March 14, 2025 | This Week in Government: Republicans Put Rubber to the Road With Testimony on Road Funding Package

House Republicans presented their road funding plan before the House Transportation and Infrastructure Committee on Tuesday.

“You’re going to get tired of hearing us say ‘revenue neutral,’” Rep. Tom Kunse (R-Clare) said about the bill package. “We’re going to come up with $3.1 billion for road funding that is revenue neutral … this is $3.1 billion of reprioritization of our existing funds. We’re not raising taxes, but we’re not cutting any vital services to fund this plan. We’re hold the School Aid Fund harmless, and we’re prioritizing one of our biggest needs right now, which is our road and bridge system.”

The bills in the plan include HB 4180, HB 4181, HB 4182, HB 4183, HB 4184, HB 4185, HB 4186, and HB 4187.

At a press conference prior to the committee hearing, House Speaker Matt Hall (R-Richland Township) said he believed that a roads deal was possible.

“What I think is critical about this roads funding plan that you’re going to see hearings on today is Gov. Whitmer and I agree on half,” he said. “I really believe, because of the great relationship that we’re building with Gov. Whitmer, that we’ll be able to solve that, and we’ll come up with and vote on a solution.”

Hall also emphasized that he thought a long-term road funding solution was possible without increasing revenue.

House Minority Leader Rep. Ranjeev Puri (D-Canton) expressed he didn’t believe that was possible.

“I strongly doubt the viability of the Republican roads plan and their commitment to making smart investments,” he said in a statement. “The GOP proposed roads fix is full of potholes and it’s going to fall on the backs off working people.”

The first bill in the package, HB 4180, sponsored by Rep. Donni Steele (R-Orion), would exempt motor fuel and aviation fuel from sales tax. HB 4181, sponsored by Rep. Steve Frisbie (R-Battle Creek), would streamline the sales and use tax to exempt the 6% tax on motor fuel. Similarly, HB 4182, sponsored by Rep. Bradley Slagh (R-Zeeland) would exempt motor and aviation fuel sales from the use tax.

The House Fiscal Agency analysis noted that HB 4180 and HB 4181 would reduce sales and use tax revenue on motor fuels by approximately $925 million based on the most recent year of data and that the effect on the budget would vary from year to year depending on fuel prices.

The committee adopted an H-1 substitute for HB 4183, sponsored by Kunse. The bill would increase the tax on gasoline and diesel fuel by 20 cents to 51 cents per gallon. . The amount would be adjusted for inflation.

HB 4184, sponsored by Rep. Jamie Thompson (R-Brownstown Township) would increase the tax imposed on aircraft fuel under the act and alter the distribution of money collected from that tax. Under the bill, the tax rate would increase to 8 cents per gallon, and the additional 5-cent tax added by the bill would be distributed between the State Aeronautics Fund and the Qualified Airport Fund.

The distribution of revenue under the General Sales Tax Act would change under HB 4185, which is sponsored by Rep. Rylee Linting (R-Wyandotte). Currently, the act requires the Department of Treasury to distribute revenue based on the amount collected under the 2% of the use tax on the sale of aviation fuel in specific proportions between the State Aeronautics Fund and the Qualified Airport Fund.

The bill would change the law to allow the department to transfer money between funds, delay and adjust a distribution currently required by the act. It would add that, in addition to other deposits into the School Aid Fund already required by the act, an additional $755 million would be deposited into the fund from the revenue collected under the 4% sales tax imposed by the act for each fiscal year.

HB 4186, sponsored by Rep. Steve Carra (R-Three Rivers), would increase to Michigan Business Tax rate from the current 4.95% to 30%. The Michigan Business Tax was eliminated in 2011 as part of the overhaul that created the current Corporate Income Tax, but certain businesses that had outstanding approved or assigned credits were allowed to continue filing until the credit is used up.

If all taxpayers discontinue filing under the MBT due to the tax rate increase under the bill, House Fiscal estimated that General Fund revenues from net business taxes will increase initially by approximately $530 to $540 million in fiscal year 2026-27 and by about $350 to $390 million in fiscal years 2027-28 through 2030-31 based on the most recent MEGA and Other Certificated Credits Annual Report.

The final bill in the package, HB 4187, sponsored by Rep. Pat Outman (R-Six Lakes) would redistribute revenue from the Corporate Income Tax. Currently, up to $1.2 billion must initially be deposited into the General Fund. After that, $50 million is earmarked for the Michigan Housing and Community Development Fund, $50 million for the Revitalization and Placemaking Fund and $500 million to the Strategic Outreach Attraction Reserve Fund. The bill would change that distribution to allow up to $2.2 billion to the Department of Transportation. Of that, 50% would go to the department for county road commissions, and 40% would go toward cities and villages. The money would be distributed in accordance with PA 51 of 1951.

The committee discussed the need to avoid artificially inflating the cost of road construction projects and ensuring that local townships were not hurt by the loss of fuel sales tax from revenue sharing.

Lance Binoniemi, vice president of government affairs for the Michigan Infrastructure and Transportation Association, testified in support of the legislation.

“We believe that this is a huge step in the right direction in improving the quality of our roads and limiting the deterioration of them and gets us much closer to that 90% good and fair condition that the state has tried to achieve for decades now,” he said. “We have seen short term investments over the past five years through a bonding program and through increased investments through Congress that all run out in 2026 and as we approach that funding cliff, we appreciate this opportunity to look at how we can increase revenues for our system.”

If nothing is done, Binoniemi said, the cost of fixing Michigan roads will only increase.

Brad Williams from the Detroit Regional Chamber also testified on the legislation.

He echoed that a long-term road funding solution was necessary but raised concerns about the elimination of economic development incentives, such as raising the Michigan Business Tax and eliminating the SOAR Fund.

“These incentives are vital tools that attract businesses to Michigan, foster job growth, and generate investment across the state,” Williams said. “We cannot afford to cede this ground to our neighboring states.”

No further action was taken on the legislation on Tuesday. More testimony on the bill package is expected during next week’s committee meeting.

Ending the Michigan Economic Growth Authority tax credits would save the state $500 million per year, a House panel was told Wednesday as lawmakers weigh an attempt to end the program.

Ben Gielczyk, associate director of the House Fiscal Agency, provided a presentation on MEGA credits and their history to the House Oversight Corporate Subsidies and State Investments Subcommittee.

The presentation comes as the House prepares to consider legislation that would hike the Michigan Business Tax from the current rate of 4.95% to 30%, with HB 4186. The tax increase would likely deter companies from filing under the Michigan Business Tax, moving them to the Corporate Income Tax, and thereby effectively eliminate MEGA credits.

At a separate event on Wednesday, Gov. Gretchen Whitmer said she thought a big policy change like eliminating MEGA credits should be robustly debated.

“A lot of our big companies, big employers, have made long-term decisions based on long-term commitments from the state, and so I think it would be a mistake to upend that,” she said. “With that being said, I think there’s probably always ways that we can make sure that our policies are smarter and achieve our goals, and they’re always ripe for review. But I don’t want to upend big employers.”

The “big employers” Whitmer likely has in mind are the Detroit Three automakers, who obtained significant MEGA credits to help keep them afloat during the Great Recession of 2008-09. When the state created the Corporate Income Tax starting with the 2012 tax year, nearly all employers moved away from the MBT – except those whose MEGA credits were so large it made more financial sense to stay there.

MEGA credits are refundable, performance-based tax credits that were awarded for up to 20 years. The program was originally created in 1995 and was discontinued in 2011.

Gielczyk clarified that the refundable nature of the credits only applies in certain circumstances.

“It just means that if the credit award is greater than the tax owed by the business, the state will pay the cash difference to the company as a refund, thereby lowering the net business tax revenues,” he said.

Additionally, as a performance-based credit, the company must meet agreed upon conditions around investment and job growth to qualify for the credit, and the value of the credit corresponds with the job and investment levels produced.

In early 2010, the state had problems with the unpredictability of MEGA credit redemption and their estimated and actual value amendments that increased or decreased, and changes were made. Ultimately, though, the program ended and was replaced with the current Corporate Income Tax.

Although the credit was discontinued, along with the Michigan Business Tax, companies with existing credits can continue to file them.

“MEGA retention credits clearly have the largest impact on General Fund revenues, as they are expected to continue through fiscal year 2032,” he said.

Industries with MEGA credits include advanced manufacturing, automotive manufacturing, research and development, and information technology.

To receive the credit, the company applies for an award and an agreement reached on specific terms of the incentive. Then, the Michigan Strategic Fund Board approved the award for the company. The company pursues investments in job creation and retention for each year of the award and then applies for a credit certification showing compliance with the terms of their agreement.

Every year during the term of the agreement, the Michigan Economic Development Corporation staff verify compliance with the terms. The company then submits the tax return with the associated certificate and the Department of Treasury reviews that tax return and issues credit refunds. Any changes to the agreement requested by the company throughout the term must be approved by the Michigan Strategic Fund Board.

The total MEGA tax credit liability is about $9.4 billion, Gielczyk said, and about $500 million in revenue expected each fiscal year until 2032.

The $500 million from MEGA credits have been part of the discussion for House Republicans’ long-term road funding plan, but Republicans said that those dollars are not part of the money going toward roads. Rather, the money from the MEGA credits would be used to backfill other budget items affected by reallocating money from sales tax. By the time MEGA credits expire, the MEGA credit money may be unnecessary for backfilling other budget items.

“We have plenty of years to reevaluate before then,” Rep. Steve Carra (R-Three Rivers) said.

Eliminating the MEGA credits before they are set to expire simply gives the state additional General Fund dollars, he said.

During the committee meeting, Carra asked if House Fiscal could calculate the difference between what the 10 companies are paying the state who are still paying the Michigan Business Tax versus what they would be paying under the Corporate Income Tax.

Gielczyk said he was unaware whether any credit value was given out in circumstances where a business failed to meet the performance metrics, but there have been amendments to the agreements.

Relieving the financial pressures facing Michigan families is a key priority that needs to be addressed with bold measures, Senate Democrats told reporters Wednesday.

To achieve that end, lawmakers said reducing taxes for young parents, expanding a cash payments program for new mothers statewide and improving access to child care would provide a huge boost to families.

“For far too many, raising a child has become a financial headache and a constant source of worry as they struggle to keep up with rising costs, and this has a profound impact on the health and well-being of parents, our kids and the economy,” Sen. Mallory McMorrow (D-Royal Oak) said. “It’s abundantly clear that the status quo is not working. A true fix requires a bold, transformative set of policies.”

McMorrow said although Democrats raised the Earned Income Tax Credit, rolled back the tax on retirement income, and expanded school meals last session, more needs to be done to help families.

Three policy items were announced by Democrats on Wednesday, but corresponding legislation has not yet formally been introduced in the Senate.

The first is a proposal for a $5,500 tax credit for parents with children under age 3. It is similar to a bill introduced last session as part of a child care and tax credit package (See Gongwer Michigan Report, April 18, 2024).

“This proposal would help parents keep more of what they earn in their pocket, making it easier for them to afford the everyday essentials,” Sen. Kevin Hertel (D-Saint Clair Shores) said, adding that it would also help spur economic growth.

Another proposal is to expand Rx Kids into a statewide program. The program was launched in 2024 in Flint and consists of a $1,500 cash prescription during a pregnancy and then $500 per month for between six and 12 months after the child’s birth. It was discussed during a recent Senate budget subcommittee hearing (See Gongwer Michigan Report, Feb. 25, 2025).

Dr. Mona Hanna, director of Rx Kids, said when a child is a baby, that is often the poorest time of a family’s life.

“What happens in that brief window of that maternal infant period shapes your entire life course,” Hanna said. “This is when we should be surrounding our families with resources and love and enrichment to make sure that they can grow up healthy and successful.”

A third proposal seeks to improve access and affordability to quality child care. The Democrats are proposing codifying the tri-share program as well as tying the child care reimbursement rate to inflation. Eliminating some of the regulatory barriers to opening and operating child care centers is also being proposed.

Hertel said the costs for families continue to go up, between child care, doctor visits and essentials including groceries.

“If we’re serious about growing our population here in the state of Michigan, we need to get serious about making parents a priority and building on an economy that supports them and their families,” Hertel said. “They need more than just budget acts. They need real solutions, and that’s what we are here proposing today.”

Alison Freas, president and chief executive officer of The Source, said many parents are struggling to get by, but any unexpected expenses can lead to a family falling backwards financially. She praised the proposals being put forward by the senators.

“With more dollars being spent on child care and other items in our communities, this could be life-changing for many families, allowing them to build a stable foundation that enables them to achieve economic stability and mobility for themselves, and pass that along with their children,” Freas said.

Sen. Sylvia Santana (D-Detroit) said an expansion of the Rx Kids program would be huge for many families struggling to provide for their young children.

“A program like Rx Kids would have been a game-changer for my family when my children were little. I also know that many families feel the same way,” Santana said.

Former U.S. Transportation Secretary Pete Buttigieg took himself out of the running for the Democratic nod for Michigan’s open U.S. Senate seat Thursday in what appears to be a move toward another run for president in 2028.

The decision, coupled with Lt. Gov. Garlin Gilchrist II launching a gubernatorial campaign earlier this week, has opened a lane for multiple other top Democrats also weighing the race.

Within hours of Buttigieg’s announcement, multiple Democrats had teased pending decisions on whether to run. Those included Sen. Mallory McMorrow of Royal Oak, U.S. Rep. Haley Stevens of Birmingham, and U.S. Rep. Kristen McDonald Rivet of Bay City.

“I care deeply about who Michigan will elect as governor and send to the U.S. Senate next year, but I have decided against competing in either race.” Buttigieg wrote Thursday morning on X, formerly Twitter. “I remain enthusiastic about helping candidates who share our values – and who understand that in this moment, leadership means not only opposing today’s cruel chaos but also presenting a vision of a better alternative.”

Buttigieg added that he plans to work on “consolidating, communicating, and supporting a vision for this alternative.”

“The decisions made by elected leaders matter entirely because of how they shape our everyday lives – and the choices made in these years will decide the American people’s access to freedom, security, democracy, and prosperity for the rest of our lifetimes.”

Earlier this month, Politico reported that Buttigieg had met with U.S. Senate Minority Leader Chuck Schumer of New York to discuss possibly running for the seat being vacated by U.S. Sen. Gary Peters (D-Bloomfield Township), who opted not to run for a third term.

Gilchrist for his part launched his gubernatorial campaign earlier this week (See Gongwer Michigan Report, March 11, 2025).

Shortly after the Politico story appeared, McMorrow posted to X that her decision will come soon.

“Busy morning, huh? Thank you to everyone encouraging me to run for Senate. I’ll have more to share soon.” she wrote

The Associated Press reported Thursday, according to sources with direct knowledge, that McMorrow may announce a campaign for U.S. Senate in April.

“Nothing to share. You’ll have it when I have it to share,” McMorrow told Gongwer News Service following a committee hearing Thursday afternoon when asked about the Associated Press report.

Stevens also hinted Thursday on X at a decision on running for U.S. Senate is approaching.

“I am continuing to connect with communities and stakeholders across Michigan to put together a coalition to deliver for working families across our great state.” she wrote. “Over the next weeks, I will continue to build our momentum, connect with those encouraging me to run, and put in place the resources needed to ensure the future is made in Michigan.”

Politico last month reported that Stevens has been seriously considering a run for the seat and that she has brought on additional staff that could be part of a campaign team if she were to enter the race.

McDonald Rivet confirmed to Gongwer a Thursday report from The Detroit News that she too was giving the U.S. Senate race a look now after Buttigieg’s announcement.

“My life’s work has always centered around improving the lives of kids and working families, and I was so proud to bring together an amazing coalition of supporters last year in mid-Michigan,” McDonald Rivet said. “Like I always have, I will consider how and where I can best serve Michigan, so that I’m part of a solution that drive meaningful results for my community.”

McDonald Rivet won competitive races for state Senate in 2022 and U.S. House in 2024.

Along with McMorrow, McDonald Rivet, and Stevens, other Democrats considering running are Attorney General Dana Nessel, U.S. Rep. Hillary Scholten of Grand Rapids, and Abdul El-Sayed, who ran in the 2018 gubernatorial primary and is now director and health officer for the Wayne County Department of Health, Human and Veterans Services.

Republicans considering running include former U.S. Rep. Mike Rogers of White Lake, U.S. Rep. John James of Shelby Township, and 2022 gubernatorial candidate Tudor Dixon.

Rogers who was narrowly defeated in the 2024 U.S. Senate race, is reportedly close to announcing another bid for U.S. Senate. Axios reported Wednesday that Rogers has hired Chris LaCivita as a political advisor. LaCivita was a top advisor to President Donald Trump’s 2024 presidential campaign.

Kim Bush, spokesperson for Nessel, in a Thursday statement said that Nessel is still considering her next move following her time as attorney general.

“The Attorney General has grave concerns about the state of the union and remains committed to her work in protecting the people of Michigan from the many illegal, harmful, and dangerous actions taken by the Trump Administration,” Bush said. “She is still considering her options for what’s next in her career and how to best continue this work but will not be deterred form the task at hand.”

House Republicans made it clear Wednesday they have no intention of sending the nine bills from last term to the governor’s desk.

The House adopted HR 41, which directs the House clerk to only present bills passed by both chambers of the 103rd Legislature to Gov. Gretchen Whitmer. Until Wednesday, majority House Republicans said they were reviewing what to do.

A Court of Claims judge recently ruled that the Constitution requires the House to transmit the bills to the governor. But Judge Sima Patel declined to issue an order for the House to do so, contending it would represent judicial interference in a legislative process.

“I directed our attorneys to conduct a thorough legal review of the situation and this court ruling. It was a very unprecedented situation, and there has been a lot of confusion. Today, the House gave us clear direction on how to proceed. We are going to follow that direction,” House Speaker Matt Hall (R-Richland Township) said in a statement. “Our legal review did identify some uncertainties that have created confusion and ambiguities after the recent court ruling. We obviously won the court case, but the House has taken the position that there is value in clarifying those questions for the sake of future precedent and to give the public a unified position.”

Senate Democrats, who brought the lawsuit, have said they in fact won the case.

Senate Majority Leader Winnie Brinks (D-Grand Rapids) in a statement was not impressed with Hall’s move.

“He lost in court, so now he wants to change the rules,” Brinks said. “It’s not a good look for him and certainly not helpful for the thousands of people who are counting on these bills getting to the governor.”

The lawsuit most notably involves HB 6058 of 2024, which requires public employers to pay a larger share of the health insurance premium for public employees.

Other remaining legislation still being held in the House includes three bills allowing Detroit history museums to seek a property tax millage from Wayne County voters (HB 4177 of 2023, HB 5817 of 2024 and HB 5818 of 2024); bills that would put corrections officers into the State Police pension system (HB 4665 of 2023, HB 4666 of 2023 and HB 4667 of 2023) and exempting public assistance, disability and worker’s compensation from garnishment to repay debts (HB 4900 of 2024 and HB 4901 of 2024).

Hall went on to say that he intended to go to the Court of Appeals “to get everyone on the same page.”

A Senate Democratic appeal would likely challenge Patel’s decision not to order the transmission of the bills and that such an action is more than ministerial. A House Republican appeal will likely challenge Patel’s ruling that the Constitution requires the originating legislative chamber to transmit a bill passed in identical form.

The Constitution says, “Every bill passed by the Legislature shall be presented to the governor before it becomes law.” However, it says nothing about when bills must be presented. Additionally, House Republicans have argued the language does not actually require bills passed in identical form to be transmitted to the governor, only that bills cannot become law unless presented to the governor for signature.

Democrats contend that the language clearly compels the originating chamber to present bills.

House Democrats vehemently protested the resolution.

“It flies in the face of something at the heart of our state, our Constitution,” said Rep. Tyrone Carter (D-Detroit) in a floor speech. “Present the nine bills that have been approved by this chamber.”