Talking Michigan Transportation

A Michigan State House fiscal analyst breaks down transportation funding

• Michigan Department of Transportation • Season 5 • Episode 160

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Understanding the intricacies of a state's transportation funding can be a daunting task. On this week’s episode of the Talking Michigan Transportation, Bill Hamilton, a policy analyst in the Michigan House Fiscal Agency and transportation luminary, talks about his work.

The discussion also includes an overview of Michigan's Transportation Fund (MTF) and the Comprehensive Transportation Fund (CTF), which funds public transportation.

Hamilton talks about a report he posted recently that analyzes the CTF in the wake of some additional appropriations. These include a $15 million annual increase in CTF funding for transit and $45 million in federal pandemic relief funds for local bus operations in the Fiscal Year 2024 budget. 

Hamilton explains that most of the public transit funds are appropriated for local bus operating assistance to some 80 agencies across the state. He also discusses the incentives for the agencies to draw down more funds by raising their own revenues through millages or other initiatives. 

Jeff Cranson:

Hello, welcome to the Talking Michigan Transportation podcast. I'm Jeff Cranson. Today I'm pleased to have as a guest a renowned bagpipes player and sometimes searcher of fine cuisine, Bill Hamilton, who in his other hours is an analyst for the Michigan House Fiscal Agency. Bill, thanks for taking time to come on and talk transportation policy and funding once again.

Bill Hamilton:

Thank you. Thanks for asking.

Jeff Cranson:

So let's start with the House Fiscal Agency. Why is there a Senate Fiscal Agency and a House Fiscal Agency, both nonpartisan and, I guess, kind of Michigan's version of the Congressional CBO? Is that fair?

Bill Hamilton:

Yes, that's exactly right. The Congressional Budget Office is the nonpartisan office that supports budget analysis at the congressional level, at the federal level, and that's what we do at the state level. You might say that the mission of the House Fiscal Agency is to assist members of the Michigan House of Representatives in analyzing and understanding the state budget. So when the governor presents a budget, we analyze it, we identify alternatives, we put the House version of budget bills together. So if you go to the House Fiscal Agency website, you'll see analysis by budget area of the governor's proposed budget, the enacted budget, all kinds of information about the budget. Why there's a Senate and House Fiscal Agency? We provide well, because we provide service to the House and the Senate Fiscal Agency is the service agency to the Senate, and we have pretty much the same mission but different clients.

Jeff Cranson:

Yeah, different clients is a good way to put it. So talk a little bit about your history there and how things have evolved with the House Fiscal Agency. You know, on my days sitting on a city desk and assigning stories and writing columns and grasping for information and for analyses the papers that you put out or your agency put out broader than just transportation, obviously, but everything was a very important source, just like the Citizens Research Council reports and some others, but I'm enough of a policy geek that I would consume these things. But things have changed since you started there, right?

Bill Hamilton:

Well, so I've been at the House Fiscal Agency 25 years, and actually I worked at MDOT in the audit staff before then and so then I came to the Fiscal Agency and some things have changed, but the basic mission has stayed the same. It's let's say it's the service agency to members. The biggest change and this happened at the time I began are term limits. So members I think members rely on the Fiscal Agency much more in a term-limited world because we have the experience, as they say, the institutional knowledge to help them understand the issues, even to guide them about how to do things, how to get amendments on bills, what the process is. So that's the biggest change, although again, it happened 25 years ago with the implementation of term limits.

Jeff Cranson:

Yeah, and the big fear then and it's played out largely and depending on who you listen to it's a good or a bad thing but that the members turning over that often would have to be too reliant on others, mostly the lobby core. So do you feel like you're able to offset that by providing them that service? And do you feel, like the younger ones especially, contact you guys and seek your analysis and your information? Do you feel as useful as you can be?

Bill Hamilton:

That's quite the question. As useful as I can be, I think so. I try to get out, and part of it, again, it's an education function. We're a little like the fiscal reference libraries. We've got to get out and make sure people understand that we are a resource they can call on us. The members of the appropriations committees certainly know what we do Some of the members who are not on appropriations. You've got to reach out and let them know that we're available to answer budget questions and we also analyze the fiscal implications of policy bills, bills that affect statute law.

Jeff Cranson:

Very few bills have no fiscal implications, right.

Bill Hamilton:

Exactly very few have they all have some. Some have significant implications. And one of the things if you go to the Michigan Legislature website and you look at bills, they're very hard to make sense of on the surface and that's not because anybody's necessarily trying to hide things. You could have a bill that amounts to a section of a large statute, like the Michigan vehicle code, and it will affect other sections in the vehicle code that you don't see in the bill. So a lot of the analysis involves digging up and putting into common language what that bill is doing, Things that are not apparent, as I say, just from looking at the face of the bill.

Jeff Cranson:

So this is all about, you know, MDOT, transportation agencies at the federal level across the country are really all about acronyms and you almost need a glossary nearby to read or digest anything. But mostly what I wanted to talk to you today you recently posted a new paper and new analysis of the Comprehensive Transportation Fund (CTF), which is basically a portion of transportation funding for public transportation. Talk about you know how that, I guess, maybe first the history of that, how that fits in with another acronym, the Michigan Transportation Fund, MTF, and the STF, the State Truckl ine Fund. But talk about the CTF and your findings and analysis and how things have changed for the better or worse when it comes to funding public transportation.

Bill Hamilton:

Well, thank you, Jeff. You've given me a big open-ended question so I can start talking and fill this out. So one thing, going back to the House Fiscal Agency website. So if you just if listeners just Google House Fiscal Agency, you'll come up with a website and on the right-hand side of the website is a dropdown menu that includes links to the different budget areas, including transportation. If you go to the transportation section, some of the publications a bunch of them deal with specifically with the budget, the governor's proposed budget, the enacted budget. All of those analysis are on either just a one-year snapshot or a two-year analysis, the 24 fiscal 24 budget compared to the 23 budget. But we also have special reports to take a step back and do a kind of a broader view analysis of budget areas. So, as you mentioned, there's a paper and I'd refer to listeners first to a paper on the Michigan Transportation Fund and that's the main collection and distribution fund for restricted transportation revenue primarily from motor fuel taxes, vehicle registration taxes and also an earmark of the state income tax.

Jeff Cranson:

Just real quickly, I'll link to these various sites in the show notes so they're easy to find. But talk about what you mean when you talk about restricted funding, because that's another term that gets thrown around and it probably sounds obvious, self-evident, but I don't know that it is for everybody.

Bill Hamilton:

Well, exactly so. In the budget process, in the state budget appropriation process, there are funds that are not restricted, that are available for any public purpose General funds. The general fund budget has been about 10 million I think it's more than that in 2024, excuse me, 10 billion and that's available for any public purpose, there are no restrictions, and that can be used for, say, higher education funding, state police corrections, general fund purposes. But there are also taxes that are earmarked either in the state constitution or in statute for specific purpose. So many of the funds in the transportation budget are restricted. The biggest chunk are restricted in the state constitution. So motor fuel taxes, vehicle registration taxes are constitutionally restricted for transportation.

Jeff Cranson:

I think this is a really, really important point because there's, you know, with all of the skepticism, distrust, misinformation about government and government agencies that permeates these days, people widely think that that money is being siphoned off for other uses. So I think it's good to put a fine point on that restricted.

Bill Hamilton:

And there is nothing that drives me more nuts on this job than when I hear people talk about funds being diverted, especially transportation funds. These constitutionally restricted transportation funds have never been diverted. And again, we have strong internal controls. In Michigan We've got two fiscal agencies, we've got an office of financial management, we've got a transportation, we've got internal auditors, the auditor general. These funds have never been diverted. The restricted transportation funds are used for transportation and of the story.

Jeff Cranson:

Good Thanks for underscoring that.

Bill Hamilton:

So just to go back.

Bill Hamilton:

So again I encourage the listeners first to start with the publication, the fiscal brief on the Michigan Transportation Fund and that explains

Bill Hamilton:

these are constitutionally, primarily constitutionally restricted funds for transportation. They're credited to the Michigan Transportation Fund, the MTF most people just use the abbreviation MTF and then they're distributed by statute, by Public Act 51 of 1951, Act 51. So the biggest chunk of MTF revenue is distributed for road and bridge programs, for the state trunk line fund, for preservation of the state trunk line system, and to local road agencies, county road commissions and cities and villages. But there is also an earmark or a distribution established in the Act 51 to the comprehensive transportation fund, the CTF, and that is the subject of my other paper that you'll find on the website. And again, that is dedicated for public transportation programs and purposes and the biggest share of that is dedicated or appropriated for local transit systems, operating assistance to transit systems and capital assistance for capital grants to purchase buses and terminals and different kinds of equipment. So again, the comprehensive transportation fund, public transportation and primarily assistance to local transit agencies.

Jeff Cranson:

And what have you seen over the years in terms of that fund? And I guess talk real specifically because you know we always say that that sales tax that you pay at the pump doesn't go to roads and bridges but it does go to transportation to some degree a very real sliver of that. But can you talk about that?

Bill Hamilton:

Exactly, yeah, so I mentioned that there is a distribution from the MTF that goes to the CTF for public transportation. So the MTF total MTF revenue is about 3.6 billion and of that, say, in 2023, the last fiscal year about 270 million was credited to the CTF for public transportation. And there is also a statutory earmark of what they call auto-related sales tax and again I described that in more detail in the paper, but it's a sliver, as you say, of the sales tax attributed to fuel sales into the sales of automobiles and automobile parts and that came comes to about 100 million in 2023. So I think it peaked at about 140 million in 2022. Estimate is about 103. So, between those two funds sources the MTF distribution and the sales tax earmark CTF revenue is about 410 million in 2023. And again, most of that, about two thirds of that, is appropriated for local bus operating assistance and capable assistance to transit agencies.

Jeff Cranson:

So that's another thing I've hoped to get across here that a lot of people may not understand that MDOT does not operate any transit services. What MDOT does is to some degree, oversee and pass through federal money and state money to those local operators that you're talking about. Do you have any sense of whether that's how it works in other states? Is that a pretty similar model or is it all over the board?

Bill Hamilton:

Oh, that's a good question. I think it's all over the board. I'm not that familiar with what other states do and I've always been hesitant looking at cross-state comparisons, frankly about anything, because you're often comparing the proverbial apples to oranges comparisons, especially when we talk about different tax systems. Because, speaking of transportation, in some states the state transportation agency is the main transportation agency statewide. In others, like in Michigan, we have a very strong local transportation system. Certainly in the road system, the highway system, a good chunk of the road and bridge system is under local jurisdiction and again in this case, when we talk about local transit agencies, they are exactly.

Bill Hamilton:

In my paper we talk about 80 different transit agencies. They are all local units of government in some sense. The state of Michigan does not own a transit system and that's one of the ways where the public transportation program is different than the highway program. As you know, mdot owns his jurisdiction over the state trunk line system. They own a big, important part of the road and bridge system in the state of Michigan. Mdot does not own transit agencies. They're all locally developed, locally supported, locally guided by either city councils, county government boards of transit authorities. Again, they're all locally driven.

Jeff Cranson:

Yeah, and that means from the biggest ones Detroit Department of Transportation, to SMART, the suburban collection of transit services in Metro Detroit and The Rapid in Grand Rapids, to the smallest, most rural systems with dial-a-ride services and things like that. So it really it spans quite a spectrum right.

Bill Hamilton:

Well, exactly so. That's the character of this system, and I always mentioned DDOT and SMART in Southeast Michigan, which is a large urban system, urban and suburban working together In urban systems like in Lansing, Grand Rapids, and also these smaller county-wide systems, and again, the focus of these systems is determined locally. The community decides the nature of that local transit service. Do you want to pick up the last guy at the end of the road or in an urban system? Do you want to have service that runs 24 hours a day? Do you want the frequency of transit service? That's all decided locally.

Jeff Cranson:

Yeah, well said. So I think, to recap things, I should probably start every podcast with saying you know, this is episode 230 of reminding people that the sales tax that you pay at the pump does not go to roads and bridges. And so when you see any reporting or stats or tables that show where Michigan's gas tax ranks against other states, there should be a big old asterisk because of that sales tax figure and those fuel taxes in those other states are going to the roads, and in Michigan 6% of what you pay at the pump is not. And the other myth that I think is really important to get across here is that the state does not operate those transit agencies. We will continue the conversation right after a quick break.

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Jeff Cranson:

If you were king and you could make some tweaks, what would you suggest going forward with the CTF? I mean, based on your voluminous research, what conclusions would you draw?

Bill Hamilton:

Well, you're asking me to do one thing that we try to stay away from here at the House Fiscal Agency, and that's giving advice or policy opinions. But that's what I do. I ask for those things. I will say one thing, and you'll see this described in the paper as I said, the CTF provides operating assistance to local transit agencies. So one thing to keep in mind the appropriation has never gone down. So in my paper I look back, in this case back to 2013. The appropriation was 172 million for local bus operating assistance and then it's in 2023, it's moved up slightly to 200 million. It's about 215 million in 2024.

Bill Hamilton:

And that's distributed by formula to, again, some of the big urban agencies to the smaller nonurban agencies. And one thing I'll say about the formula it rewards local contribution or local participation. You might call it the feedback loop. If your agency is supported locally is getting good reviews locally, people are willing to support a millage or an increased contribution by the local unit of government. That can help you draw down additional state sources. So I'll just say that one benefit of the current distribution model it's very easy for MDOT to administer. That's not something to dismiss. Easy administration or simple distribution models are usually better. It's just better to administer.

Jeff Cranson:

Well in terms of transparency, certainly.

Bill Hamilton:

Absolutely, and it rewards local contribution. So again, that's part of a feedback loop. If your local agency is connecting with the public and providing a good service, you're more likely to pass the village and get better local support.

Jeff Cranson:

Yeah, that' s an important point to make. Well, what else do you want us to know about the CTF in your most recent? I guess you'd call it an update? This isn't the first time you've done an analysis of the CTF, but what, what else would you say is new in there and and worth knowing?

Bill Hamilton:

Well. So part of what we do again is just to provide background. We're like a reference library, so I want to be the source you go to with questions about transportation funding, the MTF, the CTF. It will also get a paper out there on how federal aid works in the budget. So I encourage you all to check those out. Email me if you have questions about the CTF. I'm not quite sure what to add. I will say one thing that is not in the publication. That is new in 2024. So there was a 15 million dollar increase in CTF support for local bus operating. So again, the the pie, the distribution pie, will grow by 15 million in 2024 and there was also an earmark, effectively a one-time distribution of 45 million to local bus operating from federal fiscal relief funds, and these are some of the funds that were appropriated at the federal level as part of a COVID relief package.

Jeff Cranson:

So there was a bit unexpected, but it's 45 million of additional one-time funding for local bus operating assistance well, and that's very justifiable because, for obvious reasons, some of the people who most needed to perhaps use those services during that period were also some of the most vulnerable, and the idea especially early on, when we didn't know a lot about transmission, the idea of being in a crowded public transportation situation was kind of scary.

Jeff Cranson:

But then there was a recognition at the state and federal level that, coming out of it, we were going to need iable transit services. So I think that you know you can, you can make a strong argument for that one-time funding.

Bill Hamilton:

So actually. So there are two aspects of this. So the there were three major federal COVID relief programs and, not surprising, I'm doing a paper to kind of catch up on what those were. So those provided funding specifically for ransit agencies, so this additional 45 million. And federal funds those were federal funds that were discretionary at the state level, so that 45 million reflects a Decision by Michigan Approcator on how to use this additional fiscal relief funding in Michigan.

Jeff Cranson:

Yeah, and it's, u it's, it's very well received by those various agencies, I'm sure. Yeah, well, bill, Thank you, as always. I always appreciate checking in with you to get your background and, you know, let you share the knowledge and wisdom gained from doing this and I I admire your passion for fiscal policy and especially for transportation fiscal policy. I think I think it's it's great that we have two fiscal agencies doing what you do, so I thank you again.

Bill Hamilton:

Oh you bet anytime.

Jeff Cranson:

I'd like to thank you once more for tuning in to alking Michigan transportation. You can find show notes and more on Apple podcasts or Buzzsprout. I also want to acknowledge the talents of people who helped make this a reality each week, starting with Randy Debbler, who skillfully edits the audio, jesse Ball, who proofs the content, courtney Bates, who posts the podcast of various platforms, and Jackie Salinas, who transcribes the audio to make it accessible to all.