Michigan road funding efforts have stalled before. Can new plans break the traffic jam?

Like the freeze-thaw cycle that plagues Michigan’s roads, Gov. Gretchen Whitmer’s first plan to fix them faced a chilly reception in Lansing, but the ice on the road funding debate may be melting as spring approaches.

Michigan House Speaker Matt Hall, R-Richland Township, and Whitmer have both put forward proposals, marking the most significant step in Lansing toward reaching a deal in years.

Anyone who drives in Michigan knows the potholes that dot its roads. One study shows that when it comes to the quality of the state’s pavement, Michigan lags behind most states. Road funding experts generally agree Michigan needs more money for roads, though there is no clear consensus on the amount.

Lawmakers rejected the first plan Whitmer unveiled in 2019 calling for a 45-cent gas tax increase. Instead, she decided to go it alone with a request to the State Transportation Commission to approve $3.5 billion in bonds to rebuild state highways and bridges. The commission approved the funding, and road repair projects all over Michigan have brought orange barrels and smoother roads to state highways. But local roads didn’t benefit from the funding, and the money from the bonding program will soon run dry.

Michigan faces a road funding cliff, Whitmer said in a speech at the Detroit Auto Show this year. “If we don’t find a solution, our roads will get worse and more dangerous and that means expensive car repairs and delays on your drive home,” she said.

Questions linger over the road funding proposals from Whitmer and Hall as lawmakers iron out the details for filling the hole they would leave in the School Aid Fund by diverting money from classrooms to roads, debate how much money to provide for public transit and eye possible changes to the funding formula for distributing transportation dollars across the state.

Lance Binoniemi, vice president of government affairs for the Michigan Infrastructure & Transportation Association, which represents companies that work on Michigan roads, said the debate on road funding has lasted for decades. “I don’t know that it’s ever dead or ever solved,” he said. But it might not be a bad thing if the next governor doesn’t make road funding a campaign slogan in the 2026 race, “Because we hope the issue is solved before the next election,” he said.

The road funding plans

Hall‘s and Whitmer’s proposals have some significant overlaps. They each propose about $3 billion in road funding, and both promise significant investments in local roads.

Both plans would also ensure 100% of the state taxes Michigan drivers currently pay at the pump go to roads. That would mean removing the state’s 6% sales tax on motor fuel sales, which primarily goes to the School Aid Fund. Hall and Whitmer have both pledged to hold school funding harmless. They also both call for cuts to state government.

But the proposals have some big differences. Hall’s plan would find road funding from existing revenue and calls for eliminating a business tax credit program, which a House Republican bill would try to do with a business tax shift. Whitmer’s plan promises to bring in new revenue from big corporations and technology companies without diving into specifics. She also proposes a tax on marijuana and spending $250 million on public transit.

Lawmakers have introduced road funding bills, starting the engine on another debate in Lansing.

Democratic state Rep. Alabas Farhat, of Dearborn, introduced legislation that would create a new digital advertising tax that could help fund roads and earmark corporate income tax revenue for roads. House Republicans have introduced legislation to increase the motor fuel tax rate, eliminate the sales tax on motor fuel, incentivize businesses to forgo some tax credits and redirect money slated for the state’s corporate subsidy, placemaking and community development funds to roads.

Bob Schneider, senior research associate for state affairs at the Citizens Research Council of Michigan, called funding cuts proposed by Whitmer and Hall the biggest unanswered question as lawmakers look to strike a deal on roads. “But those budget impacts are unknown right now and they’re very big. Potentially very big,” he said.

Whitmer proposes $500 million in government cuts while House Republicans’ legislation would reduce revenue to the state’s general fund by $2.2 billion in the next fiscal year, according to a House Fiscal Agency analysis.

‘Fix the damn road funding formula’

Throwing more money at Michigan’s current system for distributing road funding could prove futile without overhauling the system for distributing dollars, said Eric Paul Dennis, an infrastructure policy researcher for the Citizens Research Council of Michigan.

Dennis riffed on Whitmer’s slogan in a piece he wrote titled “Fix the Damn Road Funding Formula,” calling for a repeal and replacement of Act 51 of 1951, the state transportation funding law which Dennis calls a “labyrinthian morass.” Lawmakers designed it to build out the state’s highway system, and while they’ve updated the law over time, Michigan has a road funding formula stuck in the past, Dennis said.

“It’s just no longer suitable for what we need to do, and tinkering with it for 74 years has gotten us to the point where we are now,” he said. Dennis said it’s still a good time to increase road funding. “But I think it would be negligent to do that without doing some heavy lifting and constructing a road funding distribution and allocation formula that actually meets the needs of today’s system,” he said.

Among the factors lawmakers should weigh to craft a better way to distribute road funding across Michigan, Dennis suggests looking at truck traffic patterns, variable construction costs and climate.

Hall told reporters during a March 6 news conference that in addition to providing more money for roads he also wants to look at regulatory changes.

Promises to fill school funding shortfall

Gas and diesel sales in Michigan in 2024 generated an estimated $924.9 million in sales tax revenue, with the bulk of those funds — an estimated $678 million — going to the state’s School Aid Fund, according to the House Fiscal Agency.

Michigan Education Association spokesperson Thomas Morgan said that money helps pay for everything from pencils to football helmets. It’s essential for the operation of schools, he said, and the union wants to see a plan for completely replacing any School Aid Fund revenue diverted to roads. “We believe the quality of our schools and roads are both key factors in attracting new jobs and investments in Michigan,” he said.

Senate Majority Leader Winnie Brinks, D-Grand Rapids, told the Free Press Feb. 26 that any road funding plan that hits education is a nonstarter for her. “I think it would be unacceptable for us to create a big hole in our education funding,” she said.

Legislation introduced by House Republicans would dedicate $755 million in sales tax revenue slated for the general fund and put it in the School Aid Fund instead. Farhat’s bill proposes raising the corporate income tax to bring in new revenue for the School Aid Fund.

Molly Sweeney, Director of 482 Forward, a parent and student education organizing group in Detroit, expressed fear schools could be shortchanged by a road funding deal in Lansing. “We’re incredibly worried,” Sweeney said. She added that schools also need more funding, citing research finding Michigan faces a significant education funding shortfall.

Eliminating the sales tax on gas would also cut state funding to Michigan communities. An estimated $92.5 million went to revenue sharing for local communities in 2024, according to the House Fiscal Agency. John LaMacchia II, director of state and federal affairs for the Michigan Municipal League, urged lawmakers to backfill funding for schools and local governments to ensure a road deal doesn’t reduce funding in those areas.

The sales tax revenue also provides some funding for public transportation, but transit advocates are holding their breath that a road funding deal could provide a big boost for public transportation.

How will a road funding deal impact public transit?

John Dulmes, executive director of the Michigan Public Transit Association, said it was exciting to see Whitmer put $250 million for transit on the table. Those funds would be ongoing — not one-time — and represent the net increase for transit funding, according to Whitmer press secretary Stacey LaRouche.

It’s not all the money the association would like to see, Dulmes said. Still, it’s a significant step and would stabilize funding for Michigan’s bus system, he said. But it’s not enough to expand Michigan’s transit system with big, new projects. “The kind of projects that you are seeing in many other regions across the country,” he said. He estimates House Republicans’ plan would bring in $50 million in additional revenue for transit.

Megan Owens, executive director of Transportation Riders United, similarly said $250 million would go a long way but not solve every transit need in the state. She said support for transit needs to be included in the road funding conversation in Lansing. “It really needs to be one package,” she said. “It could be devastating if transit were cut out.”

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Gas tax revenue a reliable source of future funds?

Whitmer has called on lawmakers to develop a sustainable, long-term road funding solution. But some see trouble down the road for a transportation funding system that relies so heavily on revenue from the gas tax.

Michigan drivers are buying less gas as vehicles become more fuel-efficient. Except for 2020 — the height of the COVID-19 pandemic — Michigan saw fewer gallons of gas sold in 2023 than during any other year this century, according to the House Fiscal Agency. While 2024 saw a slight uptick in gas sales, the number of gas gallons sold in Michigan is on a downward trend.

“There’s upside to it of course,” said Denise Donohue, CEO of the County Road Association of Michigan, such as lessening the environmental impact of cars. But improvements in the fuel efficiency of cars means a declining source of revenue for roads, she said.

While the gallons of gas sold have declined, gas tax revenue has increased. A 2015 law signed by Republican Gov. Rick Snyder bumped up the motor fuel tax rate and then indexed it to inflation. But even with the inflation adjustment, as fuel consumption continues to shrink, so does the motor fuel tax base, said Schneider of the Citizens Research Council.

Though Dennis, also of the Citizens Research Council, said gas tax revenue is currently at a historic high and doesn’t anticipate a sudden drop. “So I think this is a concern but not an emergency,” he said.

A plan that purports to buy Michigan drivers better roads might end up buying some time, too.

Contact Clara Hendrickson: chendrickson@freepress.com or 313-296-5743.

This article originally appeared on Detroit Free Press: Whitmer, lawmakers eye big road funding plan for Michigan