Michigan House slashes U-M, MSU funding in $76B budget

Michigan House approves $76 billion spending plan in late-night votes
Republican-backed budget bills would slash funding for the University of Michigan and Michigan State University
Proposal would also redirect unspent business incentives funds towards local projects requested by state legislators

LANSING — Michigan’s Republican-led House approved a $76 billion budget on Wednesday night, the opening bid in what’s expected to be a protracted negotiation with the Democrat-led state Senate and Gov. Gretchen Whitmer.

The GOP spending plan, approved in a series of narrow votes without any Democratic support, proposes cuts across a broad swath of state government and would reduce funding in nearly every department.

It would dramatically reduce funding for the University of Michigan and Michigan State University — two of the state’s flagship institutions — and increase per-pupil funding for Michigan’s K-12 schools, but using a different formula than Whitmer and legislative Democrats have pushed for.

“We found $2 billion in savings, enabling us to close a $800 million funding shortfall,” said House Appropriations Committee Chair Ann Bollin, R-Brighton.

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While the House budget proposes about $76 billion in spending, Gongwer subscription news service reports that another $9 billion in Medicaid provider taxes would be put into a contingency fund. That means the budget would be closer to $85 billion, roughly $3 billion less than Whitmer’s $88 billion proposal.

The quick action by the House was a marked change from 2025, when the lower chamber did not pass a budget until late August — after a July 1 deadline written into state law. The Legislature later missed an Oct. 1 deadline in the state Constitution, but passed a stopgap sending measure to avoid a government shutdown.

While this year’s House budget emerged four months earlier, the fiscal landscape has substantially changed, thanks to new economic circumstances and the passage of President Donald Trump’s signature tax-and-spend legislation, the One Big Beautiful Bill.

Changes in federal funding have left Michigan facing a shortfall in Medicaid funding, and fiscal experts in July predicted that lawmakers will have $1 billion less than previously expected to build .budgets over the next two years.

The budget for the 2026-2027 fiscal year, when ultimately passed and signed by Whitmer, will likely bear little resemblance to the partisan spending plan approved Wednesday. That’s because the House will have to negotiate with the Democrat-led Senate and Whitmer’s office to reconcile their respective plans and reach a bipartisan compromise before the spending bills can become law.

U-M, MSU cuts

The House budget would slash funding for Michigan’s two biggest research universities, MSU and U-M, by a combined 62%.

That would amount to a $222 million funding reduction for U-M, and a $199 million cut for MSU.

Democrats panned the proposed cuts, as did the Lansing Regional Chamber, which noted the state is in an aggressive competition for talent, innovation and economic growth.

“These cuts will raise tuition,” said Rep. Jason Morgan, D-Ann Arbor.

“This budget practically asks students to leave. It asks talented researchers and entrepreneurs to leave, meaning fewer of them will build their lives and invest in our great state.”

Bollin, however, noted the cuts represent less than 2% of the overall budgets for each university, and Republicans argued each has large endowments they could tap to avoid tuition hikes.

The cuts appear to target the universities, at least partially, for diversity initiatives. “They both said they’d cut their DEI. They lied,” state Rep. Matt Maddock, R-Milford, wrote on social media after the vote.

‘Ghost employees’

Much of the spending cuts proposed in the House GOP amount to elimination of funding for unfilled state jobs and allegedly unspent money previously allocated to state departments.

“We’re able to cut $2 million from this budget without cutting anything except for the ghost employees and the money they’re not spending,” House Speaker Matt Hall, R-Richland Township, told reporters shortly after midnight Thursday.

Bollin and Hall both touted attempts to cut what they call more than 3,300 “ghost employees” positions, although the fact that state departments have named more full-time equivalent employee positions than hired workers doesn’t mean departments are squirreling away funding.

Other cuts included major reductions in funding for information technology projects across a slew of state departments, totaling close to $320 million in gross funding, according to an analysis prepared by the House Fiscal Agency.

The Department of Environment, Great Lakes, and Energy would see more than half of its funding — nearly $500 million — cut under the House plan, which would also cut 15% from the Department of State, 24% from the Department of Technology, Management and Budget and 16% from the Department of Labor and Economic Opportunity.

The LEO programs that would be eliminated include the Office of Global Michigan and the program for business attraction and community revitalization.

Rx Kids cut

The House also removed $20 million in funding from the Rx Kids program, which provides universal basic income for new mothers and pregnant women in a growing number of communities across the state.

Hall has criticized the program, alleging it was designed to benefit Democrats politically and should have restrictions on how recipients can use the money.

He also argued undocumented immigrants should be excluded from the program, although officials who run it say they don’t use any state funding for that purpose.

Last year’s budget deal included $270 million for Rx Kids.

Another SOAR spot

The House budget also proposes $145 million in legislative earmarks, to be paid for by redirecting unspent funds previously allocated for the Strategic Outreach and Attraction Reserve Fund, or SOAR, the state’s flagship economic development program that lawmakers had already stopped funding.

That would fund 97 grants requested by lawmakers under a new process that requires them to publicly announce their funding asks well in advance of the budget’s passage.

Some of the larger grants include $15 million for the city of Owosso to replace nitrification towers at a wastewater treatment plant, $6 million for the Capuchin Soup Kitchen in Detroit to construct a new mixed-use building and $6 million for Howell to improve the I-96 and D-19 interchange.

Another $300 million in unspent SOAR funding would go to the state’s “rainy day” savings fund under the House GOP plan.

No go on Whitmer tax plan

Whitmer had proposed about $800 million in new taxes on nicotine products, online betting and internet ads to boost Medicaid funding. That didn’t make it into the House’s budget, nor have Democrats in the Senate included them in their drafts.

Hall anticipated the fight over Medicaid funding is “going to be a very high priority for me in the budget negotiations.”

Whitmer’s budget also assumed the department could receive $150 million in cost savings through unspecified efficiencies. The House doubled that assumption to $300 million, and Hall argued afterward it would force the department to “eliminate the fraud in Medicaid.”

“It’s actually a very easy budget,” Hall told reporters afterward, calling it “the least important” since he’s been in the Legislature and claiming that election of a Republican governor in November would prompt a renegotiation of any spending plans finalized this year.