MML Review Magazine Spring 2026

A DECADE IN THE MAKING: MICHIGAN’S NEW TRANSPORTATION FUNDING PLAN

By John LaMacchia If we rewind to November 2015, legislative leaders and the gov ernor were celebrating the passage of a road funding package that dedicated an additional $1.2 billion to Michigan’s transpor tation infrastructure. At the time, many organizations, including the League, cautioned that the legislation did not represent a long-term solution and warned that the state would need to revisit the topic of road funding in the near future. When Gov. Whitmer was elected in 2018, she promised to “Fix the Damn Roads.” Seven years later, and nearly a decade after the prior funding package, the legislature once again found itself working to assemble the policy framework and political support necessary to deliver on that commitment. By early 2025, it was clear that funding for roads and bridges would dominate the policy agenda. Both Gov. Whitmer and Speaker Matt Hall released competing road funding proposals. While the differences between the plans were significant, there was also clear recognition on both sides that a solution was needed. After months of negotiations, public accusations toward each other and the Michigan Senate, as well as delays in final izing the State budget, an agreement was ultimately reached. The path to that agreement was far from smooth. Negotiations played out almost entirely behind closed doors, and while word circulated that a deal had been struck, details were not released until hours before the final vote. In the end, the legislature and the governor approved an additional $1.6 billion investment in Michigan’s transportation system—an amount projected to grow to nearly $2 billion annually by 2031.

The final agreement is built on three major components. First, the deal restructures fuel taxes by eliminating the six percent sales tax on gasoline and replacing it with a 20-cent per gallon increase in the motor fuel tax. This shift is expected to raise approximately $1 billion annually and ensures that 100 percent of taxes paid at the pump are dedicated to trans portation. However, it also creates an estimated $1 billion gap in sales tax revenue that previously supported schools, local governments, transit, and the general fund. While school funding was backfilled, local governments will see a reduction in constitutional revenue sharing. Second, the package increases taxes on marijuana by creating a new 24 percent wholesale excise tax, in addition to the existing 10 percent retail tax and six percent sales tax. This provision was strongly opposed by the cannabis industry, which argues that Michigan’s market is already oversaturated. The new tax is projected to generate approximately $420 million annually for road funding. Its legality is currently being challenged in court, though the State has prevailed to date. Finally, the State will decouple from certain federal business tax reductions enacted under the Trump Administration’s “One Big Beautiful Bill.” While not characterized as a tax increase, this change slows the pace of scheduled business tax cuts, with the resulting revenue directed to transportation. This provision is expected to generate roughly $600 million initially, growing to approximately $1 billion over a five-year phase-in period.

“ Throughout the negotiations, the governor and legislative leaders consistently emphasized a shared goal of directing a greater share of new resources to local roads. ”

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