Summary:
To maintain Michigan’s current transit, the state’s FY25 budget must invest at least $285 million in Local Bus Operating, which they can achieve if the House, Senate, and Governor:
- Adopt the Senate proposal to add $40 million from the general fund AND
- Move $20 million from the Governor’s proposed “Transit Innovation Grant” into LBO.
This critical LBO funding is in addition to $252 million for transit capital, $152 million for rail, and $2.9 million for an electric bicycle incentive program.
And note, the transit we have now falls far short of Michigan’s needs. To expand transit, provide high frequency transit, and develop cross-state rail, Michigan leaders need to double transit investment to at least $1 billion a year in dedicated transit and rail funding. Rep Jason Morgan is developing bills to do so!
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Background:
Each year, Michigan’s Governor, House of Representatives, and Senate must come to an agreement on how to invest state funds to best serve the people of Michigan. Each of the three develops a proposal, then they negotiate until they get a deal, generally by June 30.
For decades Michigan horribly underfunded public transit, despite tens of thousands of Michiganders depending on it every day. In FY2024, Michigan’s state budget started moving the the right direction on transit. But as expenses have increased, current proposals for the FY2025 budget risk moving public transit in Michigan backwards!
Local Bus Operating (LBO) supports all 77 transit agencies across Michigan, funding bus drivers, mechanics, fuel, and other essential transit operations. At one time, the state paid for nearly half the costs of running Michigan’s local bus services. But after decades of failing to keep up with expenses, the state has been funding less than 1/3 of those costs, forcing agencies to increase local taxes (if they can!) or cut essential service. Last year’s budget started to move in the right direction, but without a major change, the Governor’s proposed budget would drop transit to the lowest reimbursement level ever.
Most LBO funding comes through the Comprehensive Transportation Fund – or CTF – from about 7.5% of state gas tax and vehicle registration fees and about 7% of auto-related sales tax revenues. The CTF is divided among transit operating, transit capital, rail operating and capital, and several other specialized services and programs.
Details of Local Bus Operating Budget Proposals:
The FY2024 budget invested $261 million in LBO, including $216 million of ongoing funds and $45 million in one-time funds, moving Michigan transit in the right direction!
Over the past year, due to inflation, rising wage requirements, and expansion, the cost of operating transit in Michigan increased by 9%.
So Michigan needs to invest at least $285 million to continue to reimburse transit agencies at the same level as last year. Anything less serves as an effective cut to transit agencies.
- For FY25, Governor Whitmer proposes to invest $221 million in LBO, all ongoing funds from the state’s dedicated “Comprehensive Transportation Fund (CTF).
- While a modest 2% increase from last year’s ongoing funds, it is $40 million less than last year’s total and fails to keep up with transit’s 9% inflation rate.
- For FY25, the Michigan House transportation budget committee proposes $254.25 million for LBO.
- This would add a much needed $12.5 million in ongoing CTF funds and a one-time $25 million allocation from the state’s general fund.
- For FY25, the Michigan Senate’s transportation budget committee proposed $261.75 million for LBO.
- This would match last year’s funding level with $5M from CTF and $40M in ongoing general fund dollars.
- Of these, TRU strongly urges the House and Governor to support the Senate budget proposal.
However, even the Senate’s $261 million only maintains last year’s funding in pure dollars and fails to account for increased costs of operating transit.
The Governor and House both recommended $30 million in Transit Innovation grants – “one-time grants meant to spur innovation and connection Michiganders with more transit options” – which the Senate proposed $20 million for. While transit innovation sounds great, it only works if agencies aren’t struggling to just maintain basic service. Local Bus Operating is more important. So we recommend moving $20 million from Transit Innovation into LBO to bring LBO up to a full $286 million.
Other Transit-Related Budget Items
While the Local Bus Operating budget is the most critical, the state also funds a number of other important transit-related items.
Transit Capital provides essential funding for transit agencies to purchase replacement buses, build garages, and other physical needs:
- In FY2024, the Transit Capital budget was $222 million.
- For FY 2025, the Governor and Senate both proposed $259 million, a $36 million increase
- That’s a $36 million increase, including $22 million in federal funding and $14 million from the CTF.
- For FY2025, the House proposed $252 million,
- That’s a $29 million increase, including $22 million in federal funding and $7 million from the CTF.
- While we’d of course like to see as much investment as possible, CTF funding is more urgently needed in LBO.
Rail Operations and Infrastructure:
- In 2024, the Rail Operations and Infrastructure budget was $152 million, including $30M from ongoing federal funds, $2M from private funds, $105M in ongoing CTF funding, and $14.9M in one-time CTF funding.
- For FY25, the Governor, Senate, and House all propose $152M, replacing the $14.9M in one-time CTF funding with $14.5M in ongoing CTF funds.
E-bikes: The House proposed $2.95 million for a new Michigan e-bike purchase incentive program, which TRU and many of our allies strongly support. Neither the Governor or Senate proposed the same, but hopefully they can be convinced to support it in the final budget.