The goal was to gauge how a road usage charge — paying per mile driven rather than per gallon of fuel purchased — might work in Michigan as state leaders seek a more equitable and sustainable road funding stream.
But after failing to secure funding for the pilot program via state allocation or federal grant in 2024, officials will now rely on the experience of other states to assess what a Michigan road usage charge (RUC) system might look like.
“MDOT does not see the need to ‘reinvent the wheel’ when other states’ data is relevant to Michigan,” said Michael Frezell , deputy communications director of the state Department of Transportation (MDOT). “Should lawmakers decide to allow a RUC system, we could implement it faster based on available data from other states.”
Giving up on a pay-per-mile pilot program is a mistake, said Denise Donohue , County Road Association of Michigan CEO . Using the lessons learned from other states' pilots would be useful, but Michigan’s program would need to be unique.
“The program in Hawaii would be very different compared to how RUC might look here in Michigan , or in Virginia where their program is very complex,” Donohue said. “A pilot is absolutely needed because we need a plan, we need structure and we need to concept out who is going to use it first.”
Michigan isn’t getting enough revenue between the state’s fuel tax and vehicle registration fees to address its estimated $3.9 billion annual road funding shortfall. As more electric and fuel-efficient vehicles take to the streets, the problem will only grow.
“I don’t want to go too far and say existential but it’s going to be a major problem in 10 to 15 years and so finding a solution and working on pilots now is really critical,” said Baruch Feigenbaum , senior managing director of transportation policy for the Reason Foundation , on MDOT’s Talking Michigan Transportation podcast.
Last May, state lawmakers proposed a $5 million appropriation to fund a pay-per-mile pilot program. The plan called for implementation of the voluntary pilot by June 2025 , with an assessment to be produced by the end of 2026.
Under a road usage charge system, drivers would pay a fee per mile driven, rather than pay by the gallon of gas. As it stands, MDOT said drivers pay about $400 per year to fund repairs.
Both the House and Senate approved funding for the pilot, but the proposal was pulled from the FY2025 budget after legislators learned MDOT applied for federal grant dollars to fund it.
“It made no sense to use state money when federal money may be available,” said House Minority Leader Rep. Ranjeev Puri , D- Canton , who chairs the appropriations subcommittee on transportation.
MDOT was later denied the $6.12 million it applied for via the Federal Highway Administration’s Strategic Innovation For Revenue Collection (SIRC) program.
“That was always a risk,” Puri said. “There’s no reason to talk in hypotheticals, but if this was last year, there would have been an opportunity to get money moved over. Now that we’re in a new (legislative) term (with a Republican majority), dynamics of that conversation have changed.”
Standing up a road usage charge system takes about seven years on average if funded by federal grant money, according to Donohue. That timeline could be sped up if a pilot is state-funded, with fewer reporting requirements.
Regardless, starting a pilot sooner than later would be important given the time it takes to iron out the details.
“Michigan needs to write our own destiny for the next generation of road funding and step up and find those funds in the budget,” Donohue said.
MDOT says it’s still studying road usage charges, including a demonstration that got underway this fall. But officials clarified it’s only a research project, not a pilot, and Donohue questioned whether its scope was sufficient to fully grasp how a road usage charge would work in Michigan .
What is Michigan Currently Studying?
In early 2024, Michigan had more than 19,000 residents respond to an online survey sharing their thoughts on road funding, including a pay-per-mile system. The survey was part of a $5.4 million project, which included two follow-up demonstrations.
One group would test mileage tracking technology from a pair of vendors, while the other group would be incentivized to ride public transit.
The first group, made up of about 170 people statewide, is receiving mock invoices that showcase how much they would have paid under a road usage charge system for the miles they drove during a given period. They’re testing how mileage tracking technology works, but not actually paying per mile.
The other group, about 200 Grand Rapids and Detroit -area residents, are being paid — up to $500 each — to ride public transit to/from home and one frequent destination, and log it via mobile app.
Jean Ruestman , administrator for MDOT’s Office of Passenger Transportation , said a road usage charge could increase the demand for public transit options. MDOT wanted to study what sort of nudge it could give to get more people to take transit, reducing traffic, pollution and road wear and tear.
“If there’s a road usage charge, people might be compelled by that charge to switch to transit if it’s available,” she said. “Quite often, the bus fare is going to be significantly lower than the road usage charge added to the cost of parking and gas and insurance.”
Participants in both groups agreed to a five-month commitment and they’ll conclude the project at various times this year by filling out a post-experience survey. MDOT will use the results to assess user experience and if their perception of a road use charge changed since the initial 2024 survey.
Michigan and its partners are paying about $2.82 million for the research project. The other $2.59 million was funded with a federal grant through the Surface Transportation System Funding Alternatives program.
MDOT expects to have analysis of the project in hand before the end of 2025.
What’s Wrong With the Current Funding System?
Revenue from the pump has been declining with the growing popularity of electric and fuel-efficient vehicles.
Michigan sold more than 5.3 billion gallons of gas in 2001. Since then, annual sales have declined almost 21%, falling to about 4.25 billion gallons in 2023.
“As we work to make our state greener and less reliant on fossil fuels, depending on fuel taxes will become even more difficult,” said an MDOT video on its “Road Usage Charges” website. “We have a unique opportunity to find fairer and more sustainable ways to maintain our transportation system.”
Donohue, with the county road agency, said the burden of funding roads is increasingly falling on people in rural areas and those with older vehicles.
While state leaders ponder where to go next, county road agencies are cutting costs and undergoing hiring freezes to account for reduced funding. Donohue has said they’re “treading water.”
“We’ve been talking about it for two years; we need an immediate increase in the current business model for roads, whether it’s higher vehicle registration fees, gas tax, an increased surcharge on alternative fuel. A RUC pilot could be an immediate step,” she said.
“We’re kind of back to square one now. We need the legislature to step up.”
Michigan’s House Republicans introduced a more detailed plan for shifting about $3.14 billion in state revenue toward roads on Jan. 16 .
The plan largely hinged on replacing the 21-cent-per-gallon sales tax on fuel with an equal increase to the fuel tax. Drivers would pay the same amount, but more would go to road repairs and maintenance.
House Speaker Matt Hall , R- Richland Township , didn’t indicate how the plan would address the loss of funding to schools that typically comes from that sales tax revenue.
Additionally, more revenue for roads would come from the Corporate Income Tax, offset by cuts, increased revenue and expiring programs.
Speaking at the Detroit Auto Show earlier this month, Gov. Gretchen Whitmer called for compromise from Michigan Democrats and Republicans to find a long-term, sustainable road funding solution. She didn’t offer any new funding options.
Legislators haven’t ruled out a pay-per-mile system, even if there isn’t a current plan to fund a pilot. Rep. Puri said he supports finding a modernized way to fund roads, calling it a long-term conversation that was always going to take a number of years.
“This is a new phenomenon,” Puri said. “The level of education needs to happen in how it works, but given the dire situation with road funding, we’re not in a position to discredit any ideas.”
Hawaii , Oregon , Utah and Virginia have voluntary road usage charge programs underway. Other states exploring road usage charges include California , Colorado , Missouri , New Hampshire , Oregon, Pennsylvania , Tennessee , and Washington .
Here’s a look at how the system works in Utah.
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