Transportation Funding

Unlike Federal transportation funding, which flows through MPO’s, State funding flows directly to incorporated counties, cities, and villages. Act 51 of 1951 established the Michigan Transportation Fund (MTF) as the means of collecting and distributing state transportation revenues. For many years, the main sources of MTF funding were motor fuel taxes and vehicle registration fees. Since FY 2019, State transportation funding has included income tax revenues which are now transferred into the MTF. For example, in FY 2022-23 the MTF will receive $600 million from an earmark of Income Tax Act revenue (Hamilton, 2023). In addition to income tax revenue, beginning in FY 2020-21, the MTF has also received revenue from an earmark of the excise tax on recreational marijuana sales under the Michigan Regulation and Taxation of Marihuana Act. Revenue credited to the MTF was estimated at $59.0 million for FY 2022-23 (Hamilton, 2023).    

MTF revenue is first allocated for administrative, statewide planning, collection costs, various statutory categorical programs, and the Comprehensive Transportation Fund (CTF) for public transportation programs, including capital and operating assistance to 78 local public transit agencies. The remaining revenue is then distributed to county road commissions, cities, and villages based on the formula below:

• 39.1% to the State Trunkline Fund (STF), for construction and preservation of the state trunkline system and administration of the Michigan Department of Transportation (MDOT).
• 39.1% to 83 county road commissions for construction and preservation of county roads.
• 21.8% to 531 cities and villages for construction and preservation of city/village streets. 

The MTF is distributed among the 83 county road commissions for construction and preservation of county roads. 39.1% of the total MTF is distributed among county road commissions using factors include road miles, population, and registration taxes attributable to the county.

Funding for roads at the local level is generally a mix of federal, state, and local general funds and/or local property taxes. Most of the funding for local roads and bridges, under the jurisdiction of a county road commission or the jurisdiction of a city or village, comes from state revenue, which is determined by the Act 51 formula distribution. 21.8% of the total MTF is distributed to cities and villages.

The city/village share of MTF revenue is distributed among the 531 eligible cities and villages by formula established in State Act 51.

The Michigan Transportation Fund (MTF) receives road user fees, which are restricted by the state Constitution and are distributed to road and transit agencies through a formula in Act 51 of 1951. Approximate Annual MTF Revenues for FY 2022 (MDOT 2022).  

• Vehicle registration taxes.....................$1,446 million
• Gasoline taxes.....................................$1,165 million
• Income and sales tax........................... $600 million
• Diesel fuel taxes.................................. $245 million
• Marijuana and other............................. $95 million
• Total revenue....................................... $3,553 million

Michigan maintains just under 122,000 miles of public roads (MDOT 2022). Only nine states have more miles of roads and only two states (Texas – 316,567 and California - 175,562) have significantly more road mileage. Michigan has more miles of roads than New York, Wisconsin and Pennsylvania (University of Kansas 2020). The seven-county SEMCOG region has 25,000 miles of public roads.

Under a formula that was established in Act 51: Up to 10 percent of all funds collected can be used for alternative forms of transportation, including transit buses, passenger trains, dial-a-ride and even bicycle and pedestrian travel. Of the remainder, 39.1% is retained by the Michigan Department of Transportation for major transportation projects, 39.1% is distributed to county road agencies, and 21.8% is distributed to city and village road departments.  

The state funding formula takes into consideration many factors. The most important factor is the number of miles of road under that government’s jurisdiction. However, major roads receive more money than minor roads; roads in urban areas receive more than roads in rural areas. Population is taken into consideration along with where vehicles are registered. Even how much snowfall has occurred over the past few years can impact state distributions.

County road agencies have jurisdiction over all township roads that are not under state control. Counties also have jurisdiction over select roads in cities and villages. Cities and villages have control over all roads within the municipality that are not controlled by the county or state.

All major roads in the state, 40,000 miles in total, are evaluated once every two years for pavement condition. This is done through a system called Pavement Surface Evaluation and Rating or PASER. Michigan leads the nation in using this data and matching it with pavement strategies to get the longest useful life from a road for the least cost. For more detailed information, SEMCOG maintains a map showing current pavement conditions within the seven-county Southeast Michigan region.

SEMCOG maintains a road jurisdiction map for the seven-county Southeast Michigan region.

The SEMCOG University, Transportation Funding 101 was held on May 25, 2023. Guest speakers, Matt Lyle, Federal-Aid Specialist, Michigan Department of Transportation, and William Hamilton, Senior Fiscal Analyst, Michigan House Fiscal Agency, gave an overview of federal and state transportation funding. The presentations and a video recording are linked below.

• Presentation: Federal Revenue in Michigan, Matt Lyle
• Presentation: House Fiscal Brief, William Hamilton