Governor Signs FY 2026 State Budget – Significant Increase in Road and Bridge Funding

This week, the Governor signed the FY 2026 state budget, which includes a major increase in long-term sustainable funding to repair Michigan’s roads and bridges.
While details are still emerging, MAA wanted to provide members with a summary of the new funding structure and distribution.

Overview of New Funding Sources
The new funding package is the result of several key revenue changes, including:

• Replacing the sales tax on gasoline with an equivalent gas tax – projected to generate $1 billion annually
• Implementing a 24% wholesale tax on marijuana – estimated to generate $420 million per year
• Phasing in additional revenue sources through decoupling from certain federal tax cuts and adding an IPA healthcare tax – expected to generate $430 million annually by FY 2030

All new funding will be placed in the Neighborhood Roads Fund, to be distributed as outlined below.

FY 2026–2030 Distribution
FY 2026 (in millions):

• $1,500 – Total New Funding
• $100 – Local Bridges
• $40 – Local Grade Separations (railroad crossings – overpasses/underpasses)
• $35 – Comprehensive Transportation Fund (public transportation)
• $65 – Infrastructure Projects Authority Fund (innovative or expanded public transit projects)

Remaining Distribution:

• $655 – 52% for Counties
• $353 – 28% for Cities & Villages
• $252 – 20% for MDOT

By FY 2030, the total annual increase is projected to reach $1,850 million, with the same dedicated programs and the remaining funds distributed as follows:

• $837 – 52% for Counties
• $451 – 28% for Cities & Villages
• $322 – 20% for MDOT

FY 2030/31 and Beyond
Beginning in FY 2030/31, the dedicated programs and distribution formula will adjust as follows (in millions):

• $1,850 – Total New Funding
• $0 – Local Bridges
• $100 – Local Grade Separations (railroad crossings – overpasses/underpasses)
• $53 – Comprehensive Transportation Fund (public transportation)
• $18 – Infrastructure Projects Authority Fund (innovative or expanded public transit projects)
• $7 – Counties
• $4 – Cities & Villages
• $90 – MDOT

Remaining Distribution:

• $735 – 46.5% for Counties
• $395 – 25% for Cities & Villages
• $466 – 29.5% for MDOT

Total to Each Unit of Government:

• $741 – Counties
• $399 – Cities & Villages
• $556 – MDOT

MDOT Preservation Program (Prior to Additional Funding)

Fiscal Year	Preservation Program (Millions)
FY 2026	$1,596
FY 2027	$2,036
FY 2028	$1,385
FY 2029	$1,231
FY 2030	$1,675

These figures will increase under the new long-term sustainable funding plan.

MDOT Debt Service
MDOT is currently paying approximately $200 million per year in debt service. This is expected to increase to $300 million annually as existing bond commitments mature.
Importantly, the preservation program amounts above already account for the current $200 million in annual debt payments.

Summary
MAA is grateful for the increase in sustainable, long-term road funding and extends appreciation to our legislative leaders and the Governor for their leadership and commitment to improving Michigan’s infrastructure.