Sept. 26, 2025 | This Week in Government: Leaders Say They’ve Struck a Budget Deal

The two legislative leaders and Gov. Gretchen Whitmer announced a budget agreement on Thursday as the House was finishing votes on new revenue—including a marijuana wholesale tax—for roads.

Although Whitmer, Senate Majority Leader Winnie Brinks, D-Grand Rapids, and House Speaker Matt Hall, R-Richland Township, released a joint statement that all sides had agreed to a budget plan, there’s still little in the way of details.

The three leaders issued a statement Thursday night saying they have a deal to complete the 2025-26 fiscal year budget before the Oct. 1 start of the fiscal year and “nearly” $2 billion more per year for roads.

The statement – with just 125 hours remaining until the start of the fiscal year – was the first signal from the three leaders that the pieces were coming together to avert the first state government shutdown in 16 years. Still, there is an enormous amount of work to do, some negotiations remain unfinished, and both chambers called off attendance at sessions they had hastily scheduled days earlier for Friday.

“Today’s agreement in the Legislature puts us on a path to lower costs, fix the damn roads, and pass a balanced, bipartisan budget by Oct. 1,” Whitmer said. “I am grateful to Majority Leader Brinks, Speaker Hall, and legislators on both sides of the aisle for working hard to move this budget forward. In Michigan, we’ve proven again and again that we can work together to get things done by staying focused on the kitchen-table issues that make a real difference in people’s lives. Amid so much national economic uncertainty, I am proud that we are taking action to lower costs, cut taxes for seniors and working families, create jobs, fund schools, fix roads, keep people safe and healthy, and so much more.”

During a press conference after session, Hall put the total number for local roads at $1.5 billion, which would go up to more than $1.8 billion over the next five years.

The topline for the budget will be smaller than last year, but it’s unlikely to have the $5 billion in cuts proposed by House Republicans.

“Topline isn’t 100% confirmed yet, but I have enough information on what we’re doing to know it’s going to be smaller than last year,” Hall said after the session.

None of the leaders shared details about per-pupil funding in the School Aid Fund budget, either.

Hall said as part of the framework, the budget will have no state income tax on tips, overtime or Social Security, which matches changes made at the federal level.

“This is a great win for Michigan workers, and it’s also finally starting to achieve some value for your dollars,” he said.

The House passed legislation Thursday to pave the way for finalizing a state budget, including a 24% wholesale tax on cannabis, decoupling state and federal business taxes, and trying to preserve some type of insurance provider tax.

The three bills the House passed – HB 4961, HB 4951, and HB 4968 – appear to be key pieces to a long-term increase in road funding and the 2025-26 fiscal year budget.

“This is one big step we’ve just taken today to avoid a potential shutdown next week,” Rep. Alabas Farhat, D-Dearborn, said. “The budget’s still not fully baked. It’s still not fully done. The total number for roads is something we’re working on. We don’t want anybody to lose their job as a result of the funding cliff that we’re heading towards, and we also want people in Michigan to have high-quality roads that they can depend upon.”

In the joint statement, Hall said there is still work to go, but it’s an important step that all leaders agree “to implement meaningful tax relief for Michigan workers and seniors, bring transparency and accountability to the earmark process for the first time, and eliminate ghost employees.” Government has grown far too much in recent years, and we need to trim the waste, fraud, and abuse in Lansing. That’s how we can afford the real priorities of Michigan families – like education, public safety, and fixing our local roads and bridges. This agreement puts us in a position to do just that.”

Brinks, who did not speak with reporters during Senate session Thursday, said in the statement that the framework on which they have agreed “reflects the priorities of Michiganders from every region, and while no budget will be a perfect product, I am confident that the final result we vote on next week will have features that benefit every resident.”

There are still a lot of details to work out, though. Farhat, the former minority vice chair of the House Appropriations Committee , said many of details are still being ironed out.

“It’s a thousand-page document that gets drafts,” he said. “Boilerplate gets written, money gets decided on how it’s spent.”

Rob Coppersmith, executive vice president of the Michigan Infrastructure & Transportation Association, celebrated the announcement of a roads deal in a statement.

“After decades of inaction, we finally have an agreement on a road funding deal that marks a historic step forward for Michigan. This bipartisan agreement is not only a significant investment in repairing and rebuilding our roads and bridges, it is also an investment in saving good-paying jobs and strengthening Michigan’s economy,” he said. “While this is a historic step in the right direction, we know the work is not finished. Michigan must continue to make long-term, sustainable investments to keep our roads in good and fair condition for decades to come. This agreement lays the foundation for that future.”

A key part of the road funding proposal is the $420 million estimated to come from a new 24% wholesale tax on cannabis through HB 4951. The bill creates a new Comprehensive Road Funding Tax Act, which would go toward road construction, preservation, and maintenance in Michigan.

The House Fiscal analysis estimates the bill would generate about $420 million based on current wholesale sales. During the next fiscal year, the bill would allocate $3 million of the revenue into the Comprehensive Road Funding Fund for implementation and administration costs. In subsequent years, the allocation would be reduced to $500,000, with the remaining balance – by far the bulk of the new revenue – deposited into the Neighborhood Road Fund.

The Neighborhood Road Fund would be new and is included in HB 4230. That passed the House earlier this year and targets funds to locally owned roads and bridges.

The bill passed 78-21.

Cannabis was legalized in Michigan by a ballot proposal, and under Michigan law, a three-fourths majority is needed to amend an initiated act passed by voters. HB 4951 fell five votes short of that margin, but lawmakers said the bill is on solid legal footing.

The bill creates a new act instead of amending Proposal 18-1, the Michigan Regulation and Taxation of Marihuana Act.

“We’ve got some great lawyers here,” Farhat said. “They’ve looked at this, and they’ve made it clear that this will withstand a legal challenge, being that it’s at the first point of sale and not at the retail side.”

The cannabis industry, however, promised a legal challenge.

Robin Schneider, executive director of the Michigan Cannabis Industry Association, said if the Legislature attempts to implement the new tax without getting the three-fourths majority required to amend an initiated act, there will be a lawsuit.

“If they raise the prices this much, they send the customers back to the illicit market and put everyone out of business,” she said in a statement. “We will lose 30% of our customers from our border states, plus cannabis tourism, because this makes us the highest tax rate in the Midwest.”

Schneider said if the tax increase is implemented, Michigan will become the national example of “what not to do,” citing California. Just this week, the state’s governor signed a bill rolling its excise tax back to 15% after it had earlier this year increased the tax to 19%.

Michigan charges a 10% excise tax along with the 6% sales tax on marijuana purchases.

Lawmakers defended the 24% wholesale tax, saying it would put Michigan on par with other states.

“Every time I drive on the highway, all I see are these (marijuana) billboards everywhere. So, I don’t think they’re doing as bad as they’re saying they’re doing. …There is some saturation that we’re seeing, but at the same time, we are heavily behind our peer states on where we ought to be on a wholesale tax,” Farhat said. “The people of Michigan deserve their fair share to be able to go toward roads, and that’s what we’re doing here today. And maybe we see a few less billboards, but that’s fine.”

Hall said the agreed-upon 24% is lower than the 32% Whitmer proposed in her executive budget recommendation.

“We want to have an industry,” he said. “But ultimately, we wanted to dedicate the money to roads. Michigan has among the lowest marijuana prices in the country … and we think this [tax] is lower than a lot of other states because it’s a wholesale tax.”

HB 4961 would allow Michigan to “decouple” state and federal business taxes.

Under President Donald Trump’s One Big Beautiful Bill Act, which was enacted in July, businesses are set to pay less in taxes federally, and because of how the state code is aligned with the federal code, they would also pay an estimated $677 million less to the state.

The federal changes could immediately and significantly affect state revenue and the General Fund, as they act as “timing shifts” that increase deductions in the short term without changing businesses’ total liability over time. Decoupling would avoid that.

“It’s just decelerating what the federal government gave an acceleration to,” House Finance Committee Chair Rep. Mark Tisdel, R-Rochester Hills, said. “The credits will still be there. The advantages will still be there. It’s just spread out over more time, so we’re not experiencing that upfront crunch when we’re trying to come up with billions of additional funds for roads.”

The bill passed 95-4. Rep. Steve Carra, R-Three Rivers; Rep. James DeSana, R-Carleton; Rep. Phil Green, R-Watertown Township; and Rep. Jaime Greene, R-Richmond, voted against it.

The National Federation of Independent Business expressed disappointment that the Legislature approved the decoupling plan.

“Unfortunately, the tax savings small businesses experience on their federal taxes will be wiped out when filing their state taxes, as well as making state taxes more confusing,” Amanda Fisher, state director of NFIB, said in a statement.

HB 4968 directs the Department of Health and Human Services to ask the federal Center for Medicare and Medicaid Services for a waiver that allows Michigan to continue to collect its insurance provider tax while the state figures out how to comply with new federal rules. The OBBBA is expected to result in the federal disqualification of that provider tax, which raises considerable funds for Medicaid.

This legislation would save the state $2.4 billion in federal fines, Tisdel said.

HB 4968 passed 95-4. Carra; DeSana; Rep. Jaime Greene, R-Richmond; and Rep. Brad Paquette, R-Niles, voted no.

The three discharged bills are all tie-barred to each other – and to HB 4183. That’s a bill the House passed earlier this year that would raise the fuel tax from 31 cents per gallon to 51 cents per gallon.

A fuel tax increase would move in tandem with a bill removing the 6% sales tax from fuel – a revenue-neutral change that would assure all taxes paid at the pump go to roads. It would mean about $1 billion more for roads each year.

Lawmakers didn’t provide information about how they plan to remove the sales tax from fuel without affecting the School Aid Fund.

“It’s the intent to make schools whole,” Hall said. “I don’t know everything that we’re allowed to say, but I’ll just say we make schools whole as part of the plan.”

Once the principals set targets for the budget, the final push to get the budget across the finish line can begin.

“We haven’t agreed to the exact details of how we’ll get this thing through,” Hall said. “I would expect you may see the budget put into a big bill and move through the chambers, but we haven’t finalized that.”

Although both chambers have session scheduled for Friday, neither will have members in attendance to conduct business.

Session is also scheduled in both chambers for Monday, but it is unclear whether attendance will be taken.

The Senate passed several budget implementation shell bills on Thursday, most of which moved along partisan lines, with questions raised by a Republican who could not bring herself to give her support at this stage.

With five days remaining ahead of a possible government shutdown, movement of the slate of budget implementation bills provides potential vehicle bills for the product of final negotiations, which were ongoing Thursday. Gov. Gretchen Whitmer, Senate Majority Leader Winnie Brinks, D-Grand Rapids, and House Speaker Matt Hall, R-Richland Township, said Thursday night they had reached an agreement (see separate story).

Bills modifying state fees and disbursement of funds were passed in the Senate by votes of 19-17 along party lines, including tobacco settlement revenue (SB 574 ), municipal filing fees (SB 575 ), creation of an Energy Efficiency Revolving Fund (SB 576 ), water fees (SB 577 ), the Movable Bridge Fund (SB 578 ) and the Natural Resources and Environmental Protection Act (SB 579 ).

Another fee bill, SB 273, passed 36-0 and would amend yearly fees that pesticide distributors, fertilizer manufacturers, and distributors must pay to the Department of Agriculture and Rural Development.

Members passed a three-bill package on Thursday that would create state funds used for tuition and child care costs for members of the Michigan National Guard.

Sen. Lana Theis, R-Brighton, spoke against the National Guard bills prior to the votes.

“As yet, we have no agreed-upon budget,” Theis said. “I have no idea what these bills will look like when and if they come back to us. There are definitely things in it, like these three bills, that I would otherwise be supportive of. I would very much like to see the final language, but at this point in time, I have to be a no.”

The first bill, SB 540, would enact a Michigan National Guard Child Care Assistance Act. It would create a Michigan National Guard Child Care Assistance Program within the Department of Military and Veterans Affairs. The program would allow eligible National Guard members to apply for child care costs to be covered when away on weekend drills or yearly training.

Under SB 541, a Michigan National Guard Member Benefit Fund would be created within the Department of Treasury. The DMVA would be able to spend the money from the fund, on appropriation, to implement and administer the Michigan National Guard Tuition Assistance Act and the Michigan National Guard Child Care Assistance Act.

Finally, SB 542 would amend the Michigan National Guard Tuition Assistance Act. It would require the transfer of the remaining funds from the Michigan National Guard Tuition Assistance Fund at the end of the 2024-25 fiscal year to the Michigan National Guard Member Benefits Fund.

Members voted 30-6 on SB 540 and SB 541, and voted 26-10 on SB 542.

The pros and cons of regulating a federal program intended to allow hospitals to stretch their resources by providing lower costs on certain pharmaceuticals were debated by a House panel on Wednesday.

HB 4878 would provide regulations for the federal 340B program, which requires pharmaceutical manufacturers to offer certain drugs at discounted prices to 340B entities, such as hospitals or clinics serving low-income or vulnerable patients. Those facilities can then use the savings from discounts to stretch resources and serve more patients.

The legislation would create a new act for reporting drug price increases and set rules for conduct related to the federal 340B program. It would prescribe civil penalties, give duties to state agencies, and apply to drug manufacturers, wholesalers, pharmacies, hospitals, and 340B entities.

Rep. Curt VanderWall, R-Ludington, who chairs the House Health Policy Committee , called the bill a commonsense solution to a complicated problem in health care.

“It protects health care providers and federally qualified health centers by allowing them to use this program to its full extent and stops the gamesmanship between pharmaceutical manufacturers and the participants in this program,” he said. “It sheds desperately needed light on the size and scope of the program. In a word: transparency.”

Chip Foley of the Michigan Health and Hospitals Association testified in support of the bill, saying that while there was still room for improvement, the bill provided a starting place.

“This legislation is critical to protecting the integrity and sustainability of the 340B program,” he said.

Hospitals use the savings from 340B to offer free blood pressure tests and free mammograms, Foley said.

“There’s a clear opportunity to strengthen the bill by ensuring that manufacturers are held to the same level of accountability as hospitals,” he said. “There is room for improvement on all sides. … But we all know, don’t let perfect get in the way of the good.”

Rep. Luke Meerman, R-Coopersville, asked if the 340B program incentivized doctors to prescribe more prescription drugs in their most expensive forms.

Stephanie Fields with the Michigan Health and Hospitals Association said the difference in cost of the drug for the patients versus the pharmacy was the last thing on the mind of medical providers.

“They’re making a decision on what’s best for that patient, and the providers are deciding what drugs the patient should be on for their course of treatment, not the pharmacy, and certainly not the 340B program,” she said.

The funds from the 340B program go back into the hospital’s overall funding and are applied across the entire system, Foley said, but the money must be used for community benefit.

Morgan Halloran, director of state policy for PhRMA, testified against the bill.

“It locks in what we think is exactly broken in the program and enshrines in state law mechanisms that ensure continued exploitation of the program that generates significant profits for large, tax-exempt hospital systems, pharmacy benefit managers, chain pharmacies, and other third-party actors at the expense of patients,” she said.

Halloran also said the bill as written would be an expansion of federal law and would amplify the effects of hospital markups for drugs, which are in turn increasing costs for patients.

“This trend underscores the current urgent need to realign the program with original congressional intent: supporting true safety net providers and vulnerable patients, not enabling financial exploitation through unchecked pharmacy contract arrangements and hospital consolidation market practices that divert resources away from the program designed to help while driving up overall health care costs,” she said.

Emily Gibellina with AbbVie, a pharmaceutical manufacturer, also testified against the bill, saying her company’s position was that Michigan should not be legislating an exclusively federal program.

“I know firsthand that there are some safety net hospitals that benefit from this program, but I also know that large health care systems and third parties exploit the program for their own benefit and not the needs of their patients,” she said. “This program creates a perverse incentive to provide higher-cost drugs.”

Jarett Skorup of the Mackinac Center for Public Policy also testified against the bill, saying it enabled the government to pick winners and losers.

“They should do other options, like expanding competition for drug manufacturers and for hospitals, and let the market kind of sort out how this program works,” he said.

Rep. David Prestin, R-Cedar River, said the 340B program was a lifeline for many hospitals in the Upper Peninsula.

“A lot of our systems are using these 340B funds to help bolster their ability to deliver health care services,” he said. “They’re holding on by a lifeline. Throwing the baby out with the bathwater, a complete reversal of 340B and the way that it’s used, especially in my district, could devastate the entire health care industry that’s already under immense pressure.”

Frank Waters of the Michigan Primary Care Association testified in support of the bill, stressing that all money from 340B programs went back into patients.

“This is about being able to provide the same level of care that our health centers have been able to provide over the years,” he said. “Health centers are losing money year over year in the 340 B program. While the program may be growing, health centers are losing money year-over-year because of the contract pharmacy restrictions, so we appreciate this legislation addressing that issue.”

No further action was taken on the bill on Wednesday, but VanderWall said he expected to report it the next time the committee meets.

Environmental groups thanked the Michigan Supreme Court on Friday for granting an application for leave to appeal a lower court ruling in its lawsuit over the Public Service Commission‘s permit approval for the proposed Line 5 tunnel project.

The Supreme Court granted the leave of appeal this week in the lawsuit filed by the Environmental Law and Policy Center and Michigan Climate Action Network along with four tribal groups.

In April, the groups filed their appeal with the high court for a review of the decision of the Court of Appeals affirming the PSC’s approval of a permit for Enbridge to build a tunnel beneath the lakebed of the Straits of Mackinac for a section of pipeline to be relocated (See Gongwer Michigan Report, April 3, 2025).

The appellants and appellees in the case will each have 20 minutes of time during oral arguments. A date has not yet been set.

“ELPC and MiCAN appreciate that the Michigan Supreme Court has granted our petition for leave to appeal the lower court decision upholding the Michigan Public Service Commission’s permit approving Enbridge’s Line 5 oil pipeline tunnel through the Straits of Mackinac, which unduly threatens the vital air, water, and other natural resources of our Great Lakes Communities,” Environmental Law and Policy Center Executive Director Howard Learner said in a statement.

Earlier this year, the Court of Appeals ruled it had found no reason to reverse the PSC’s decision to grant permit approval for the project, saying the commission had provided a comprehensive opinion outlining its decision and had acted reasonably in considering its actions regarding Line 5 (See Gongwer Michigan Report, Feb. 19, 2025).

In its April filing, the groups stated that the key question being raised with the court is whether Enbridge met the criteria under state law in obtaining a permit for the proposed tunnel project. Also, the groups asked if the Court of Appeals had erred in holding that the PSC has a duty to apply the common law public trust doctrine because the commission is not expressly empowered to do so by the Legislature.

“On behalf of the tens of thousands of Michiganders who supported our appeal, we are grateful for another opportunity to ensure the projects protect public health and the environment,” Michigan Climate Action Network Executive Director Denise Keele said in a statement.

Following the April ruling by the Court of Appeals, an Enbridge spokesperson said the appeals court had come to the correct determination regarding the thoroughness of the PSC’s decision and that the tunnel would be a safe option to continue moving needed energy resources to market.

Enbridge spokesperson Michael Barnes, in a Friday statement, said the company is confident in the thoroughness of the PSC’s permitting process.

“The February decision from the Michigan Court of Appeals affirmed the comprehensive and detailed work of the MPSC to approve the Great Lakes Tunnel Project,” Barnes said. “As we proceed with this modernization project, we remain committed to operating Line 5 responsibly with enhanced safety measures in the Straits that protect Michigan’s natural resources.”

All of Michigan’s 18 labor market regions saw receding non-seasonally adjusted unemployment rates over the month of August, new monthly data from the Department of Technology, Management and Budget shows.

Those regional unemployment rates ranged from 4.3% to 6.9% during August, with a median rate decrease of 0.8 percentage points. The largest rate decline was in the Detroit-Warren-Dearborn metropolitan statistical area at 1.4 percentage points.

Since August of 2024, 15 labor market areas exhibited unemployment rate increases, with a median rate gain of 0.4 percentage points. The Flint and Saginaw metro areas saw the largest over-the-year rate gain of 0.6 percentage points.

“While unemployment rates decreased typically throughout all regions in August, they remained elevated throughout most areas over the year,” Center for Data and Analytics Labor Market Information Director Wayne Rourke said in a statement. “Payroll jobs have risen throughout a majority of metro areas over the month and over the year.”

Total employment advanced in 15 of the 18 labor market areas over the month, with a median gain of 0.6%. Employment lowered in the Detroit and Northwest Lower Michigan regions and stayed the same in the Northeast Lower Michigan region.

Over the year, 16 regions exhibited employment reductions, with a median decrease of 1.5%. The Northeast Lower Michigan region and the Upper Peninsula were the only two labor market areas that displayed employment increases between August 2024 and August 2025.

Regional labor force levels decreased in 16 of the labor market areas in August, with a median decrease of 0.3%. The Battle Creek area total workforce saw a slight uptick of 0.2% and the Monroe metro area labor force total went unchanged from July.

Regional workforce levels declined in 16 regions over the year, with a median reduction of 1.0%. The most significant yearlong labor force decrease occurred in the Traverse City region, which saw a 2% drop.

Not seasonally adjusted nonfarm employment rose by 10,000, or 0.2%, during August. Industries with the largest over-the-month payroll job gains included government, which increased by more than 7,000 jobs, and professional and business services, which increased by more than 4,000.

Nonfarm employment rose in 10 of the state’s 15 metro areas over the month, with a median increase of 0.3%. The largest monthly employment increase occurred in the Battle Creek area.

Total nonfarm employment rose by 41,000, or 0.9%, from August 2024. Twelve metro areas had payroll job increases in the same period, with a median increase of 0.6%.

All 83 counties saw lowered unemployment rates over the month, with a median rate reduction of 0.9 percentage points. Jobless rates increased in 50 counties over the year.

The state’s lowest unemployment rates were in Livingston County (3.1%), Oakland County (3.4%), Mackinac County (3.6%), and Lapeer County (3.8%). The highest rates were in several northeast Lower Peninsula counties (Oscoda at 9.6%, Alcona at 8.2% and Presque Isle and Ogemaw, each at 7.9%).