LANSING — A scaled-back road funding plan that is part of a 2026 budget agreement reached Sept. 25 between Gov. Gretchen Whitmer and legislative leaders would dedicate more than $1.5 billion a year in additional funding to fix local roads, according to summaries prepared by the House Fiscal Agency.
The plan, which relies in part on a new 24% wholesale tax on marijuana, is about half as big as the $3 billion road deal Whitmer and House Speaker Matt Hall, R-Richland Township, had aimed for. The plan also draws on redirecting corporate income tax revenues and removing the 6% sales tax from fuel sales to allow for a 20-cent-per-gallon hike in the fuel tax, while leaving the price paid at the pump about the same. Together, the changes are expected to increase annual road funding by $1.5 billion to $1.8 billion per year, Hall said at a Sept. 25 news conference.
Removing the sales tax from fuel sales has been the elusive white whale in decades of road funding discussions. Though there’s been general agreement that every penny of tax paid at the gas pump should go to roads — which sales tax does not — attempts to remove the sales tax have been stymied by concerns about reduced revenues for schools and local governments, which sales tax revenues support. Lawmakers said Sept. 25 the latest deal will hold schools and local governments harmless, but many details are still pending.
A 2023 report from Public Sector Consultants, a Lansing think tank, prepared for the Michigan Infrastructure and Transportation Association, which represents road builders, said the state needs to invest an extra $3.9 billion annually in its roads and bridges to bring them up to standard and keep them safe and in good condition.
Still, MITA welcomed bills the House passed Sept. 25 in bipartisan votes. That legislation is expected to pass ahead of the Sept. 30 end of the 2025 fiscal year, as part of the budget agreement.
Rob Coppersmith, the association’s executive vice president, called the road funding deal “a historic step in the right direction.”
House Bill 4951, which passed the House in a 78-21 vote, would impose a 24% excise tax on the wholesale price of marijuana sold to retailers. The new tax, which would be in addition to a 10% excise tax and a 6% sales tax already applied to marijuana sales, is expected to generate about $420 million annually, according to a House Fiscal Agency summary, with nearly all of that amount being deposited in a Neighborhood Road Fund to fix roads and bridges.
House Bill 4961, which passed the House in a 95-4 vote, would direct a share of Michigan’s corporate income tax revenue to roads, in the following amounts: up to $688 million in 2026; up to $776 million in 2027; up to $864 million in 2028; up to $952 million in 2029; and just over $1 billion a year every year thereafter, according to a House Fiscal Agency summary.
Those bills can only become law if House Bill 4183, passed by the House earlier this year, also becomes law. It would increase the fuel tax by 20 cents per gallon, to 51 cents per gallon, approximating the amount of sales tax that would be removed from fuel sales.
Some critics say any long-term road funding plan should not be based largely on fuel tax revenues, since fuel sales are expected to decline over time as vehicles become more fuel-efficient and more motorist shift to electric vehicles.
The Senate is expected to pass the bills Sept. 29 or Sept. 30, along with the rest of the budget bills, which still need House approval, and send them all to Whitmer for her signature.
Contact Paul Egan: 517-372-8660 or pegan@freepress.com.
This article originally appeared on Detroit Free Press: Michigan budget deal would steer $1.5B more to road, bridge repairs