March 14, 2025 | This Week in Government: House Moves Road Funding Plan Telling Senate to Get Onboard; Democrats Call it Half-baked

The House passed a nine-bill package on Wednesday to provide $3.1 billion for a long-term road funding plan, and although House Republicans insist it’s revenue neutral, Democrats argue the plan could have massive ramifications on the budget.

The legislation passed with bipartisan support, though Democrats objected to the proposal, saying that Republicans were playing shell games with state dollars.

“We’re going to prioritize fixing our local roads over giveaways to a select few corporations, the most connected corporations in the state,” House Speaker Matt Hall (R-Richland Township) said. “We’re going to prioritize fixing our roads … We’re infusing over $3.1 billion of new money into roads, and that’s basically doubling the amount of money that’s goes into roads.”

The package includes HB 4180, HB 4181, HB 4182, HB 4183, HB 4184, HB 4185, HB 4186, HB 4187, and HB 4230 (See Gongwer Michigan Report March 18, 2025).

House Minority Leader Ranjeev Puri (D-Canton Township) said the plan, as passed, was a non-starter.

“Without a fully baked plan, this is just a terrible use of our state dollars,” Puri said. “The plan should be to have everyone at the negotiating table to have an earnest negotiation.”

The plan moves all $2.2 billion generated by the Corporate Income Tax and to road funding. This includes the more than $1 billion currently earmarked for corporate incentives and housing. Then, the proposal ends the practice of collecting sales tax on fuel and increases the fuel tax a corresponding amount – revenue neutral for drivers but putting about $1 billion more toward roads.

Currently, roughly $1 billion of Corporate Income Tax revenue is divided between the General Fund, the Housing and Community Development Fund, the Revitalization and Placemaking Fund, and the Strategic Outreach Attraction and Reserve Fund.

To backfill those funds, the plan calls for increasing the Michigan Business Tax, which would effectively eliminate Michigan Economic Growth Authority credits freeing up $500 million for the state. The plan would also eliminate the $500 million currently going to SOAR. An additional $600 million would come from higher-than-expected state revenues and another $500 million would come from eliminating budget earmarks.

The sales tax on fuel currently generates funds for the School Aid Fund and statutory local revenue sharing. To hold that funding harmless, the legislation allocates $750 million in sales tax to the School Aid Fund and $95 million in sales tax to local revenue sharing. The plan also retains the $50 million currently allocated for the Housing and Community Development Fund.

The result is $850 million that is unaccounted for in the plan.

“We’re going to make a lot of cuts in this budget,” Hall said. “We’re also going to go through that budget, line-by-line, and we’re going to work it, and we’re going to find things that are less important, and we’re going to prioritize roads.”

Lawmakers will work out what those budget cuts will be through the budgeting process, House Republicans said, whether that’s duplicative programs or those that are deemed ineffective.

“Government spending in the state of Michigan has grown nearly 50% in the last six years,” Rep. Pat Outman (R-Six Lakes) said. “We’ve added nearly 4,000 government employees. The money is there. We just need to reprioritize it a little bit better.”

Democrats objected, saying they could not support a plan without knowing where the cuts were coming from.

“There are plenty of programs in our state budget that fund critical services for everyday, working-class people … and any of those programs are now at risk of being on the chopping block,” Puri said. “This is an issue that everyone wants to solve, and so I think that there’s going to be a lot of discussions that happen in parallel to this. How they all end up merging I don’t know.”

Democrats did not offer an alternative plan on Wednesday, and Rep. Alabas Farhat (D-Dearborn) is the only Democrat in the House or the Senate that has put forward legislation addressing a long-term road funding plan this term – HB 4142, HB 4143, and HB 4144.

Farhat’s bills would increase the Corporate Income Tax and create a new digital advertising tax.

“I think the speaker forgot to include my bills that actually pay for the plan, but I’m glad we took a step in the right direction today,” Farhat, who voted yes on the legislation, said. “I was proud to stand with the labor community and work towards better roads now.”

Puri said his goal was not to be “another cook in the kitchen” on road funding.

“There’s not some magic bullet out there,” Puri said. “We also just don’t want to be crowding the noise of all the debate that’s out there. We want to be coming to the table in good faith.”

Rep. Noah Arbit (D-West Bloomfield) said the Republican plan didn’t move the conversation around road funding forward in a meaningful way.

“It’s not robbing Peter to pay Paul, it’s robbing Peter and Paul, and Mary’s already dead,” he said. “This is not a real solution. It just shifts money around.”

He did acknowledge that it might be necessary for Democrats to put forward a comprehensive plan for roads.

“Some plan that stakes out our broad principles about what we would view to be a meaningful step forward on roads,” he said. “I think those conversations will continue.”

HB 4180, which would exempt motor fuel and aviation fuel from sales tax, passed 65-43. Democrats Rep. Joey Andrews IV (D-St. Joseph), Farhat, Rep. Jason Morgan (D-Ann Arbor), Rep. Samantha Steckloff (D-Farmington Hills), Rep. Joe Tate (D-Detroit), Rep. Karen Whitsett (D-Detroit), and Rep. Angela Witwer (D-Delta Township) voted for the bill.

HB 4181, which would eliminate the 6% specific tax levied on interstate motor carriers that use motor fuel or alternative fuel in Michigan, also passed 65-43. Andrews, Farhat, Morgan, Steckloff, Tate, Whitsett, and Witwer again voted for the bill. HB 4182, which would exempt motor fuel and aviation fuel from the use tax, passed 65-43, with support from the same list of Democrats.

HB 4183, which would increase motor fuel tax to 51 cents per gallon, passed 62-46. Andrews, Farhat, Morgan, Steckloff, Tate, and Whitsett voted for the legislation, but Witwer voted no, along with Rep. Steve Carra (R-Three Rivers) and Rep. Jim DeSana (R-Carleton).

HB 4184, which would increase the tax imposed on aircraft fuel to 10 cents per gallon, passed 62-46. Andrews, Farhat, Steckloff, Tate, Whitsett, and Rep. Dylan Wegela (D-Garden City) voted yes. Carra, DeSana, and Rep. Josh Schriver (R-Oxford) voted no.

HB 4185, which deposits $755 million into the School Aid Fund from the revenue collected under the 4 percent sales tax imposed by the act and $95 million for cities, villages and townships, passed 64-44. Andrews, Farhat, Morgan, Steckloff, Tate, Wegela, and Whitsett voted with the majority.

HB 4186, which would increase the Michigan Business Tax to 30%, passed 61-47. Andrews, Farhat, Morgan, Steckloff, Wegela, and Whitsett voted with the majority.

HB 4187, which would modify the distribution of the Corporate Income Tax, passed 63-45. The chamber adopted a floor substitute to maintain funding for the Housing and Community Development Fund. Andrews, Morgan, Steckloff, Wegela, and Whitsett voted for the bill.

The final bill in the package, HB 4230, which would establish the Neighborhood Road Fund, passed 63-45. Andrews, Farhat, Morgan, Steckloff, Tate, and Whitsett voted for the bill, but Witwer and Carra voted no.

Interest groups widely praised Wednesday’s vote as a step forward on the issue, which has plagued the state for decades.

“Michigan is in desperate need of a new road funding plan as drivers speed into spring pothole season, any legislative movement toward an eventual negotiated solution, like this one, is progress to be celebrated because that means progress toward smoother roads, job creation and a growing economy,” Build It Michigan Strong Coalition spokesperson John Sellek said in a statement.

The coalition includes the Michigan Chamber of Commerce, the Michigan Infrastructure and Transportation Association, the Home Builders Association of Michigan, among others.

The Michigan Municipal League also praised the vote.

“With bipartisan support, the passage of this proposal is a significant first step to solving this problem,” board president Sault. St. Marie Mayor Don Gerrie said. “We are committed to finding a long-term solution and are ready to engage in dialogue.”

The Detroit Regional Chamber and MichAuto continue to express concerns about the elimination of the MEGA credits.

“The vote today in the State House to increase the Michigan Business Tax and eliminate the MEGA credits various large Michigan employers hold undermines trust in the state’s commitments, sending a disturbing signal to businesses that Michigan does not honor its contractual obligations,” the groups said in a statement. “For companies that have long honored their end of this bargain by retaining and creating jobs before receiving any credits, the vote today creates uncertainty that could drive them to relocate or invest elsewhere, especially as competing states continue to offer attractive incentives to lure businesses.”

With the legislation out of the House, the ball is now in the Senate’s court, Hall said.

“My hope is by demonstrating this moving through the House, they’re going to be hearing over spring break from their local governments. They’re going to be hearing from their road builders. They’re going to be hearing from many people, their unions, the laborers, saying: put a roads plan on the table,” Hall said. “We should get this done, and this is the closest we’ve ever been.”

Schools need $22.8 billion more to bring their buildings up to basic standards for health, safety, and wellness with more than $10 billion needed during the next decade for roofs and HVAC systems alone, a study from the School Finance Research Foundation found.

The study, released Thursday, involved the evaluation of 2,534 buildings to determine the cost for them to meet health, safety, and wellness standards. The study engineers reviewed 89 individual components of school facility health and safety and collected data in each participating school on items like HVAC, roofing, electrical, fire protection, and more.

It is also the culmination of two years of research and 95,000 collective hours spent assessing buildings across Michigan. Roughly 1,500 engineering and other professionals assessed 243 million square feet of building space statewide.

“This study will help educate the policymakers, school community and general public about the critical infrastructure needs facing so many of our schools,” Steven Ezikian, SFRF executive director, said in a statement. “We look forward to working with school leaders across Michigan to make school facilities an important part of the school funding conversation in 2025 and beyond. We encourage policymakers, school leaders, members of the media, and the public to use this groundbreaking study as a resource for shaping important public policy discussions that affect our students for generations to come.”

The study noted schools generally fund infrastructure needs through bond proposals in local communities.

“While this method of funding allows districts to directly address their unique facility needs, it also creates variability in the quality of school facilities across districts,” the study says. “Wealthier districts, with higher property values, can generate more revenue from the same millage rate compared to less affluent districts. This disparity can result in differences in the quality and condition of school facilities, as wealthier districts are able to invest in more modern, well-maintained buildings, while less affluent districts may struggle to provide adequate facilities for their students. This highlights the importance of equitable state support to supplement local funding efforts.”

During a press conference, Wayne RESA Superintendent Daveda Colbert also said some communities can bond and taxpayers take on the cost and while it is a large increase for them, it is still not enough to fund all of the aging infrastructure. And in other communities, she said, a bond might not impact the taxpayers in the same way and raise sufficient funds.

“What we’re asking and hopeful for is that this data will now be used to look at what is needed to appropriately, adequately, and equitably fund our educational system in Michigan,” she said.

Nick Ceglarek, Northwest Education Services superintendent, said every child in Michigan deserves to have the same quality of facilities regardless of their ZIP code.

“I understand that there are challenges within our communities to be able to support increased taxes,” he said. “And that’s why I believe it’s important that the study lays out the importance for the state to support specific initiatives to help level the playing field.”

Colbert also addressed those who feel schools continue to ask for and receive more funding each year.

She said in 2018, the SFRF said schools needed to be funded at $9,500 per pupil and at that time schools were around $6,700. And, she said, that number didn’t include transportation or capital.

During the last 30 years, Colbert said schools have been under funded.

“In the last couple years, we have received record funding. When you add back not having the funding, what you end up on is a hamster wheel of trying to play catch up,” she said. “Couple that with COVID. … So it’s almost like we’re in a full chase, a full-on chase. … You’ve heard over the last couple years record funding. But if you follow it 30 years back (and) bring us to now. You’ll see the ebbs and flows in the funding. We go two steps up, one step back. Two steps up, one step back. The needs continue to grow.”

State regulators said Monday that Southeast Michigan telephone customers living in and around Detroit will in the coming months need to begin using their area code to make phone calls including local calls.

The Public Service Commission in a Monday release said the move is being made ahead of the implementation of a new 679 area code that is to be overlaid within the 313 area code jurisdiction.

While the 313 area code will remain in place, it is projected to run out unassigned phone numbers, which will be able to be assigned to customers beginning on Nov. 7, 2025, once all 313 phone numbers have been assigned.

Beginning April 7, 2025, a six-month “permissive dialing” period will begin in which all customers in the 313 area code will still be able to make local calls using only seven digits but will also be able to do so using 10-digit dialing.

Starting on Oct. 7, 2025, all local calls made in the 313 area code will need to be made using 10 digits, including the area code. The PSC said trying to make a local call using only seven digits after that time will not be successful and those who do may receive a recording telling them to try their call again using 10 digits.

The PSC also urged customers in the affected area to reprogram all services, automatic dialing equipment, applications or software in the coming months to dial 10 digits if they are currently programmed to dial seven digits. This includes life safety systems, fax machines, Internet dial-up numbers, gates, speed dialers, cell phone contact lists, and voicemail services.

Community college advocates told lawmakers on Wednesday the state’s programs providing funds for students to seek post-secondary credentials are working and should continue.

Brandy Johnson, president of the Michigan Community College Association, spoke before both the Senate and House higher education subcommittees on Wednesday while three community college representatives also spoke to House lawmakers.

The officials praised the funding available through the Michigan Achievement Scholarship guaranteeing tuition coverage for many community college students. They also said the Michigan Reconnect program, which allows for older students to receive scholarships, should be permanently expanded to 21–24-year-olds rather than only applying to students older than 25.

Additionally, Johnson and community college presidents are asking the Legislature to change how dual enrollment is funded. Currently, K-12 schools pay for dual enrollment students – those taking a college course while still in high school – through foundation allowance funding.

“When it is paid out of the foundation allowance, K-12 schools who are rational, good leaders, but have to be fiscally responsible, there is not a good incentive to shout the benefits of dual enrollment from the rooftops if it feels like a money loser,” Johnson told the House Appropriations Higher Education and Community Colleges Subcommittee.

Chris Patritto, president of Gogebic Community College, who spent decades in the K-12 system, said dual enrollment has become more important to students, parents, and communities.

However, he said although there is a deep need for dual enrollment, which he said has many benefits for students including preparing them for college, giving them more options of courses to take in high school, increasing graduation rates and more, it can be difficult for rural schools to provide the benefit.

“Especially in rural schools, their resources are very limited. … with declining enrollment, tax bases, sometimes those resources are not there,” he said.

He said the proposal out there now is to provide some funding to the K-12 schools through the School Aid budget to help with dual enrollment. He said it’s necessary and a win-win for everyone.

“I would support that whole heartedly. … I think this is a wonderful, wonderful opportunity to really bring into focus the K-14 concept,” Patritto said.

Officials also praised the Michigan Achievement Scholarship and the Michigan Reconnect program. On Michigan Reconnect, the state temporarily expanded the eligible age group to those 21 and older but it has reverted back to those 25 and older. Officials are asking the Legislature to lower the age requirement permanently.

Al Pscholka, with Lake Community College, said Michigan is in a “war for talent,” and called the Community College Guarantee and Michigan Reconnect useful tools from lawmakers.

With the changes, he said Lake Community College has seen a 14 percent increase in credit hours and 11% increase in enrollment during the fall.

In the last two years, the college has doubled its first time, full time students, he said.

Johnson told the Senate Universities and Community Colleges Subcommittee that the Community College Guarantee has already been successful. For the 2024-25 fiscal year, 18,226 students received scholarships through the program.

She said on average the scholarship saves $2,134 per year in tuition in fees. In total, $38.9 million was awarded so far in the 2024-25 fiscal year. It represents about 15% of the total Michigan Achievement Scholarship fund, which also provides funding for public and private universities.

Sen. Thomas Albert (R-Lowell), during the Senate subcommittee, said it is important to measure outcomes as the programs are using taxpayer dollars.

“We want to make sure we are having a good return on investment,” he said.

Johnson said the MCCA tracks student outcomes and Reconnect outpace student success outcomes for general students and adults who did not receive a scholarship.

Additionally, Johnson said community colleges are also working to show employment outcomes for students who complete a program.

House Republicans proposed tax credits aimed at easing the cost of starting a family before the House Committee on Economic Competitiveness on Thursday.

“It’s too expensive to raise a family and start a family,” Rep. Bill Schuette (R-Midland) said. “We’ve heard discussions about cost – from child care to everyday family essentials – they’re going up and up over the last few years, and that’s squeezing Michigan families.”

The solution, Schuette said, was for the Legislature to act.

“We can help give Michigan families more of their hard-earned tax dollars back, and we can make it easier for them to start to save for the expenses that it takes to raise a family,” Schuette said. “President Reagan loved to say that you get less of what you tax and more of what you subsidize. I think we could use more families in this state.”

The committee heard testimony on a bill package that would create tax credits for child care programs and allow for tax deductions for contributions to a child care savings account. Other bills in the package would create tax exemptions for certain baby and toddler items.

HB 4055, sponsored by Schuette, would amend the Income Tax Act to allow taxpayers to claim a state-level tax credit of an amount equal to 50% of their federal child tax credit.

A federal child tax credit is generally $2,000 per child under 17, plus $500 per other dependent, and available to those with an annual income of up to $200,000, or up to $400,000 for those filing a joint return. For those with higher incomes, the credit is reduced by 5% of income above the threshold until it reaches zero.

An analysis of the bill by the House Fiscal Agency estimated that the tax credit offered under the bill would reduce individual income tax revenue by approximately $1.4 to $1.6 billion annually.

HB 4056 and HB 4057, also sponsored by Schuette, would create the child care savings program, which would allow individuals to create a savings account with state individual income tax benefits for the purpose of paying for child care expenses.

HB 4058 and HB 4059, sponsored respectively by Rep. Kathy Schmaltz (R-Jackson) and Rep. Nancy DeBoer (R-Holland), would provide tax exemptions for some baby and toddler items. HB 4058 would amend the sales tax, and HB 4059 would amend the use tax.

“Babies and toddlers need a lot of things, and as we know, it’s all about affordability,” Schmaltz said. “Eliminating the sales tax on these items really adds up and will help our families and parents buy the things they need for their babies and toddlers.”

Rachel Richards with the Michigan League for Public Policy testified on the legislation, saying that although the league supported the idea of the legislation, some families would be left out.

“About one in four Michigan children are left out of the full federal child tax credit because their parents make too little,” Richards said. “Because it’s tied to the federal child tax credit, it will ultimately leave out some of our most vulnerable children making the lowest incomes.”

Genevieve Marnon of Right to Life Michigan also testified on the bill package, saying it would make it easier for people to choose to have children.

“Financial concerns are cited as one of the main reasons women either choose not to have a child or choose to have an abortion,” she said. “While these two bills will not eliminate all the financial pressures on young families, they are an excellent start to help ease this financial burden.”