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February 18, 2026

Extra Friends Edition

This Week's Highlights

Road Funding is Accidentally Cut for FY2026
Register for Webinar Analysis of Governor Whitmer's Executive Budget Recommendations

How the 2025 Transportation Funding Package Accidentally Cut Road Funding in FY2026

The 2025 transportation funding package (TFP) was a notable outcome of Michigan’s contentious Fiscal Year (FY)2026 budget deliberations. The 2025 TFP was celebrated as a successful bipartisan road funding solution that would provide over $1 billion in new road funding in FY2026, increasing to over $2 billion by FY2030.

But the reality facing road agencies in FY2026 is very different. Because of timing mismatches between state accounting and when revenue is actually distributed to road agencies, the total amount of funding that agencies will receive in FY2026 will likely decline slightly compared to FY2025. The confusion and uncertainty surrounding new road funding are causing short-term cash-flow and planning problems for Michigan’s road agencies.

IN A NUTSHELL

-- Michigan’s 2025 transportation funding package was billed as delivering over $1 billion in new road funding in Fiscal Year (FY)2026. However, road agencies have experienced a 15+ percent decrease in distributions of state funding in the months following the adoption of the package.

-- This discrepancy between a promised funding increase and realized funding decrease is due largely to differences in formal state accounting and timing of distribution of funding to road agencies. Additional delays and uncertainties are imposed by statutory details and bureaucratic complexities related to new funding sources provided by the 2025 transportation funding package.

-- Road agencies will see funding increases beginning in April 2026 (the seventh month of the state’s FY2026). However, the funding increases in the final six months of FY2026 are likely to be less than the decreases seen in the first six months. While the official state budget may reflect over a $1 billion increase in road funding in FY2026, road agencies may actually receive less funding than in FY2025. The promised FY2026 funding increase will likely be distributed to agencies in FY2027, and some may be distributed in the final months of FY2026, but the exact timing and amount of this funding remain unclear.

Read the Brief

Several federal and state policy changes over the past year set the stage for an interesting budget cycle this year.

For FY2027, GF/GP revenue is expected to be down by more than $1.2 billion from the May forecast, an 8.3 percent decrease. On top of that, state budget writers will begin to address federal cost shifts that place greater burdens on states for Medicaid and food assistance programs. The key challenge for budget writers during FY2027 budget deliberations will be addressing deficits, rather than allocating surpluses, as has been the case for several consecutive years. Any new investment proposals that grow the budget will necessitate additional dollar-for-dollar reductions to offset their impact.

Senior Research Council staff Bob Schneider and Craig Thiel will provide their assessments of the General Fund and School Aid Fund Governor Whitmer’s FY2027 Executive Budget in a noon-time session. MIRS reporters John Reurink and Kyle Melinn will participate in asking questions.