June 2025 Capitol Perspectives

Unpacking the Michigan House’s FY 2026 Budget Proposal

Since January, many of the crucial items on the Michigan Legislature’s annual to-do list related to the budget process have been accomplished. Representatively, state economists completed the January and May Consensus Revenue Estimating Conferences (CREC) to determine how much state lawmakers can allocate, Governor Whitmer outlined her priorities in her State of the State and executive budget proposal, and the Michigan Senate approved its budget for schools via SB 166 (May 2025, March 2025, February 2025, and January 2025 Capitol Perspectives). Notably absent from this progress, though, has been the Michigan House of Representatives, who, in recent years, would typically have approved a budget framework by the end of May (House Fiscal Agency). Reflective of this situation, June started with some consternation from “a coalition of education stakeholders” over the Michigan House’s hold up in “releas[ing] its FY 2025-26 budget” – something they called “an unprecedented delay that prevents negotiations from moving forward” in the Michigan Legislature and hinders districts’ ability to plan their own budgets for the fast-approaching 2025-26 school year (MASA 6/6 Legislative Update).

By the middle of June, the Michigan House responded by passing HB 4577, which is their model for school funding, by a margin of 56-53 (MASA 6/13 Legislative Update; MASA Special Legislative Update). While this action met these voices’ demand for a finalized House budget, it did little to quell the frustrations of some education advocates who said the bill’s content “rais[ed] concerns” (MLive). With respect to these substantive details, the state House’s approach is unique. While it includes “one of the largest increases to per-pupil funding for public schools in years,” it comes with a potential 20% penalty for school districts that do not comply with certain mandates related to the culture wars, and it moves away “from [what some Republican lawmakers have called] the ‘expansion and explosion of categoricals,’” which are “funding sources school districts can apply to support specific programs” like transportation or students’ mental health needs (Michigan Advance; MLive; MASA 6/13 Legislative Update). Regarding the conditional funding threat tied to various social issues, House lawmakers would penalize “districts [that are non-compliant] with proposed boilerplate language prohibiting race, gender and DEI instruction or initiatives,” including entities teaching “any curriculum that includes supposed race or gender ‘stereotyping,’ allowing transgender girls to participate in girls’ sports or providing multistall unisex bathrooms” (Michigan Advance). In terms of its levels of per-pupil funding, “the proposed [House] budget includes two increases to funding given to districts for each student enrolled” – $10,025 per student for the foundation allowance (“a 4.3% increase”) and “another $1,975 per pupil” based on the changes to categoricals (MLive). Cumulatively, some analysts have reported that the House’s approach could result in more funds “to wealthier Michigan districts, cyber schools and even private schools” (The Detroit Free Press).

Beyond these structural changes to how they would support Michigan schools, the House included a collection of controversial measures in its budget. For one, after battles last year over how much school districts should contribute to the Michigan Public School Employees Retirement System (MPSERS), which resulted in rate reductions, the House called to undo these changes (September 2024 and July 2024 Capitol Perspectives; MASA 6/13 Legislative Update). Second, the House would not fund universal school meals, which Governor Whitmer has championed as a significant policy accomplishment (The Detroit Free Press; State of Michigan). Third, HB 4577 would require districts “to employ [at least] one school resource officer” and “one staff member to support student mental health,” raising some fears about staff availability (MLive). Finally, the Michigan House would send “more than $1 billion from the School Aid Fund to higher education – the equivalent of $1,500 per K-12 student” in what has been labeled “an apparent bid to free up General Fund money for a large roads deal that might come later” (MASA Special Legislative Update; The Detroit News via The Grand Haven Tribune). Some voices have said that this action “shortchanges K-12 education by robbing Peter to pay Paul, instead of making a real investment” (Michigan Alliance for Student Opportunity).

With the House’s framework shared, at the end of June, “Senate Majority Leader Winnie Brinks and House Speaker Matt Hall met to begin formal budget negotiations” (MASA 6/20 Legislative Update). Though, even with this gathering and the Michigan House’s action on the FY 2026 School Aid Fund, observers have commented that “it appears increasingly unlikely that a school aid budget will be in place by the July 1 statutory deadline” and that they are not “optimistic that school funding levels would be set in the coming days as districts try to guess what the Legislature will ultimately do” (MASA 6/27 Legislative Update; The Detroit News via The Grand Haven Tribune). This sentiment ties back to “even some House Republicans [acknowledging] that major revisions will be needed” on HB 4577 “during the upcoming Conference Committee process;” the Senate Appropriations Committee “question[ing] the overall structure of HB 4577” and “rais[ing] concerns about the long-term sustainability of funding shifts, equity impacts across district types, and the potential effects on at-risk and rural students;” and broader polarization and resultant gridlock between the GOP-led state House and Democratic-governed Michigan Senate (MASA 6/13 Legislative Update).

School leaders hoping to finalize their 2025-26 budgets will surely be hoping that the Michigan Legislature can overcome the “stark differences between the House-proposed budget and budgets proposed by Democratic leadership in the Michigan Senate and governor” and accelerate the budget adoption timeline (MLive). However, “the [legislatively-imposed July 1] deadline carries no legal penalties if lawmakers fail to come to an agreement on funding,” and it is very possible that districts will be left with significant “uncertainty” while they plan for next year (MLive). Further, the deeper the state gets in this budget battle, the more likely it is that the Michigan House will try to leverage HB 4162, which it passed in March, to approve “bare bones” education necessities (per-pupil funding, 31aa, special education spending, and MPSERS – leaving $5 billion unallocated) (Chalkbeat Detroit; MASA 3/7 Legislative Update). In fact, its leaders could threaten a government shutdown unless the Michigan Senate agrees with the June House budget framework or March stopgap measure. In any event, with how chaotic this budget process has been, policy watchers will just have to wait and see what the Michigan House, state Senate, and Governor Whitmer can agree to and when they do so. 

Selecting Michigan’s Next State Superintendent 

While reviewing now-stalled efforts to restructure school governance in Michigan, including HJR E, which “proposes a constitutional amendment requiring the State Superintendent [to] be appointed by the governor [rather than the State Board of Education], with Senate approval, beginning January 2027,” and HB 4148, which shifts “the selection process for State Board of Education members to a rotating nomination schedule” based on districts, the April 2025 Capitol Perspectives noted the decision of State Superintendent Dr. Michael Rice to retire from his current post, effective October 3rd (MASA 3/21 Legislative Update; MASA 3/14 Legislative Update; Chalkbeat Detroit). In early June, the entity that the Michigan State Board of Education hired “to assist in conducting the search” for the next state superintendent released a timeline for selecting “Michigan’s next top education leader,” which could have the process finalized by September 4th (Chalkbeat Detroit). It features “aggressive recruiting of candidates,” outreach to “key individuals and organizations,” which includes members of the public, and board-led interviews of “tier one candidates” (Chalkbeat Detroit).

In the last few weeks, the state superintendent position and the Michigan Department of Education have been in the spotlight “at a time of increased focus on the state’s mixed education record” (Chalkbeat Detroit). Emblematically, at the start of the month, during testimony before the House Committee on Oversight, alongside State Board President Pamela Pugh, State Superintendent Rice and Republican lawmakers went back and forth over “recent progress in Michigan’s schools” (MASA 6/6 Legislative Update). While Michigan's current education leaders “cited a record-high graduation rate, increases in AP enrollment and scores, and success in expanding preschool access and teacher recruitment efforts,” some legislators questioned the state’s “low national literacy rankings” and “flailing math scores” (MASA 6/6 Legislative Update; Chalkbeat Detroit). Notably, one member of the Michigan Legislature raised “the specter of tearing down the department and starting anew with a department controlled closely by the Michigan Legislature” (Chalkbeat Detroit). As such, it will be fascinating to see where the Democratic-controlled State Board of Education goes in selecting the next leader of Michigan’s education system and how the Michigan Legislature responds to their decision.

Exploring Federal Education Policy Developments

What is happening in Washington, DC, related to education policy has become a mainstay in editions of Capitol Perspectives. That said, recent articles have focused on some of the new administration’s aberrational actions, including extensive executive orders to reshape the federal education policy landscape and resultant litigation and state efforts pushing back (May 2025, April 2025, March 2025, February 2025, and January 2025 Capitol Perspectives). In June, some more expected, at least process-wise, federal education policy developments occurred that are worth keeping in mind. They related to both President Trump’s federal budget vision and some June decisions by the U.S. Supreme Court.

Concerning the administration’s “FY 2026 budget proposal,” President Trump suggested “$12 billion in education cuts, significant cuts to health and nutrition programs, and shifts in financial responsibilities to states” (MASA 6/6 Legislative Update). As summarized by the MASA 6/6 Legislative Update, his proposal “would consolidate Title II, REAP, Title IV, Parts A & B, and McKinney-Vento” in “a new $2 billion block grant: the K-12 Simplified Funding Program (K12 SFP),” and it would eliminate Title I (Part C), Title III, Teacher and School Leader Incentive Grants, Supporting Effective Educator Development (SEED) Grants, and Full-Service Community Schools. Notably, the Trump administration would sustain or boost funding for “Charter School grants, Impact Aid, Indian Education, and the Perkins CTE program,” “Title I funding would be preserved at $18 billion,” and “IDEA, Part B (Grants to States) would see a $677 million increase” (MASA 6/6 Legislative Update).

In reading the tea leaves of how this federal policy might impact Michigan schools, these actions must be understood both in isolation and in the context of other efforts, including the Big Beautiful Bill’s “major overhaul of Medicaid requirements,” which could theoretically impact school budgets by harming overall state finances, as discussed in the May 2025 Capitol Perspectives (ABC News; MASA 5/23 Legislative Update). Many of the House's Medicaid reforms, though not all of them, were “left untouched” by the Senate parliamentarian tasked with ensuring that all provisions of the Big Beautiful Bill comply with the rules for the budget reconciliation process, which allows Republicans to avoid “a 60-vote supermajority to pass” this legislation in the Senate (CNBC; Education Week). This outcome was different than “the path to a nationwide private school choice program” included in the House version of this legislation, which the Senate parliamentarian ruled violated a “technicality,” “forc[ing Republican lawmakers to strike the proposal—for now” (Education Week). Additionally, there are reports that “the Trump administration is signaling that it may defy Congress and withhold billions of dollars in federal formula grants that school districts and states expect to start receiving on July 1—including...Title I-C for migrant education, Title II for professional development, Title III for English learners, and Title IV-B for before- and after-school programs” (Education Week). Such a decision could force local budget shifts even before the U.S. Congress can finalize the budget.

The other federal actions related to K-12 education to consider from June involve the U.S. Supreme Court. As noted in the May 2025 Capitol Perspectives, last month, in Oklahoma Statewide Charter School Board v. Drummond, the U.S. Supreme Court released a 4-4 ruling that “upheld an Oklahoma Supreme Court ruling that blocked the establishment of...what would have been the first religious charter school in the” United States (MASA 5/23 Legislative Update). In June, the U.S. Supreme Court made two other consequential decisions for K-12 schools at the end of their term. First, this body's 6-3 decision in Mahmoud v. Taylor, which involved “parents who objected to LGBTQ-themed books that a Maryland county approved for use in elementary school classrooms,” lets “parents...opt children out of LGBTQ-related lessons” (Fox 47; NBC News). Centrally, a majority of the justices ruled that the “introduction of the 'LGBTQ+ inclusive' storybooks, along with [the] decision to withhold opt-outs, places an unconstitutional burden on...parents' rights to the free exercise of their religion” (NBC News). While President Trump said that the decision is “a ruling for parents” who have “lost control,” critics have argued that it hinders “pluralism” (Fox 47). There are also concerns from “public school boards, administrators, and teachers” over “how to navigate opt-out demands of all kinds – from courses that include LGBTQ characters in books to science classes that teach Darwin's theory of evolution” (NPR). Second, in a 6-3 decision in Federal Communications Commission v. Consumers’ Research, “the U.S. Supreme Court...spared the federal E-rate program for school internet connections from dismantling or major disruption by ruling against a lawsuit that challenged its funding structure” (Education Week). Supporters of the program said a different decision “would [have] devastate[d] schools and libraries and the students and communities they serve,” while dissenters worried about the permissibility of Congress’ actions in setting up the initiative (Education Week). Taking the actions of the U.S. Congress and Supreme Court together, families, educators, administrators, and state policymakers got a mixed bag of finality from the nation’s capital in June. While these cases have reached their end stage, stakeholders will need to continue monitoring the federal budget picture over the next few weeks.

For questions or more information, please contact Tyler Thur in the Office of K-12 Outreach at thurtyle@msu.edu.