Senior Fiscal Analyst Educates on State Transportation Budget

HARRISON – The Clare County Road Commission hosted a special informational event in December, where William Hamilton presented “Budget Briefing: Transportation” at the Harrison City Hall. Hamilton, senior financial analyst for the House Fiscal Agency, elaborated on several topics, including Funding Sources, Appropriations Areas, and Major Budget Topics, which included Transportation Revenue and Transportation Areas.

Hamilton explained that the state’s transportation budget supports state and local road and bridge programs, which includes construction and preservation of the state trunkline highway systems, as well as funding for local road systems in 83 counties, and 531 cities and villages. The budget also supports transportation programs which include capital and operating assistance to 80 public transit agencies, as well as rail passenger service in the state. The transportation budget also addresses aeronautics programs through capital assistance to public use airports through the federal Airport Improvement Program. Lastly, the budget provides for administration of the Michigan Department of Transportation.

Using figures reflective of the June 2023 budget, the FY 2023-24 Transportation Budget Funding Sources listed the Gross Appropriations of $6,630,449,900 (total spending authority from revenue sources). When deducting Interdepartmental Grants of $4,353,000 the remaining Adjusted Gross Appropriations amount is $6,626,096,900 (which represents 8% of the total $80.7 billion adjusted gross state budget). Other revenue sources include: Federal $2,149,121,400 (32% of total state transportation budget); Local $85,773,500 and Private $16,800,000 (local, private and interdepartmental grants combined equal 2% of transportation); State Restricted $4,082,402,000 (62%); and State General Fund/General Purpose $292,000,000 (4% of transportation).

Hamilton noted the state restricted revenue comes primarily from motor fuel and vehicle registration taxes and is the largest fund source in the transportation budget, followed by federal revenue.

He also spoke of how transportation appropriations have fluctuated over time (2005-2024) and increases which began with the 2015 Road Funding Package, and the FY 2019-2020 and FY 2020-2021 federal aid/COVID relief funding, as well as federal fund increases through the last two years.

Hamilton also described the three major program areas in the state’s $6.6 billion [rounded] Transportation Budget and their proportion as: Roads and Bridges $5,500,692,000 (83%); Public Transportation $818,776,000 (12%); and Aeronautics $310,981,700 (5%).

In describing the State Restricted Revenue, Hamilton noted the transportation budget includes $4.1 billion from state restricted revenue sources, primarily motor fuel taxes of $1,256,000 (31%) and vehicle registration taxes of $1,523,000,000 (37%), plus earmarks of income tax at $600 million (15%); other state restricted of $350,302,000 (8%) diesel motor fuel taxes of $269,5000,000 (7%); and marijuana excise tax of $83,600,0000 (2%).

Using data from calendar year 2021, Hamilton itemized the 120,498 route miles/96.66 billion vehicle miles traveled on state trunklines (9,659/50.25 billion); county roads (86,600/31.11 billion); and city/village streets (21,249/15.3 billion). He also did a similar breakdown of the state’s bridges, listing structures/deck area by million square feet/million vehicles per day: state trunklines 4,512/51.346/77.5; county roads 5,833/13.439/10.5; city and village 907/5.040/4.5. Those total up to 11,252 structures, 69.825 million square feet of deck area, and 92.4 million vehicles per day.

MDOT established pavement performance goals in 1997 which it achieved in 2007, sustained that for a couple years, and now there is decline. Now, the current estimated need is for an additional $2 billion annually just to maintain the trunkline system. He pointed out those pavement performance measures do not take into account conditions of local systems, safety or other factors.

Hamilton also fielded questions from attendees. Dave Wright, Hamilton Township supervisor, voiced one of the most concerning questions regarding road funding: “How is the state going to make up the loss of fuel tax with electric vehicles?”

Hamilton said there has been a lot of attention on electric vehicles, noting that the gas tax as a consumption tax has been declining since 2002, so electric vehicles aren’t the only cause for the decline in that base. Contributing factors are more fuel efficient vehicles, an aging population driving fewer miles, and younger people who are slower to seek driver’s licenses. He also pointed out that vehicle registration taxes comprise half that budget, and those continue to increase. Also, electric vehicles are more expensive, which leads to higher registration cost.

Hamilton also noted that consumers don’t actually pay fuel tax at the pump. While the tax is included in the cost of the fuel, those taxes are actually paid when the fuel is delivered to the tanker at the supplier level. He said there actually are fewer than 100 actual taxpayers, i.e., Marathon Oil, which makes it a very efficient tax to collect.

He said one alternative funding model being considered is a Vehicle Miles Traveled tax which would require some method of tracking mileage use, possibly using a transceiver. A second possibility would be an entirely new taxing system, implementation of which he said would be extremely complex. He said tracking also could be done on a limited-access system, such as expressways.

When asked how the road commission could go about seeking funding for a new facility construction project, Hamilton explained that annual funding is for basic road commission operations, and the best case would be through a legislative earmark, designated for that construction project.

Hamilton’s presentation contained far more items and explanations than can be offered in this space. However, the entire House Fiscal Agency Budget Briefing: Transportation is available at www.house.mi.gov/hfa/Transportation.asp

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