New Michigan road plan promises billions to bring smoother drive: Here's how - Detroit Free Press

Michigan lawmakers and Gov. Gretchen Whitmer approved a bipartisan road funding plan with money for local roads and public transit.Environmental groups have concerns about a fee increase for those who drive electric vehicles and plug-in hybrids while education advocates fear an impact to school funding.The plan already faces a legal challenge to a new cannabis tax to generate road funding revenue. While proponents of the funding boost for Michigan roads say it will pave the way for a smoother ride, others see potholes in the plan and fear a bumpy journey ahead. Gov. Gretchen Whitmer and lawmakers came together to approve a plan that includes new revenue and cuts to pay for road repairs and transportation infrastructure. For Whitmer, reaching the deal marked a legacy-defining moment. "I ran for office in large part because I wanted to fix the damn roads," she said in an Oct. 3 statement in the wake of the plan's legislative approval. At a celebration in Macomb County's Clinton Township, a crowd wearing safety vests and hard hats surrounded Whitmer and held up signs that read, "BIG GRETCH KEEPS HER PROMISE, WE KEEP OUR JOBS." The roughly $2 billion the plan secures for roads, once fully implemented, is not as much money as either the governor or Michigan House Speaker Matt Hall, R-Richland Township, initially sought. Still, they touted it as a marquee accomplishment that provides much-needed funding for local roads, which didn't benefit from Whitmer's 2020 bonding program for state highways and bridges. But the new road funding plan has prompted some concerns. Environmental advocates say it punishes those who drive electric vehicles and plug-in hybrids with new fee increases. Funding shifts to pay for roads have also sparked fears that local governments could confront tough budget decisions. While the plan promises zero school funding cuts, education advocates still see an impact. One legal battle has already emerged over a key new source of revenue for roads. A lawsuit challenges a new tax on cannabis, which the state's leading cannabis trade association has cast as an existential threat to the nascent industry. What will funding boost mean for road conditions? There remain unanswered questions about how exactly the new funding will impact road conditions, according to Lance Binoniemi, the vice president of government affairs for the Michigan Infrastructure and Transportation Association, a statewide trade association that includes Michigan companies that construct roads and bridges. "It's going to definitely improve pavement conditions, we just don't know by how much yet," he said. Forthcoming projections should provide a clearer picture of how far the money will go, Binoniemi said. Eric Paul Dennis — an infrastructure researcher at the Citizens Research Council of Michigan — who has called on state leaders to "Fix the Damn Road Funding Formula" sees a missed opportunity to improve Michigan's road funding system in the new plan. Instead of heeding his recommendation to replace the law that funnels transportation dollars to road agencies, lawmakers set up a new fund to deliver more money to local roads that will essentially run in parallel to the old system. Dennis described the result as "convoluted." "More money will not hurt," he said. "But it's almost definitely not the most effective, most efficient way to spend the additional revenue," he added. Denise Donohue, CEO of the County Road Association of Michigan, countered that while Michigan's road funding formula may be old, lawmakers have updated it over time, and it works today. "We can talk about fixing the damn roads, but it always starts with fixing the road funding, and so I think we've made a huge step as a state towards that. It will still take a decade or two to get to where we need to be," she said. Where will new money come from? The road funding plan includes two new sources of revenue. A tax on cannabis businesses of 24% on the wholesale price will generate an estimated $420 million annually, according to a House Fiscal Agency analysis, providing a boost for county and local road authorities. By a one-vote margin, the tax narrowly passed the Michigan Senate. In its lawsuit, a state cannabis association argues that because voters in the state legalized recreational cannabis via a 2018 ballot measure, the tax required a three-fourths vote in both chambers of the Michigan Legislature. Drivers of electric vehicles and plug-in hybrids will also provide new revenue for roads, as an increase to the motor fuel tax triggers a hike to the fees they pay. Electric vehicles will see their vehicle registration surcharge increase by at least $100, while plug-in hybrids will see at least a $50 increase in 2026. Together, those will generate an estimated $11 million, with most of the funds supporting transportation, according to a House Fiscal Agency analysis. State Sen. Jeff Irwin, D-Ann Arbor, raised concerns about the new fees before voting against them on Oct. 3. "Do we want to build the vehicles of the future or tax the vehicles of the future?" he said. Environmental advocates want to see lawmakers roll back the fees, which will constitute the highest electric vehicle fee in the United States, based on a recent review of fees across the country. Hall has suggested that electric vehicle drivers aren't paying their fair share to drive on Michigan roads. In contrast, a study from Ecology Center — a Michigan-based environmental group — found that they contribute more to road funding when comparing electric vehicle models to their gas counterparts. Slapping another fee on top of what drivers of electric vehicles are already paying seems "punitive," said Charles Griffith, director of the Ecology Center's Climate & Energy Program. Tax shift at the pump leaves lingering angst Starting in 2026, the motor fuel tax will increase by at least 20 cents and coincide with the elimination of the 6% sales tax on gas and diesel — a current practice that makes Michigan a national outlier. The change will ensure that the taxes Michigan drivers pay at the pump will support the state's transportation system. The School Aid Fund that supports K-12 education in Michigan and currently receives tax revenue generated from motor fuel sales will see those lost dollars at the pump replenished from the General Fund, the state's largest pot of discretionary funding. Concerns about the tax shift remain. "You're replacing a guaranteed source of funding," said Bob McCann, executive director of the K-12 Alliance of Michigan. A future group of state lawmakers is not obligated to backfill the School Aid Fund, he noted. Local governments, which also benefit from the sales tax the road plan eliminates, won't see that revenue fully replaced after earlier plans to do so were walked back in the final deal. The plan will reduce revenue sharing to local governments by an estimated $92.8 million during the first full fiscal year with the new motor fuel tax, according to a House Fiscal Agency analysis. Michigan Townships Association Director of Government Relations Judy Allen said she heard from one township that equated the revenue loss to three firefighters. Townships face the possibility of making cuts or asking voters to approve tax increases, she said. Unlike townships, cities will receive some road funding but also face potential revenue hits to their local communities under the plan, according to John LaMacchia II, state and federal affairs director for the Michigan Municipal League. Possible budget pinches don't just await the local level. The road funding plan also delivers a big hit to the General Fund. The road funding plan disentangles federal tax changes in President Donald Trump's One Big Beautiful Bill Act from the state corporate income tax, blunting the impact on state revenue. Some corporate income tax revenue collected by the state is then dedicated to road funding and transportation under the plan. Once fully phased in, those earmarks, along with the sales tax shift at the pump, will each reduce General Fund revenues by hundreds of millions of dollars. Funding boost for public transit Michigan drivers aren't the only ones expected to benefit from improvements to Michigan's transportation network. The road funding plan was a cause for celebration among public transit advocates. The Comprehensive Transportation Fund, which supports public transit, will see an estimated $65.6 million increase due to the tax shift at the pump in the next fiscal year — the first full fiscal year when the tax change will be in effect, according to the House Fiscal Agency. The road funding plan also dedicates $35 million annually to the Comprehensive Transportation Fund through the fiscal year ending in 2030 and includes $65 million for investments in transit projects. That might not be enough money to build a new train line. But Megan Owens, executive director of Transportation Riders United, said it could help pilot other transportation projects and demonstrate interest in them that could generate further state investment. "So, it's a huge step in the right direction," she said. State Rep. Jason Morgan, D-Ann Arbor, who co-chairs the Public Transit Caucus in the Michigan Legislature celebrated what he called an unprecedented investment. "This is the largest increase in public transit funding in Michigan's history as far as I'm aware," he said. "This is a truly transformational investment." In the immediate wake of the new roads plan, its champions have celebrated the bipartisan support it received and the size of the funding boost, even if some describe it as a kind of initial breakthrough. Meanwhile, before the funding plan takes Michigan down a new road, its detractors are fighting to head in a different direction. Contact Clara Hendrickson: chendrickson@freepress.com or 313-296-5743.