STATE OF MICHIGAN NEWS AND LEGISLATION

State of the State: 2026 Priorities

Governor Gretchen Whitmer delivered her final State of the State address in February, outlining her top priorities for the year and reflecting on the progress of her administration. She centered her remarks on three primary policy areas: literacy and early childhood education, housing affordability and supply, and health care affordability — including initiatives to reduce medical debt and stabilize Medicaid funding. She concluded by calling for continued bipartisan cooperation and passage of an on-time, balanced state budget.

State Revenue Forecasts and the FY2027 Budget Fight

Michigan closed out FY2026 with a signed, enacted budget — but the road to FY2027 is already shaping up to be challenging. Governor Whitmer has proposed $88.1 billion in funding for FY2027, with $13.6 billion allocated to the state's general fund and $21.4 billion toward K-12 education. The state faces a projected $1.8 billion funding gap driven largely by revenue declines, rising health care costs, and persistent inflation. House Speaker Matt Hall has already signaled opposition to any new taxes, setting the stage for what could be another protracted budget standoff. Last year, the House did not approve its budget plan until late summer, leading to negotiations that ultimately missed the October 1 constitutional deadline.

However, there is a meaningful dose of good news on the revenue front. The Senate Fiscal Agency reported that February revenue collections from Michigan's major taxes and lottery totaled $1.6 billion — an increase of 23.1% compared with February of the previous year. Tax collections came in $225.2 million higher than January 2026 consensus revenue estimate projections, with General Fund revenue exceeding expectations by $237.8 million. School Aid Fund revenue fell $16.4 million short of projections, though fiscal year-to-date figures are more encouraging: General Fund revenue is $268.5 million above expectations for the year, and School Aid Fund revenue is $56.5 million higher than projected.

These stronger-than-anticipated collections provide a more stable foundation heading into budget negotiations and may ease some of the pressure on General Fund priorities. The next Consensus Revenue Estimating Conference (CREC) is scheduled for May, and its findings will set the formal guardrails for final budget deliberations.

Litigation Over "Work Projects" Funding

The legal battle over $645 million in "work project" funds — unilaterally cut by the Republican-led House Appropriations Committee in December 2025 — may be moving toward a negotiated resolution. In a filing last week with the Michigan Court of Claims, the House and the Michigan Department of Technology, Management and Budget jointly informed the presiding judge that the parties have engaged in "preliminary but fruitful discussions about the possibility of resolving this dispute."

Approximately $370 million in community grants remains at stake, representing funds that are either unspent or not yet legally committed. The remaining funds support projects in districts represented by both Democrats and Republicans. The Michigan Court of Appeals and Michigan Supreme Court have both declined to fast-track the matter, leaving it to work through the Court of Claims process. ACEC/Michigan will continue to monitor developments closely.

Michigan Transportation Funding

The FY2026 enacted state budget — signed into law in October 2025 — established a significant new foundation for Michigan transportation investment. The agreement will eventually generate over $2 billion in new annual road resources and ensures that all taxes paid at the fuel pump are dedicated to transportation. The budget includes $1.1 billion in new appropriations for highways and bridges in FY2026, growing to over $2 billion annually by FY2030, along with $417 million for water infrastructure initiatives including lead service line replacement. Federal IIJA formula funding currently accounts for approximately 51 percent of Michigan's five-year transportation program.

Advancing Qualifications-Based Selection (QBS)

QBS legislation remains a top legislative priority for ACEC/Michigan in 2026. HB 4774 would require state agencies to select design professionals based on qualifications, experience, and capability — not the lowest bid.

The bill has passed the Michigan House and is now awaiting a hearing in the Michigan Senate Standing Committee on Regulatory Affairs. ACEC/Michigan is actively engaging with the committee chair and members of the committee to request a hearing and advance the bill toward a Senate vote. We will continue to provide updates as the legislation progresses.

Modernizing Michigan's Plane Coordinate System: HB 5577

Michigan lawmakers are taking steps to modernize the state's geodetic reference framework with HB 5577, sponsored by Rep. John R. Roth. The bill is currently on the House floor awaiting a vote.

HB 5577 would amend 1964 PA 9 — which the bill would rename the State Plane Coordinates Act — and transition Michigan from the Michigan Coordinate System (MCS) of 1983 to a modernized Michigan Plane Coordinate System aligned with the National Spatial Reference System (NSRS) and the State Plane Coordinate System (SPCS) established by NOAA/NGS.

Key changes include the elimination of the existing north, central, and south zone structure, replacing it with zones defined by contiguous county boundaries or submerged lands. The bill would also require that estimates of positional tolerance be presented at a 95% confidence interval — a more rigorous and nationally consistent standard — and would update recording requirements to include metadata such as the geodetic reference system used, applicable epoch, statement of relative accuracy, and date of observation. Several sections specific to the outdated 1927 and 1983 MCS would be repealed.

Modernization of the State Plane Coordinate System is a priority issue for Michigan's surveying and engineering community and is among the key topics for the 2026 Engineers, Architects & Surveyors Legislative Day on April 30. ACEC/Michigan supports this legislation and will monitor its progress as it advances toward a House vote and moves to the Senate.

Speaker Hall's Proposed Service Tax: What Engineering Firms Need to Know

One of the most consequential — and potentially far-reaching — tax proposals to emerge in Lansing this session comes not in the form of introduced legislation, but as a sweeping policy concept floated by House Speaker Matt Hall (R-Richland Township). No bills have yet been introduced, but the proposal has already generated significant debate across the Capitol and among Michigan's business community, and it warrants close attention from the engineering profession.

Speaker Hall has described his plan as "the biggest tax reform in Michigan history, even bigger than Proposal A" — a roughly $5 billion property tax relief package that would eliminate the State Education Tax, the personal property tax, the real estate transfer tax, and the so-called "pop-up tax" incurred when a home's taxable value increases at the point of sale.

To pay for those cuts, Hall is proposing a 6% sales tax on select services currently exempt from Michigan's sales tax, which he estimates would generate approximately $4.73 billion in new revenue — resulting in a net tax reduction of roughly $270 million overall.

The services Hall has specifically mentioned as potential targets for the new tax include limousines, country club memberships, private jets, marinas, tourist services, travel agencies, skiing, golf, artificial intelligence services, newspaper publishing, performing arts, environmental consulting, and political ads. Hall has emphasized that these are examples, not a comprehensive list, and that the full roster of taxable services remains fluid.

A number of everyday services would be exempt from the proposal, including nail salons, barbers, landscaping, legal services, health care, childcare, veterinary care, dry cleaning, and car repairs.

Why This Matters for Engineering Firms

Of particular concern to ACEC/Michigan members is the explicit mention of environmental consulting as a potentially taxable service category. While the full scope of what would constitute a taxable "professional service" under Hall's proposal has not yet been defined — and no legislation has been introduced — the inclusion of consulting services in the Speaker's preliminary list raises important questions about whether engineering, design, and surveying services could ultimately be swept into the tax base as details are worked out.

Hall has indicated he intends to pursue the service tax through legislation that would end decades-old sales tax exemptions on targeted services, rather than through a ballot initiative.

The proposal has been met with deep skepticism from Democratic lawmakers in the Senate, who control that chamber, making passage a significant political challenge — particularly in an election year when both House and Senate majorities are at stake. Hall has acknowledged that powerful interests are likely to mobilize against the plan, especially those representing industries that would newly face the sales tax on services.

Michigan attempted a broader services tax in 2007 under then-Governor Jennifer Granholm, which was quickly repealed following heavy lobbying and public backlash. Hall has argued his proposal is structured differently, targeting more discretionary services rather than everyday personal care and household services.

ACEC/Michigan is actively monitoring this proposal and is on record opposing any expansion of Michigan's sales tax to professional design services. As part of our advocacy priorities for 2026, ACEC/Michigan is working to secure a clear statutory exemption for architectural, engineering, and surveying services as part of any tax reform discussions that advance in Lansing. We will provide updates as this proposal develops and legislation is introduced.

Housing Supply Reform: A Sweeping Nine-Bill Package

One of the most consequential and closely watched legislative debates in Lansing this session involves a nine-bill housing reform package collectively described by its sponsors as the Michigan Housing Readiness Package. Championed by Rep. Kristian Grant (D-Grand Rapids) and Rep. Joe Aragona (R-Clinton Township), the bills are currently before the House Committee on Regulatory Reform and the House Government Operations Committee. The package would represent one of the most significant state-level preemptions of local zoning authority in Michigan history.

The bills and their individual provisions are as follows:

HB 5529 (Rep. Grant) would amend the Land Division Act to prohibit local ordinances from requiring a minimum parcel or lot size greater than 1,500 square feet for a detached single-family residence where the subdivision is accessible and will be served by public water and sewer. Current state law allows minimum lot size requirements of up to 12,000 square feet.

HB 5530 (Rep. Wortz) would mirror those minimum lot size restrictions in the zoning context under the Michigan Zoning Enabling Act, prohibiting a minimum parcel size greater than 1,500 square feet for a detached single-family residence served by public water and sewer.

HB 5531 (Rep. Neeley) would substantially revise the statutory framework governing site plan submission, review, and approval. Local units of government would be required to approve, reject, or conditionally approve a site plan within 60 days of receipt. After initial site plan approval, a local unit could require additional or revised studies only if they are necessary to ensure compliance with zoning standards, state or federal law, applicable codes, or to address a demonstrated and material public health or safety concern. Local governments would be prohibited from requesting additional studies to impose new or unrelated requirements or to reopen previously reviewed and approved issues.

HB 5532 (Rep. Aragona) would revise protest petition requirements for proposed zoning ordinance amendments, increasing the eligibility radius from 100 feet to 300 feet beyond the boundary of the land subject to the proposed change. For amendments that would increase the number of authorized dwelling units, the required signature threshold would increase from 20% of owners in the affected area to 60%.

HB 5581 (Rep. Kunse) would prohibit local ordinances from imposing a minimum dwelling area requirement greater than 500 square feet.

HB 5582 (Rep. Grant) would cap mandatory parking requirements at no more than one space per dwelling unit for multifamily residential uses and would allow mobile homes in any residential zone.

HB 5583 (Rep. Longjohn) would mandate setback requirements of no more than 15 feet from the front property line and five feet from the side or rear for dwellings or outbuildings in local units of government located within or adjacent to a metropolitan statistical area.

HB 5584 (Rep. Andrews) would create a statewide definition of "duplex" and mandate that duplexes be a permitted use in any zoning district where single-family residences are allowed, without being subject to any procedures different from a single-family residence.

HB 5585 (Rep. Meerman) would create a statewide definition of "accessory dwelling unit" (ADU) and mandate that ADUs be permitted by right in all residential zoning districts without requiring a public hearing. ADUs would be prohibited from being counted in density calculations and could not be subject to additional parking requirements or owner-occupancy requirements. Mobile homes would be allowed in any residential zone.

The package has drawn significant opposition from local governments across Michigan. The Michigan Association of Counties and the Michigan Municipal League have both raised concerns that the bills prioritize statewide mandates over local planning authority, arguing that the legislation would usurp local control and apply one-size-fits-all standards that fail to account for the unique needs and contexts of individual communities. The City of Detroit adopted a formal resolution opposing HB 5529–5532 on March 18. The bills remain in committee, and ACEC/Michigan will continue to monitor their progress.

Dam Safety Reform: A Long-Overdue Reckoning

Six years after the catastrophic failure of the Edenville and Sanford dams outside Midland — which forced more than 10,000 residents to evacuate, caused $200 million in damages to 2,500 properties, and ultimately cost taxpayers hundreds of millions more in rebuilding costs — Michigan lawmakers are once again taking up the question of dam safety reform.

HB 5485, introduced this month with bipartisan support, would upgrade Michigan's flood control standards — widely considered the weakest in the nation — and expand state regulatory authority over dams. The bill would require all high-hazard dams to demonstrate they can withstand a probable maximum flood event, create a statewide dam registration system requiring owners to prove their structures are in good working order, mandate that owners demonstrate adequate financial capacity to cover maintenance or removal costs, require more frequent inspections, and give regulators new enforcement authority to act on problem dams.

State Rep. Bill Schuette (R-Midland), a key sponsor of the legislation, called the 2020 disaster "a clarion call." The bill has the support of the Association of State Dam Safety Officials — the national group that investigated the Midland disaster — as well as Michigan's Department of Environment, Great Lakes and Energy, whose state dam safety chief said the legislation would bring Michigan into alignment with national design and performance standards for high- and significant-hazard dams.

The reform effort comes as state officials warn that taxpayer funds for dam repair and remediation are running out — a concern already playing out at the AuTrain Dam in the Upper Peninsula, where a private owner declared bankruptcy after years of delayed maintenance. Similar concerns have been raised about Consumers Energy's proposal to transfer 13 aging hydropower dams to a private equity firm. ACEC/Michigan will monitor the bill's progress and provide updates as it advances.

Drone Regulation: Michigan's SHIELD Package Takes Shape

One of the more significant emerging pieces of legislation for Michigan's engineering and infrastructure community is the S.H.I.E.L.D. package — Securing Homeland and Infrastructure with Emerging Laws for Drones. The 15-bill bipartisan package, led by state Rep. William Bruck (R-Erie Township), would fundamentally change how Michigan regulates drone usage, covering everything from where drones can fly to which drones state agencies are permitted to purchase.

HB 5319, the lead bill, would designate correctional facilities, law enforcement buildings, and critical infrastructure — including power plants, railroads, data centers, and battery storage facilities — as "no drone zones." Additional bills in the package would allow police and authorized private security personnel to disable drones that violate the law or pose a public safety risk, create a state standard for "no drone zone" signage, and prohibit drones from trespassing over private property to invade privacy or harass residents.

The package would also establish a statewide drone registry administered by the Michigan Department of Transportation and prohibit state and local governments, colleges, and universities from purchasing or operating drones with components manufactured by federally-designated companies of concern — with a ban on purchases phased in over two years and a ban on operation phased in over five years.

The bills received their first committee hearing in late January and are scheduled for a series of three hearings. No votes have yet been taken. Sponsor Rep. Bruck has characterized Michigan's current drone environment as a "Wild West" and argued the state is "very vulnerable to nefarious drones."

The package has drawn scrutiny on two key fronts. Legal analysts have raised concerns that provisions authorizing police drone takedowns and establishing state-level airspace restrictions may conflict with federal law, noting that Congress has granted the FAA sole jurisdiction over airspace, and that such provisions are likely to face federal preemption challenges. Additionally, full implementation of the package is estimated to cost Michigan taxpayers up to $60 million. ACEC/Michigan is monitoring the package closely and will engage in the legislative process as it advances.

FEDERAL NEWS AND ACEC NATIONAL

Federal Update: Supreme Court Tariff Decision, CIT Refund Order, and an Escalating Trade Landscape

The tariff situation has continued to evolve rapidly since the U.S. Supreme Court's landmark February 20, 2026, ruling holding that the International Emergency Economic Powers Act (IEEPA) does not authorize a president to unilaterally impose tariffs without explicit congressional approval.

March 4 brought two significant additional developments. On that date, the Court of International Trade (CIT) issued an order directing U.S. Customs and Border Protection to stop collecting IEEPA-based tariffs and to reverse tariffs that had been assessed but not yet paid — with the order applying to all importers, not only those who filed suit. However, following a closed-door hearing on March 6, the court suspended the "immediate compliance" portion of that order after CBP warned that its current systems cannot handle the unprecedented volume of refunds across more than 53 million entries from 330,000 importers. CBP has outlined a new platform — the Consolidated Administration and Processing of Entries (CAPE) system — to manage the refund process, which it estimates will be ready within 45 days. The CIT order is expected to be appealed by the administration, and the ultimate timeline for refunds remains uncertain.

Also on March 4, Treasury Secretary Bessent announced that the Section 122 tariffs — currently set at 10% globally — will increase to 15%, though without confirming an effective date or specifying which countries will face the increase. Section 122 authority is temporary and set to expire July 24 unless extended by Congress — an outcome widely viewed as unlikely.

The administration is also pursuing longer-term tariff authorities. On March 11, the U.S. Trade Representative launched sweeping Section 301 investigations targeting structural excess capacity and forced labor practices among key trading partners — an authority that carries no cap on tariff rates and no statutory time limit.

Legal challenges continue on multiple fronts: 24 state attorneys general have filed suit challenging the Section 122 tariffs, and more than $160 billion in previously collected IEEPA tariffs may ultimately face court-ordered refunds — with interest accruing at an estimated $650 million per month.

As ACEC President & CEO Linda Bauer Darr has noted, the Supreme Court's ruling did not end the tariff debate — it opened a new front, shifting the policy battleground rather than resolving it. ACEC has supported member firms through webinars and briefings outlining the legal implications and potential future scenarios.

State of the Union: Infrastructure Takes a Back Seat

President Trump delivered his 2026 State of the Union address on February 24 — the longest in at least 60 years at approximately one hour and 48 minutes. The speech focused primarily on immigration enforcement, economic gains, tariff policy, and foreign affairs. Transportation Secretary Sean Duffy highlighted that the administration has moved nearly $10 billion out the door to jumpstart infrastructure projects. A sustained, long-term commitment to surface transportation reauthorization was not a centerpiece of the President's remarks.

Surface Transportation Reauthorization: April Target for House Committee Vote

The most consequential federal infrastructure issue facing the engineering community this year is surface transportation reauthorization. The IIJA authorization expires on September 30, 2026. After that date, highway, bridge, and transit formula funding to states falls back to pre-IIJA levels unless Congress passes a new long-term reauthorization bill.

This week, House Transportation & Infrastructure Committee Chairman Sam Graves (R-MO) announced that the committee is now targeting April for the release and a committee vote on its surface transportation reauthorization bill. The timeline slipped from March due to ongoing bipartisan negotiations and the committee leadership's focus on aviation safety legislation.

Chairman Graves indicated he expects the bill to total between $500 billion and $550 billion — a range that, depending on final details, could at least maintain current IIJA funding levels. Funding totals remain under active negotiation with both Democrats and the Trump Administration.

One important scheduling note: the House is in recess the first two weeks of April, meaning the earliest a committee vote could realistically occur is the week of April 13. Nothing on that timeline is definitive yet. Industry analysts caution that enacting a full reauthorization bill before October 1 remains a very ambitious goal, and some form of short-term extension should be anticipated.

Federal Appropriations: Partial Shutdown Continues

While Congress cleared a broad appropriations package earlier this year providing full-year funding for Transportation, Housing and Urban Development, Defense, Labor, and Health and Human Services, a partial government shutdown affecting the Department of Homeland Security has been ongoing since February 14, 2026, due to a congressional standoff over immigration enforcement funding. The shutdown is affecting the Transportation Security Administration, with TSA employees beginning to miss full paychecks.

Core transportation funding through IIJA remains unaffected. Core formula programs for highways, bridges, and transit are fully funded for FY2026. The FY2026 spending legislation did rescind over $2.3 billion in IIJA allocations, with the largest cuts targeting the National Electric Vehicle Infrastructure (NEVI) program, but core highway, bridge, transit, and water formula programs survived intact.

ACEC National Advocacy Highlights

February was an active month for ACEC's federal advocacy efforts. Highlights include advancing appropriations support, policy engagement with congressional leadership, federal agency briefings, expansion of the Engineering Workforce Consortium, and $235,017 raised for ACEC/PAC year-to-date. ACEC's recent Coalitions Winter Conference in Houston reinforced the importance of peer collaboration and shared expertise in navigating this policy environment.

At the federal level, ACEC recently celebrated passage of the "One Big Beautiful Bill," which extends key provisions of the 2017 Tax Cuts and Jobs Act and permanently restores full deductibility of research and development (R&D) expenses — a long-sought policy victory that provides engineering firms with greater certainty to invest in innovation and expand their workforce.

DBE Program Lawsuit Dismissed as Moot

In a significant development for federal procurement policy, the federal judge presiding over the lawsuit challenging the constitutionality of the U.S. Department of Transportation (DOT) Disadvantaged Business Enterprise (DBE) program dismissed the case as moot late last week.

The judge ruled that the Interim Final Rule (IFR) issued by U.S. DOT last October — which removed the presumption of economic and social disadvantage based on race and gender — had provided the relief that the plaintiff contractors had sought. As a result, the injunction previously issued by the court was deemed no longer necessary, and the judge determined it was not appropriate to issue a final ruling on the underlying constitutional arguments, given that the fundamental dynamics of the program had already been changed by the IFR.

It is worth noting that the motion to dismiss was filed by the intervening DBE contractor groups, not the plaintiff contractors — who had sought a final ruling on the merits of the constitutional challenge rather than a dismissal. The case's resolution on mootness grounds means the broader constitutional questions surrounding the DBE program remain unresolved.

ACEC/Michigan will continue to monitor developments related to DBE program implementation as the IFR takes effect across states. Members seeking additional guidance and resources on the IFR and its implications for state-level DBE program implementation are encouraged to consult ACEC National's DBE Resource Page for the most current materials and state-specific guidance.

Support ACEC Advocacy: Contribute to the State and National PACs

The policy battles described throughout this update — from QBS legislation in Lansing to surface transportation reauthorization in Washington — do not happen without sustained, organized advocacy. A critical part of that advocacy is the financial support provided through the ACEC/Michigan State PAC (CEPAC) and the ACEC National PAC (ACEC PAC).

Your contributions to CEPAC and ACEC PAC help elect leaders at both the state and federal levels who understand and support Michigan's engineering and infrastructure community. ACEC's Political Affairs team advocates year-round for policies that strengthen the engineering industry — securing legislative victories on transportation investment, infrastructure asset management, procurement reform, liability protections for design professionals, and workforce development. No other organization represents our industry as effectively, and member contributions are essential to sustaining that work.

Architecture, engineering, and surveying firms support approximately 129,000 high-skill jobs across Michigan and design the infrastructure systems that underpin the state's communities and economic growth. Ensuring that policymakers understand and champion that contribution requires ongoing investment in advocacy at every level of government.

To contribute to the ACEC/Michigan State PAC (CEPAC), please visit the ACEC/Michigan PAC Information page. To contribute to the ACEC National PAC (ACEC PAC), please visit ACEC PAC online. Contributions may also be spread throughout the year using PayPal's monthly donation option.

Please note that PAC contributions must be personal contributions and may not be made using corporate funds, unless your firm is a sole proprietorship or partnership.

Questions about PAC contributions? Contact Troy Hagon, Deputy Director, ACEC/Michigan at thagon@acecmi.org or (517) 580-0334.

Looking Ahead

Michigan's infrastructure outlook for 2026 is shaped by a convergence of significant forces: evolving tariff policy and continued legal uncertainty, a critical September deadline for federal surface transportation reauthorization, a challenging FY2027 state budget process, stronger-than-expected recent revenue collections, a possible negotiated resolution to the work projects litigation, advancing dam safety reform legislation, a sweeping housing reform package generating significant debate in Lansing, the emerging SHIELD drone regulatory framework, the continued push for QBS, and the evolving federal DBE program landscape.

The next several months will be pivotal. The week of April 13 is shaping up as a key moment at the federal level, when the House Transportation Committee may hold its long-anticipated vote on surface transportation reauthorization. In Lansing, the May Consensus Revenue Estimating Conference will set the parameters for the FY2027 budget negotiation.

ACEC/Michigan remains actively engaged in advocating for policies that support infrastructure investment and high-quality engineering services. We will continue to provide timely updates as these issues evolve.