now.

HB 5646 (PA 27) requires faculty at educator preparation programs to receive training in the science of reading as well.

Superintendent of Public Instruction Glenn Maleyko praised the legislation in a statement.

“I am excited that we are making literacy achievement Michigan’s top priority, because we must make sure that every child reads for Michigan’s students to be successful in school and in life,” he said.

Whitmer also signed SB 903 (PA 22), which codifies requirements for districts to receive weighted funding. Weighted funding provides resources based on student need with a focus on improving outcomes in the classroom.

SB 989 (PA 24) was also signed. The bill changes the interim teaching certification process to expand pathways for individuals’ training to become special education teachers.

“Michigan is facing an education crisis, and we can’t afford to leave any student behind,” Sen. Dayna Polehanki, D-Livonia, said in a statement. “My bill will help guarantee that every student, including those receiving special education services, gets the support they need while strengthening our teacher workforce and ensuring our schools have the qualified educators every child deserves.”

Wildfire smoke from Canada and Northern Minnesota did not just create a surreal hazy environment across Michigan and other states for several days, but it also had a negative effect on the state’s economy during its worst stretch, one group stated in a recent analysis.

Anderson Economic Group released an analysis Wednesday which found Michigan was one of multiple states that likely suffered multibillion-dollar economic hits due to closures, event cancellations, and other responses to the health hazards the smoke presented.

The group estimated, based on the partial information analysts were able to compile, that Michigan lost more than $4 billion in economic activity due to the Canadian and Minnesota wildfires.

It also projected losses of about $5 billion in New York and about $2 billion in Wisconsin.

States and public health departments warned the public about hazardous air quality conditions during the peak of the smoke that blanketed several states last week. This led to many outdoor events and sporting events being canceled and public space closures.

The public was also warned about being outside for long periods of time as well as working or exercising outdoors.

Anderson Economic Group estimated the smoke curtailed tourism activities in the affected states and other outdoor activities.

“We can already observe closures and reduced activity at parks, businesses serving customers in the open air, health clubs, and other locations where people would otherwise be exercising, relaxing, dining, working, to just enjoying the outdoors,” Richard Melstrom, an environmental economist with the group, said in a statement. “Our preliminary estimates, based on early data, indicate these losses total in the many billions of dollars.”

Anderson Economic Group stated its analysis examined the geographic spread of the smoke using data from the National Oceanic and Atmospheric Administration, air quality data from Airnow, and other sources.

It also used data on publicly announced closures to determine estimated losses, as well as information from past wildfire losses and economic indicators of the populations and incomes of people in the affected areas. Industry factors that indicated sensitivity to closures due to poor air quality were also considered.

The analysis did not include long-term health effects, the loss of forests or natural resources or the costs of combatting the fires and loss of infrastructure in the fire zones in its calculations.