2025 brought reforms to earmarks, corporate subsidies, road funding and employer mandates

The Michigan Legislature, consisting of a Republican House and a Democratic Senate, made significant policy changes this year, including reforms to pork spending, reining in corporate welfare, loosening new mandates on employers and passing a road-funding package.

“Legislators weren’t able to agree on a lot this year, but when they did, they agreed with us,” said James Hohman, fiscal policy director at the Mackinac Center.

The organization was concerned that a voter-approved ballot proposal would harm employers and tipped-wage workers. That concern took a sharper focus after the Michigan Supreme Court ruled that legislators cannot adopt a ballot proposal and amend it in the same session, as they tried to do.

The court ruling paved the way for new wage and employee leave mandates. Restaurants and other employers would face higher minimum-wage costs without being able to adjust wages to account for tips employees receive. Businesses, nonprofits and other employers would also face a new sick-leave mandate.

Nearly all restaurant operators surveyed reported the new mandate would cause them to raise prices, Michigan Capitol Confidential reported in July 2024.

Lawmakers responded, and in February 2025, the Mackinac Center praised their effort to “blunt the economic damage of these laws by exempting small businesses from the paid leave mandates, making it easier to prevent sick time abuse and restoring the tipped wage.” A new law offered exemptions to some companies and nonprofits. It also slowed down the schedule for raising the minimum wage.

Increasing state spending on road repairs — a Mackinac Center priority — came when legislators eliminated funding for the Strategic Outreach and Attraction Reserve, a business subsidy program. The Mackinac Center had called for an end to the program ever since lawmakers created it in 2021.

The 2026 state budget marks a change in how taxes are spent, Hohman of the Mackinac Center said.

“This road funding plan drops the practice of earmarking the fuel sales tax on fuel to schools and instead commits the fuel tax to roads, meaning that taxpayers shouldn’t notice a difference at the pump. Even with that change, schools see an increase in spending through savings elsewhere in the budget and the growth of state revenue.

“The House budget is based on tax changes that House members have approved but that have not been approved by the Senate. Senators would have to agree to change tax policy and approve budgets based on the tax switch.”

The budget substituted a sales tax levied on fuel, whose proceeds go to schools, for an excise tax that now goes to road repairs.

An increase in the wholesale tax on marijuana will also contribute to increased spending on roads. Democratic members of the Legislature had pressed for that tax increase in budget negotiations.

Putting a stop to spending on the SOAR subsidy program played an even larger role in boosting road funding, however.

The SOAR program allowed lawmakers to dole out taxpayer money to corporations at their own discretion, Hohman wrote in a Sept. 27 blog post. The state had authorized $1.45 billion in subsidies in the name of creating 14,800 jobs, he wrote.

Michigan spent $720 million in taxpayer funds on SOAR before it shut down, with no jobs created.

2025 also saw a reform of the earmark process, led by House Speaker Matt Hall, R-Richland Township. The 2025 budget, passed during the previous legislative term, included $4 billion in taxpayer funding for pork projects selected by individual legislators.

A rule in the 2023-24 term said legislators had up to a year to divulge their requests, including the amount sought and its recipient. Even then, however, members of the media or public could not easily obtain the information.

New House Speaker Matt Hall-R, Richland Township, added a new requirement to House rules in 2025, requiring that all requests be available online as soon as they are filed. Members of the House also had to affirm that their earmark requests were constitutional. The Senate added its own version of the rule during the 2026 budget process.

The Michigan Constitution requires that all funds directed to private entities serve public purposes. It also requires a two-thirds vote for such spending.

The Mackinac Center filed suit on May 20 against the Department of Labor and Economic Opportunity, alleging that many past subsidies did not meet these requirements.

It sued in the Court of Claims.