The long-awaited, long-term road funding plan cleared the Legislature after gaining support for new revenue and will be signed by the governor. Under the plan, $1.5-$1.8 billion in new revenue over the next five years will become available for roads, with a significant portion directed to local roads. Approved new funding includes a new 24% wholesale tax on marijuana (estimated $420 million), $1.1 billion from redirecting the sales tax at the pump to the fuel tax and the redirection of a portion of the Corporate Income Tax. The removal of the sales tax at the pump reduces constitutional revenue sharing for townships, cities and villages by $63 million in FY 2026, as no backfill for constitutional revenue sharing was included. Effective Jan. 1, 2026, the sale of fuel at the pump will not be subject to the sales tax but rather a gas tax increase of 20 cents, making it revenue neutral and directing all taxes collected at the pump to roads.
The plan secures significantly more resources for local roads and creates a new Neighborhood Road Fund directing money for counties, cities and villages. While language in the bill states no match is required for local roads, county road agencies may ask for a match.
The plan also includes $500 million over the next five years for local roads, as well as $200 million for local rail grade separation.