Speaker 2 (00:00.526)
Hello and welcome to the Facts Matter podcast brought to you by the Citizens Research Council of Michigan, unabashedly nonpartisan and deeply committed to the idea that facts should drive policy, not politics. Today we're tackling a big one, the Rhodes budget. And this is all driven by the data driven assessment of Michigan's Rhodes program, a policy paper that was released a few short months ago.

updated just this week and very timely given the fact that the legislature is going to come back and will begin work on the Rhodes budget. am joined by the award-winning researcher, Eric Paul Dennis, our infrastructure research analyst at CRC, who received a very nice award, Eric, for this very study that you did from the Governmental Research Association, the most distinguished research award. So congratulations on that and thanks for being with us.

Thank you, Guy, and thank you for that. Congratulations as well. I'm quite proud of that.

You should be. You tackled a big one here. Let me just set the table here. recent testimony to the Michigan House that you submitted, you said this. This is not a moment of crisis. Michigan's road program is now reasonably well funded. You're also quoted as saying other factors such as funding distribution and project selection appear more influential, AKA when it comes to road improvement.

and road quality. How did you arrive at those conclusions?

Speaker 1 (01:35.532)
Yeah. So I was really interested in trying to find a way to evaluate Michigan's road program performance, basically meaning bang for the buck. What does our road infrastructure look like considering the amount of money that we spent on it? And I took a, there's a couple of different ways I came at this. The main approach I relied on was by comparison to other states. So I devised a way to compare states by road system conditions.

as well as road funding levels. Each comparison takes a bunch of different data, combines it to an index score. So I'm going to refer now to...

I mean, there are a there's no shortage of yardsticks here, right? I mean, you can look at it in terms of lane miles of funding per capita population density. You found shortcomings in almost all of them, didn't you?

Right, and I wouldn't even call it shortcomings. It's just you're measuring different things. So I was really trying to measure everything to the extent that I could, combine it together. In my recent update, so we've updated this data in the last month. I found Michigan ranked 28th in funding levels, 40th in system condition, which suggests a performance gap and room to improve. And you can see this visually if you plot.

these index scores into a scatterplot. And there are a lot of caveats. This could have been done differently, possibly a little bit better. One thing I would mention, I did this analysis after I had already focused on trying to find the best way to judge both system conditions and funding individually. It was only after I had done that analysis

Speaker 1 (03:27.372)
that I had the idea that these could be put together to do this combined performance analysis. So I'm a little bit concerned, for example, that my funding index might overemphasize the most recent funding and doesn't capture enough historical context to really get at the funding levels that are most influencing our current system conditions. That said, since I've published this, done this, I've...

reran the data in a variety of ways. For example, taking aggregate funding levels over the entire previous decade, average funding levels, just a simple average year for year. And I keep getting very similar results. Basically, Michigan, we're on the lower end of funding, but there's a lot of states, well, there's not a lot of states, but enough states that have similar levels of funding to Michigan that have better system conditions that

I'm pretty comfortable saying at the very least that several other states have more cost efficient statewide road programs and Michigan has room to improve.

Okay, bottom line is they're getting a bigger bang for the road construction buck than we are here in the state of Michigan. And you talked about that scatter plot. I mean, we've got Texas and Florida on one side that have high pavement quality, but also are richly funded compared to other states in the nation. Michigan is kind of in the middle, but above us, I mean, we are looking up at states that are less quote unquote well-funded than we are. What are they doing that we aren't?

That's a great question. I'm not entirely sure, so I can only work with the public data that's available to me. I tried, I did spend a lot of time trying to figure that out. For example, states are required to submit, I think it's every three years, something called a transportation asset management plan to the federal government that describes what they're doing. But so I am an engineer.

Speaker 1 (05:29.506)
worked in road agencies and I can tell you that what happens on paper doesn't always happen on pavement. So there's a lot of things within the culture of these organizations that I really can't get to just by looking at the data, especially, mean, considering I'm one person trying to figure this out by myself, but it is definitely worth looking into some of these other states, especially pure states like Ohio, Indiana.

Georgia, Missouri that appear very similar.

There are that we are competing with for heavy industry and for manufacturing jobs where roads matter. And that's what I guess one of the data points that really leapt out of me when you adjusted for construction cost inflation and you included the 2024 funding levels. So included the debt driven increase in road funding, the governor's bonding program.

Absolutely.

Speaker 2 (06:30.444)
We were only in real terms 6 % higher than in previous years. And you talked about the historical impact. mean, between 2002 and 2013, the folks that were saying we were historically underfunded were probably right, weren't they?

Yes, before 2015 and really before 2017-2018, our funding levels compared to other states were pretty low.

So subsequently, have we caught up when you look at this and say, we've only seen a 6 % gain in real construction purchasing power, 18 % increase when you factor in the governor's bonding program. Is that enough to help us catch up to those other states? The fact that we're 40th in pavement quality suggests otherwise.

Well, it takes a while to apply that new funding to all of the roads that we have. As of 2022, by my method, the CINDEX scoring method, we rank 24th. So we're now in the top half of states at least. We also, like you mentioned, we are currently better funded, even though not by much, we're currently better funded than any time since.

By my analysis, since at least 2004, the Transportation Asset Management Council actually put out some numbers that did an inflation adjustment and they found that we're better funded now than at any point since 1997.

Speaker 2 (08:05.37)
You did take a novel approach to coming up with this funding index where you tried to get a clearer picture. Because I mean, there are some yardsticks that say we're 50th in the nation. There are others that say we're 16th. I mean, and the vested interest kind of cherry picked their yardstick to about whether or not they want to expand the pie or hold its status quo. But I'm curious on pavement quality for those of us that drive these roads on a daily basis.

has the overall pavement quality improved? Or do we have the same level of poor roads that we've always had, but maybe a few that were fair have become good?

As you mentioned before, there's a lot of different ways you can measure road quality and there's a lot of different system scopes that you can apply that to. And it kind of depends on how you look at it. would say overall, we've been, it looks like we've been pretty static. Over the last couple of decades, there's been some improvements in some ways, some regression in other ways. I do. So I will say.

At least in comparison to other states, I can only compare us to the most recent available federal data, which ranges from 2022. Our bridge data goes to 2024, but bridges aren't inspected every single year. So the inspection reports that are reported in 2024, five years old or more. So I do expect that the increase in funding that we continue to see

We'll start showing up in the data as we update this as it becomes available.

Speaker 2 (09:48.374)
But that number that we're 40th in the nation, meaning that only 10 others are below us, also understanding that we probably are more challenged because of the kind of weather that we have here in Michigan. But when you look at that, does it tell the true picture for people that are living in metros versus in rural areas?

No, that's one of the things that I've looked at and would like to look at more in the future. We actually rank fairly high in our rural pavement conditions, but our urban pavement conditions and some of our most important roads seem to really be struggling, which I think gets to the question of how we're

distributing funding across the state and making these investment decisions.

So one of the things that is the media did a lot of reporting on your assessment and you didn't just challenge some sacred cows, you went out sacred cow tipping. mean, there were a lot of vested interests that got, I think a little ruffled about this because you said this, increasing Michigan's road funding without fundamental reform.

to how it is spent would be a disservice to the citizens of the state. So let's attack that. What would be number one on your punch list as an engineer to fixing the formula or maybe fixing how we spend that money? Is it Public Act 51?

Speaker 1 (11:27.342)
I think that's, and it's a really hard place to start, because it's a very heavy lift, but to put a little bit of context to this so listeners don't know, Public Act 51 is the law that determines, among other things, how road revenue is shared across Michigan between the Michigan Department of Transportation, 83 counties, and 531 cities and villages.

This law was written in 1951. That's not why it's called Act 51. That's just a coincidence. But it was written in 1951 and actually intended to fund a 15-year highway construction program. But stuff happened. It was kept in place. It has been amended. There's been dozens of carve-outs over the years. But that

I mean, aren't there 300 amendments?

Depends on how you count. I'm not sure about that. I haven't counted the amendments, but I think there are a lot. And I think the result of that has been to make the law just a lot more complicated. would challenge anyone to read that law. Imagine something like you have a budget of a hundred dollars or something and try to figure out how it would be distributed.

If you cheat, can find some really well done flow charts done by the House Fiscal Agency, but I'm not convinced those flow charts are 100 % accurate or even could be. I've tried to read this law and recreate that. And this law is so Byzantine that it basically requires that some provisions be interpreted or just ignored.

Speaker 2 (13:04.664)
So we're trying to carve up a pie here for 615 different road agencies. As you looked at this, for folks that are listening, who are the haves and who are the have-nots? Are more rural areas coming out better than those in metro areas, we could surmise from the pavement index that you did? Or are there some counties that are just being frozen out where other counties are doing better? Who comes out ahead?

I'm not comfortable answering that question directly. I have some intuitions, but I think basically we don't know. We haven't done enough work to figure out how our needs are distributed and how well our funding matches those needs. And this has been acknowledged before. So before 2015, when the legislature passed that road funding package,

The previous road funding package was passed in 1997. When the legislature did a road funding thing in 1997, they recognized that they were putting money into a system that they didn't think was working very well. So they created an Act 51 study committee that they thought would be able to advise them on how to amend or replace Act 51.

was a condition that Governor Engler put in there, didn't he? Saying before we raise taxes, we want to review this.

I don't know the history, it did end up, at the very least, they created a study committee that released a report in 2000. And that report basically said, we don't think that the law should be amended until we have more data about where the needs are. And so rather than advising the legislature to revise or replace the law in any specific way, they recommended that the legislature create some kind of statewide asset management body that could

Speaker 1 (15:06.088)
One, implement an asset management plan to try to assure that money is being well spent and also get their head around where the needs are to advise the legislature on how to amend or replace this law.

So other states have these asset management councils. And I think in concept, that's probably a sound idea. Has it worked or has it been as effective as its creators envisioned?

I don't think it has. when following that report in 2000, the legislature created the, what we now call our transportation asset management counselor, TMC. The legislation gave them a mandate to adopt a statewide asset management program, which they have. The legislature did not mandate them to advise on amending act 51. And so they've never done that. Additionally, the legislature didn't create

like an independent body. They determined that the council would be made up of appointees representing various road interests. So there's on the council two from MDOT, two from the County Road Association of Michigan, others from the Michigan Municipal League, regional planning organizations like SEMCOG, the Michigan Association of Counties, and the Michigan Townships Association. So TAMC was made up of a variety of road interests, taxed and tasked with creating an asset management strategy that

everyone could agree to. And keep in mind that everyone includes some very small and rural road agencies. So the approach that they adopted in trying to keep everybody happy and on board was kind of a lowest common denominator approach.

Speaker 2 (16:52.994)
Well, also some folks would look at this and say there's some pretty deeply vested interests on that panel and you may not be getting the most objective needs based approach.

I think that's true. And I want to clarify that the members of the council, think are, nearly all of them, most of them, even throughout history are dedicated public servants that are trying to do their best to improve Michigan's road program. But they are volunteer appointees who...

whose full-time job is usually working for the agencies that are receiving the money. And they're representing these organizations that almost all of them have, I think all of them have lobbying arms. Like these are lobbyists that usually lobby for more road funding. So they're working within a system that I think can't be expected to.

Try to make anyone unhappy by imposing any kind of accountability or asking anyone to do anything that they wouldn't be comfortable with.

So we're gonna take a deeper dive into this. We're starting something we're calling the In the Weeds podcast that will be coming up a week from the debut of this one. So watch for that. And of course, also urge all of you to subscribe to this if you appreciate the kind of research you're getting from Eric and the other CRC researchers. We're almost out of time, Eric. I've got to ask you, we've covered the two major recommendations. We'll do a deeper dive into that in our next podcast.

Speaker 2 (18:35.788)
What has been the reaction? I know you tried to work alongside with the folks at some of the, about the road builders and some of the policy makers and some of the government officials that oversee our roads budget. What was the reaction to your research?

So most of the feedback that I've gotten has been in the form of response quotes in news articles covering my research. Once...

Once I started publishing, and actually before I started publishing, I was in frequent contact with many of these groups, but they kind of decided to stop responding to me once I started sharing my data with them.

So the silence was deafening?

silence was notable. That's not completely true. I have had a couple of conversations with people who actually are now retired, which is maybe why they spoke to me, but were previously in this industry. But most of the feedback that I've gotten, I've gleaned again from response quotes that have basically said this research is not

Speaker 1 (19:54.878)
academic or unvetted, things like that. But I welcome anyone who has specific issues with it to talk to me and tell me how I can do it better. I'm always trying to...

We are always seeking feedback at CRCmich.org. A final question before we do a quick recap here Eric and that is, know, the timeliness of this is important. The one big beautiful bill act has passed. We know thanks to analysis by one of your colleagues Bob Schneider that we addressed in an earlier podcast on Facts Matter is

that this is going to blow somewhere in the neighborhood of a $1 billion hole in Michigan's budget. So if ever there was a time to say we need to allocate dollars better or to say this is going to be an even bigger challenge, it's now, correct?

Yeah, I think so. And the 2015 road funding legislation actually put us in a pretty decent place right now. We're better funded than we have been in decades. We're about average nationally. And that's not saying that there aren't more needs. I think it's very important to keep up with this. We shouldn't ignore funding issues.

And we should also point out, you're not dismissing the idea that revenue should be frozen or that we don't need revenue growth.

Speaker 1 (21:15.03)
No, absolutely not. the, so in early in the year, there were a couple of plans put out that we're suggesting we need north of $3 billion. Let's assume that gets rounded down to 3 billion even. That's about $300 for every Michigan resident from infants to hospice patients, or about $730 per year for every Michigan household. This is real money and that's got to come out of either somebody's

through additional revenue taxes or fees, or from other state programs. And it's going to be very difficult to come for the legislature working through the fiscal year 2026 budget to create a balanced budget and find all of this new money for roads. I think this is an appropriate time. We have a little bit of breathing room now to really think about how we're spending this money, making sure that it is being distributed

to the agencies and projects that need it the most and try to make sure we're getting the most bang for the buck in our road funding.

But what you said there is very key. It's a heavy lift. Anytime you're talking about reforming something as entrenched as PA-51, it's going to be very difficult and we will do a deeper dive into that on our In the Weeds podcast, which will drop in about a week. So look for that. Eric, Paul, Dennis, thank you very much.

Thank you guys.

Speaker 2 (22:46.26)
And we want to remind you that this is the Facts Matter podcast brought to you by the Citizens Research Council of Michigan. We do not accept lobbying jobs. We do not accept government money. We are totally donor funded. And to that end, if you appreciate this unbiased, highly objective approach to the policy challenges in Michigan today, we would urge you to visit the CRC MISH website, CRC MISH.

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Speaker 1 (24:34.99)
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