LANSING — The state budget signed July 21 by Gov. Gretchen Whitmer is in a deficit and further action is needed to prevent Michigan’s next governor from taking office with a half-billion-dollar budget hole, according to a new report.
The report from the nonpartisan Citizens Research Council of Michigan, a Livonia-based think tank, says that, based on current revenue estimates, state general fund spending detailed in the budget will exceed revenues for both the 2027 fiscal year that begins Oct. 1, and the following year.
A spokesman for the Whitmer administration rejected the report’s major finding.
Michigan’s constitution requires a balanced budget.
In light of that fact, “It’s very likely that the administration and lawmakers have an agreed upon framework for addressing the remaining shortfall,” says the report, released July 22.
“However, if that is the case, the framework has not been publicly released.”
The report notes that the 2027 budget proposal that Whitmer presented in February called for only $13.6 billion in general fund spending, $500 million less than what is authorized in the budget she signed into law July 21.
Yet Whitmer’s proposal called for $780 million in new taxes, plus a $400 million withdrawal from Michigan’s Rainy Day Fund. Neither of those measures, intended to help balance the budget, were included in the final budget approved by lawmakers on July 3.
The report projects a 2027 budget deficit of between $600 million and $900 million. It says there are several measures the Legislature and governor can take to address the shortfall, including use of remaining COVID-19-era federal stimulus funds, which are not quantified in the report but must be spent by the end of this year. Even if those measures are taken, the governor who takes office Jan. 1 would face a projected general fund shortfall of more than $500 million for the 2028 fiscal year, partly because the 2027 budget, as written, relies on a variety of funding sources that total $455 million that won’t be available in 2028.
Whitmer, asked about the report at a July 21 event in Grand Rapids, said she had not had a chance to digest the report and would follow up with reporters once she did.
“It’s a balanced budget,” Whitmer said. “I’m proud of this budget. We had to make a lot of hard decisions … and what happened in Washington DC really shifted a lot of costs onto the states; made it harder to make sure we’re protecting people.”
Cole Pachucki, a spokesman for the State Budget Office, said in a July 22 email that any suggestion that the 2027 budget is not balanced is false.
“Michigan law requires a balanced budget, and Gov. Whitmer has signed a balanced budget every year of this administration — including this one,” Pachucki said. “The budget framework reflects standard accounting practices, including reflecting known lapses (of unspent money from the 2026 fiscal year being carried over to 2027), the expiration of unspent COVID contingency funding that was scheduled to sunset this year, and a lapse of uncommitted SOAR (Strategic Outreach and Attraction Reserve) funding.”
Pachucki acknowledged that those fund transfers would not be apparent to anyone reading the budget documents. “The framework includes lapses of $449,200,199 in uncommitted SOAR funding and $97,544,038 in COVID contingency funding from the Michigan State Police,” he said. “These lapses are not reflected in the enacted budget documents. They’re accounting treatments applied administratively, not itemized appropriations.”
Pachucki did not immediately address the report’s projected shortfall for 2028.
The size of the state budget has generated considerable discussion, amid assertions from the Citizens Research Council and other analysts that accounting gimmicks were used for both 2027 and 2026 to make those budget totals appear smaller than they actually were.
The report pegs the gross size of the 2027 budget, including federal spending, at $86.4 billion, which is up about 1.8% from the 2026 budget as initially passed, which the report pegs at just under $84.9 billion.
After passing the initial budget, the Legislature and governor sometimes pass a supplemental budget that includes more spending measures. They did that twice for the 2026 budget. The report says that when supplemental spending is included, the 2026 total increases to $86.7 billion, slightly larger than the budget signed yesterday.
This story has been updated to add new information.
Free Press staff writer Arpan Lobo contributed to this report.
Contact Paul Egan: 517-372-8660 or pegan@freepress.com.
This article originally appeared on Detroit Free Press: New Michigan budget has expenses that exceed revenues, report says
Reporting by Paul Egan, Detroit Free Press / Detroit Free Press
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By Paul Egan, Detroit Free Press | USA TODAY Network
