Despite some recent rumblings from the Michigan House (more details below), the Michigan Legislature is still on pace to complete the FY 2027 state budget by the July 1 statutory deadline, assuming things keep moving as they have been.  Both chambers have passed their initial drafts of the budget, and appropriations committee members have been working feverishly to reach a compromise before July 1.  The Revenue Estimating Conference that took place in May gave appropriators a little more wiggle room, especially on the School Aid side of the ledger.  However, it is still expected to be a relatively flat overall budget for 2027 due to some losses in federal funds and efforts by several lawmakers to cut overall spending.
 
However, the devil is always in the details.  Some of the more pressing differences between the House, Senate and Governor’s proposals have yet to be decided.  For example, Governor Whitmer used additional taxes and a portion of the state’s “rainy day fund” to fund her budget proposal.  The House and Senate left those pieces out.  The House made some drastic cuts to state operations and funding for statewide programs, while the Senate recommended a relatively flat budget for next year. 
 
The Governor, House and Senate also have three different proposals to reduce property taxes on Michigan residents.  The Governor’s is the most modest, mainly lowering taxes for senior citizens.  The Senate’s plan is a bit broader, but comes with a $300 million price tag.  The House plan is the most widespread but comes with a cost of several billion dollars.  Speaker of the House Hall has proposed to make up for that gap by instituting a Sales Tax on Services – a concept that was hotly debated and discarded over a decade ago as being politically unsalable. 
 
More below on the budget and other issues of importance to MAGE members.
 
 
Supreme Court Hears Oral Arguments on Bill Presentment Issue
 
The next step in the prolonged legal battle over a set of bills being held in the House took place just over a month ago.  On May 6, the Michigan Supreme Court heard oral arguments on this case that has incredible importance to public employees – and especially some state employees – in Michigan.  The issue began when Speaker Matt Hall refused to forward four separate legislative packages consisting of nine separate bills that had passed both chambers in 2024, but failed to be presented to Governor Whitmer for her signature before the new 2025 Legislature was seated.  Two of those packages dealt with issues important to MAGE members:  1.  Allowing certain state workers who have a defined contribution retirement plan to join the hybrid plan available to Michigan State Police officers; and 2. The improvement of collective bargaining rights regarding health care for public employees (the “80/20” law). 
 
There is no set timeline for the Supreme Court to come to a ruling, but the expectation is that the Supreme Court will reach a decision by mid-summer.  The greater concern is whether or not Speaker Hall will abide by a ruling that goes against him.  It would be unprecedented for the Michigan Legislature to ignore a Michigan Supreme Court ruling, but we are living in unprecedented times.  The best outcome for the workers who would be impacted by this would be for the Michigan Supreme Court to rule that the bills must be transmitted to the Governor, the Speaker of the House to do so, and the Governor to sign the bills into law.  We are hopeful that this saga will end thusly, but anything can happen. 
 
 
Speaker of the House Floats Possibility of Delaying State Budget Process
 
Although the Michigan House and Senate are well ahead of where they were last year at this time in terms of completing the 2027 budget on time, there is still a possibility that they could fail to meet the July 1 deadline.  Speaker of the House Matt Hall stated recently that he would support a “continuing resolution” to maintain current spending past the new fiscal year (October 1, 2026), thereby extending state spending through January 31, 2027.  This would allow the next Governor and Legislature to complete the 2027 budget process – something Speaker Hall predicted would give new Republican leaders in Lansing more say.  That statement makes a number of assumptions, however, that may not come to pass. 
 
More worryingly, it would place public schools in a very difficult position.  K-12 schools are required by law to complete their annual budgets for the upcoming school year by July 1.  If the Michigan Legislature fails to complete the budget by that date (as they failed to do last year), K-12 schools will be forced to guess at their eventual funding, making it much more difficult to plan for new programs and to balance staffing levels. 
 
It would also make life much harder for state workers by essentially freezing in place current spending.  This would make it much more difficult to make staffing or programmatic changes to reflect changing demands, whether it deal with public benefits, public health, state parks, or a variety of other state services. 
 
While the differences between the House and Senate drafts of the budget are already closer than they were last year, some of the possible stumbling blocks to reaching a deal include policy priorities from the House Republican caucus.  These priorities include large property tax cuts, cuts to anti-poverty programs, and reforms to childhood literacy requirements.  The issue of so-called “ghost employees,” a term used by House Republicans to refer to funded but unfilled FTEs in state departments, also continues to be raised as a key priority of the Michigan House.  House leaders allege that departments use these unfilled FTE positions to shift dollars for other projects.  The State Budget Office has responded that any funds set aside for positions that do not get filled revert back to the state general fund at the end of the fiscal year and cannot be used for other purposes. 
 
So, with all of that, the budget negotiations could still go off the rails in the next few weeks even though both sides are closer on the majority of it than they were last year.  It will not become a serious problem for state departments until October 1, but if things do not get wrapped up by July 1, expect a very contentious summer.