Talking Michigan Transportation

Michigan budget has good news for studying road usage charges

• Season 7 • Episode 242

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With Michigan’s Fiscal Year 2026 budget agreement now signed into law, this week’s edition of the Talking Michigan Transportation podcast focuses on a long-discussed pilot project for a road usage charge (RUC) system, which received funding.

First, State Sen. Veronica Klinefelt of Eastpointe, who chairs the Senate Transportation Appropriations Subcommittee and has been a strong advocate for studying alternative ways to fund transportation, explains why she advocated for the RUC pilot.

Later, John Peracchio, a senior adviser to Michigan’s Council on Future Mobility and Electrification (CFME), offers his insights on how a RUC system has worked in other states and how the council can help with the education process.

Jeff Cranson:

Hello, welcome to the Talking Michigan Transportation Podcast from Jeff Cranson.

Jeff Cranson:

With Michigan's fiscal year 2026 budget agreement now signed into law, I wanted to focus on one long-discussed component that received funding, and that's a road user charge pilot, also known as RUC. We've discussed this concept on the podcast in the past with many experts, and I was pleased to get the perspective of State Senator Veronica Kleinfeld of East Point, who chairs the Senate Transportation Appropriations Subcommittee and has been a strong advocate for studying alternative ways to fund transportation. I also spoke with John Peracchio, a frequent guest on the podcast. He's an original member and co-chair of the Council on Future Mobility here in Michigan. And he's been very involved in these issues, including some work with the International Bridge Tunnel and Turnpike Association. So, I hope you enjoy the conversation.

Jeff Cranson:

Okay, once again, as I mentioned in the introduction, I'm with Senator Veronica Kleinfeld of East Point, who is not only the chair of the Transportation Appropriation Subcommittee in the state Senate, she's also been a big advocate of finding alternative ways to fund transportation. She realizes, because she's delved into this in ways that many other lawmakers haven't, that the fuel tax is a diminishing return, and that's uh, you know, at least 50% of our road revenue now, the other half being from registrations on vehicles. So we finally have in this budget $7.65 million for a road user charge pilot. Several other states have done this. Um, some could argue that uh Michigan is late to the game, or we could say at least we're finally doing it. So, Senator Kleinfeld, thank you for being here. I appreciate it.

Veronica Klinefelt:

Thank you for the invitation.

Jeff Cranson:

So let's talk about this. Uh, talk a little bit first about your background and how you came to the Senate and how you ended up with this chairmanship and why you've come to care so much about transportation.

Veronica Klinefelt:

Well, I served a lot of years at the local level, started out on school board, but I did eight years on city council and ten years as a county commissioner, and in both of those positions, dealt extensively with roads and with roads issues. Uh, so I bring that knowledge uh to the Senate.

Jeff Cranson:

Yeah, that's a lot. That's a lot of local government. So, what do you think that you found out maybe that you didn't know in those in those earliest years about people and how they interact with the road system?

Veronica Klinefelt:

I think I didn't understand the funding mechanisms. You know, as a resident, you you just drive the roads. You don't really think that much about how they become to be, why they get into disres disrepair, why the cities or the county or the state aren't fixing them. Uh so I learned a lot, starting at the city level, on how we fund roads and the shortfalls and the struggles that governments deal with trying to figure out how to fix the roads.

Jeff Cranson:

So that brings us to funding and the challenges and Michigan's decades-long um challenge and coming up with a long-term sustainable road funding solution, something that doesn't have us back arguing about it every year or every other year. If we could actually educate people as to why a road user charge makes sense, why it can be the most equitable way, the most efficient way to pay for roads, I think that would be a big step. Talk about why you've embraced um studying this concept.

Veronica Klinefelt:

Number one, you have to think about who should be paying for roads, right? Um, if you have a senior citizen that has a car but only drives a couple miles a year, should she be paying the same amount of money as somebody that's on the road every day putting wear and tear on the roads? So there's a there's an equity factor into this. Then the way that we've done it for years, uh we come up with fixes that are gonna last a couple of years. And we know inevitably that the way that we fund roads isn't going to keep up with inflation. So the cities, the counties, the townships, and the state will eventually fall behind on the funding again and run short of money. Finding a way that sustains it for the future that you don't ever have to revisit it because you have a system in place that allows you to deal with what the cost is, adjust for the what the cost is, um, and you've just put something in place that is set, it's sustainable, and you don't have to revisit it every couple of years.

Jeff Cranson:

So, what do you hear from constituents and friends and family when you talk about the road user charge concept? And you know, you've been pushing for this for some time and hoped that it would be part of the last budget cycle. Uh what kind of feedback?

Veronica Klinefelt:

Obviously, people are very hesitant. Uh they don't want to be tracked, which is sort of ironic because we're tracked everywhere we go, we're tracked with our phones, we're tracked with our vehicles already, we're tracked in our own home on everything that we do. But they also feel like they don't want to pay the extra cost. Well, if you can replace one system of how you fund something with another system, you may end up paying a little more simply because you're paying enough to actually fix the roads, but you're not paying both systems. I would like to eventually get to a system that is based on roads. The fees that come in are based on the usage of the roads and not based on some tax that doesn't have anything to do with roads.

Jeff Cranson:

Yeah, and that's something that you know I've thought about a lot over the years that one of the problems with the gas tax and why it's so difficult to have a vote on raising the gas tax is because that's the one item that you see on every street corner. So you're people are most aware of what gasoline costs versus the other services and goods that they buy. So if you go to this road user charge system, you're not constantly thinking as a as a lawmaker, oh my goodness, if I have to vote on this again, you know, I'm gonna get killed in my next election, even though all the studies show from other states that nobody has lost an election because of a gas tax vote. But setting that aside, this is just a more efficient way of doing things. And it's why, no less than the Reason Foundation, you know, by no means a liberal think tank, has been pushing this for a long time because they see the practicality of it.

Jeff Cranson:

Uh, what do you hope, I guess, going forward will come out of this? MDOT will will get a consultant on board to conduct this pilot and uh find participants around the state. You know, what would be your fervent, fervent dream, I guess, for the best outcome?

Veronica Klinefelt:

When I look at things like this and coming up with a solution, I don't worry about whether or not I'm gonna get re-elected. I might get kicked out for some totally other reason. So why worry about that? Come up with a solution, right? And if I were to lose office, but I left with a sustainable plan that that would benefit Michigan for years to come, then I've actually left off as having completed something significant and I would feel good about that. And looking at road usage charge does exactly that. People understand that the money that they're paying for roads is coming from the travel they've done on the roads. It's based on that. And it makes sense. We're not trying to find other areas of society detects to cover this.

Jeff Cranson:

Yeah, I think that's well said. Thinking about this in terms of tolling, some people have said, well, you know, why don't we start there, you know, walk before you run? Um a lot of people would say, well, those states that have had tolling for a long time are the first ones that are now piloting and studying road user charge. So have you in your time in the chamber, um, have you had to take a vote on the tolling study or anything related to tolling?

Veronica Klinefelt:

No, that actually took place before I got into office, but I was open to the idea of tolling because all the states around us have already done that. And uh it's not directly related to party lines, right? There's Republican states and Democratic states that have done it. It appears to be rather unpopular in Michigan. Uh whether it was that or the road usage charge, no matter what the sustainable system is, you have to get over that hump. I think the more beneficial one would be the road usage charge because it doesn't just cover the roads that are being told, it covers all the roads. It addresses all the problems, all the issues, all the bridges. And I just think it's probably the most beneficial way to address the situation. And I think it's the future. And if Michigan isn't looking at it, and everybody else is, we again will be left behind in moving forward and modernizing our infrastructure system. And I don't want to be that state.

Jeff Cranson:

Yeah, since we're so often compared to Ohio, um, you know, the Ohio Turnpike generates $350 million a year. So that's $350 million that the Ohio Department of Transportation doesn't have to spend on that road that they can spend elsewhere. They are now looking at studying a road user charge themselves. So, going to your point, you know, these other states that we're often compared to, Indiana now has in place a law that would allow them to toll other interstates and not just the Indiana toll road. So they're moving ahead with trying different things. Um, if it is a competition, as it's often framed for us, you know, the state's doing this, why aren't we? Then that's all the more reason. So I think there's a lot of people that appreciate what you've done and that uh are are excited about this and seeing what will happen. It'll take a lot of education, a lot of explaining. Dealing with the equity factor is a big part of this, and that can be done. Again, the experts that have done this in other states have some ways to mitigate those concerns and the privacy concerns too. So I think something good could come out of this. Um, is there anything else you want to add to that?

Veronica Klinefelt:

Just that I think we tend to fear change, um, and it inhibits us to grow and advance. And this is one of those areas where if we could get past that wall, uh, it would benefit Michigan for years to come.

Jeff Cranson:

Yeah, well said. Well, thank you. Thank you for taking time to do this, and thanks for your hard work on the state budget. And I know that because you'll still be chair of the appropriation subcommittee going into next year, you're very excited about getting some rest and then starting on fiscal year 27.

Veronica Klinefelt:

Thank you. Appreciate it.

Jeff Cranson:

Stay tuned for the second segment of this week's podcast with John Peracchio.

MDOT Message:

Even with the best planning, backups and traffic congestion can occur during road construction. This can pose hazardous situations for both motorists and construction workers, particularly when drivers are distracted. Motorists are more likely than workers to be killed or injured in work zone-related incidents. Additionally, the leading causes of all work zone-related crashes are distracted driving and speeding. So it's crucial to do your part in ensuring the safety of both drivers and focusing on your most important task, safe driving. Slow down and stay focused.

Jeff Cranson:

As promised, the second segment features John Peracchio, who has been a guest on the podcast in the past, and I talked about his background earlier in the introduction, so we don't need to get into that again. John, I always appreciate your insights on these things. I know you're excited that the Road User Charge pilot finally made its way into the budget. It's part of the fiscal year 2026 budget, uh, $7.65 million for MDOT to hire a consultant to pilot this. Talk about why you see this as a good step.

John Peracchio:

Well, I think it's a great step, and thanks for having me, Jeff. Uh, so if you take a step back and look at where the auto industry is right now, you see car companies that have invested billions in the development of electric vehicle powertrains now hitting the pause button for some portion of that and focusing on uh making internal combustion engine vehicles more efficient and uh with advanced technologies. Well, what does that do to a fuel tax to support our roads and bridges? It just gradually decreases. It's never gonna go up, it's only gonna go down. And it frankly uh it's like our roads and bridges are um you know dying of dehydration. And our solution with the fuel tax is uh is basically Chinese water torture. Drip, drip, drip, drip. And so we need an alternative. The alternative is to look at road usage charging based on vehicle miles traveled, no matter what kind of powertrain you have in your in your vehicle. And it gives us a lot of policy flexibility in terms of handling uh concerns about especially lower income people and other policy alternatives that are complementary to trying to provide for uh transportation funding in the state of Michigan.

Jeff Cranson:

So that concern about lower income people, um, we heard that a lot when Michigan did the tolling study and when it was discussed in the legislature. Some states, some in latent states, have found some very creative ways to mitigate those concerns. Can you talk about that and what you could do with a road user charge to be equitable?

John Peracchio:

Sure. So we qualify people for government benefits all the time based on their income. And we could do the uh same thing with road usage charging rates. So we can set rates based on people's income level if our policymakers choose to do so. It's a very simple process of calibrating the um uh road usage charge rate to what people's actual incomes are. And I think that that offers um, you know, our governor and the legislature an important policy tool as they you know try to uh create a stable funding mechanism for uh our roads and bridges.

Jeff Cranson:

So tell me, I guess, what your experience. Um you've done some work with the International Bridge Tunnel and Turnpike Association, which on the surface, I think most people think of that as uh an organization that supports tolling, but they're they're not narrow in their scope. They've been very supportive of studying of states looking at road user charges. So, what have you learned along the way from talking to your colleagues there?

John Peracchio:

Yeah, so we've actually had a standing committee on road usage charging since the pandemic. And we've been working with states that have pilot programs and those that don't. Uh states that have pilot programs often also have tolling uh programs. Uh, and then states that don't aren't currently involved in road usage charging pilots or studies, but have tolling, are looking at ways of consolidating things like customer care uh accounts across different agencies to try to reduce the amount of friction for people using the roadways uh and creating payment mechanisms that are uh really simple for people to use. And in most cases, the pilots have focused on uh what I would call infrastructure light mechanisms. And that doesn't necessarily mean high-tech. So, for example, the state of Hawaii, and you could only do this in the in a place like Hawaii, they charge you based on an odometer read when you have your annual safety inspection. Now that works great if you're on an island.

Jeff Cranson:

If you're an island state, yeah.

John Peracchio:

Exactly. It's a great solution if you're on an island and it's it you know doesn't really invade your privacy, but it doesn't work for states. Uh, you know, we're close with two peninsulas, but we're not an island yet. So we have to look at other uh potential uh mechanisms. And, you know, I think one thing that we've talked a lot about in the in the Standing Road Usage Charge Committee of IBTTA is leveraging your smart device uh and using uh GPS, which is not good enough for, let's say, fully autonomous vehicles, because the resolution is still a meter, two meters, but it's certainly good enough to support being on a roadway and reporting where uh how many miles you're using on that roadway.

Jeff Cranson:

Break that down a little more so that uh people understand when you talk about why it wouldn't be uh 100% foolproof for autonomous vehicles when you talk about a meter or two meters and the distance.

John Peracchio:

Okay, so when I say resolution, I'm literally talking about um the distance that is, let's call it uh, you know, uh slop in terms of exactly where you are. So even though you're standing on a uh at a particular point on uh in the street or on a sidewalk, the GPS system has you there plus or minus a meter or two. So again, it's good enough for getting you on the roadway. And if you're going at a at a certain speed, we know you're in a vehicle because you can't be walking or running. It's too too fast, right? And so algorithms can figure all that stuff out. But if you're talking about an autonomous vehicle, I mean, you know, two meters, you know, you're gonna hit uh on a two two-lane roadway, you're easily gonna run into problems with uh oncoming traffic uh or you know, vehicles that are dodging deer in Michigan. You're gonna be in serious trouble. But um, for locating you on a roadway and understanding how many miles you're using, it'll work just fine.

Jeff Cranson:

Boy, that's a whole other topic I'll have to take on sometime when we talk about uh studying ways to make wildlife crossings safer and prevent crashes, um what that means in an automated or autonomous vehicle environment. Uh that's something I haven't read or seen a lot about. But anyway, whole nother issue. Um so some states we know that have had tolling for some time, red states, blue states, um, are also looking at road user charges and doing and doing pilots. Uh what does that tell you?

John Peracchio:

It tells me that they've understood that if you just focus on a fuel tax to fund non-toll roads, okay, because toll roads are actually, you know, to the extent they're statutorily organized, they you know, fund themselves and other things. For non-tolling situations, we need another mechanism than a fuel tax either at the federal level or at the state level, because ice vehicles are becoming more efficient. Um, and I indeed, electric vehicles are increasing in volume. Okay, so we need something other than a fuel tax-based funding mechanism for roads, bridges, indeed, the broader needs of transportation in the United States.

Jeff Cranson:

Yeah, Senator Kleinfeld, who I spoke with earlier on this topic, made that point that um, yeah, toll system has worked well, but it's very specific to those roads. So, you see Michigan completely, after years of debating this going back to before the interstate system was built, uh, and there was a turnpike commission actually convened in Michigan in the early 50s, and they were looking at I-75 from Toledo to Bay City, basically, and decided to go away from that model. I've long believed, and you and I have talked about it. I don't buy the whole peninsula state thing because tolling has worked so well in Florida. But uh we're probably gonna skip over that now. We're looking at a road user charge, and that's that's what you see really as the future.

John Peracchio:

Absolutely. And we can do it again, infrastructure light. In other words, we don't need what I call stone knives and bearskins. We don't need the ugly gantries, we don't need to have everybody using a toll tag with toll readers and video uh capture with bootstraps and suspenders to make sure that the tag was read properly so we take a picture of people's license plates. We are gonna need some roadside infrastructure for sure, even with road usage charging, you leveraging, for example, uh smart devices. We're gonna need some, but we're not gonna need the kind of heavy infrastructure investment that you need with uh traditional tolling.

Jeff Cranson:

Okay, I just want to make it clear that we don't mean any offense to anybody that uses a stone knife or a bear skin. Okay. Um no, John.

John Peracchio:

No, today, but if we I'm talking about if we go back, you know, you know, uh the the pre-bronze era, Jeff. Yeah, absolutely.

Jeff Cranson:

Um what do you think you can do with the Council on Future Mobility and Electrification to help educate, which is really we're beyond advocacy now for the road user charge. We have the pilot, it's in it's it's the the money's in place. We know that we're gonna be able to get the pilot going, but this is all about education now. So, how do you see that group factoring into this?

John Peracchio:

I think I think uh the Council on Future Mobility and Electrification uh can certainly help with education. I also think we can uh assist the study and the pilot with offering technology ideas and solutions, especially given that we have uh representatives from major automobile manufacturers on the council. It is critical to involve car companies in the discussion. Uh, you know, they're usually not thrilled about things like tolling or road usage charging. Uh that said, they want an enhanced customer experience. And so posit this notion that when you buy a new vehicle and you're going through the FI process, you know, the finance and insurance process, you sit there and they um offer you all these different products, finance products, you can check a box and instantly open an account for road usage charging in the state of Michigan. It can be that seamless. It would be the same as applying for a title for a new car or transferring a title, right? So those are the kinds of things the Council on Future Mobility can take a step back and say, hey, have you thought about this? This is a great idea for making the customer experience better and helping to reduce friction so that it's easy for the customer to understand what they're paying for.

Jeff Cranson:

It'll be really interesting to see how those conversations go. One thing I've thought about too, and I'm sure this has crossed your mind, is that maybe this takes away from the the political challenges for lawmakers to vote on transportation funding because it's so often involved, the gas tax over the years, and there is no single service or product that we buy that we are so cognizant of the price because it's on every commercial corner, right? So we're reminded gas is this much. And I know I find myself looking, even if I don't need to fill up my tank, I'm like, oh look, gas is 279 this week, you know, and it's a common thing, right? It's why uh Gas Buddy is such a popular website. So we get away from that. Do you think that helps ultimately in in taking some of the politics out of transportation funding?

John Peracchio:

So I don't fancy myself to be a political analyst, although, you know, being involved with uh the state since 2017 now, I've certainly had an education on how things work or sometimes are challenged. Uh but I actually look at just the opposite. It will give people now, if we eliminate the fuel tax and go to a pure road usage charging system, it means you'll actually be able to tell precisely what the price of gasoline is on a per gallon basis. Because right now, the fuel tax is both the federal and the state is buried in a wholesale calculation. So you what you see, yeah, you definitely understand uh what the price that you're gonna pay for a gallon of gas at your local uh gas station, but what goes into that price right now has a couple of taxes in there that would potentially go away, including a sales tax in Michigan.

Jeff Cranson:

Correct. Which will go away. So yeah, that that's a that's a good point. That is another way of looking at it. I just think that you're not gonna see it everywhere and not be reminded of it all the time. But uh it'll be interesting to see if we can move forward with this and if you know there there will be the education necessary because I don't see this as happening just legislatively because they all of a sudden say, you know what, this is the right thing to do. They're gonna have to have constituents that see the benefits, and that's where the education comes in.

John Peracchio:

So I completely agree. I actually think educating the public is as important as any technical solution we choose ultimately to implement road usage charging. I think even though there are challenges with various options of to on how to get this done tech technologically, the biggest challenge will be public acceptance and making sure they understand precisely what they're paying for in a road usage charging system.

Jeff Cranson:

Yeah, we'll have to go through grieving and denial first.

John Peracchio:

Well, which stage is that of you know uh we'll have to figure that out before we get to acceptance.

Jeff Cranson:

Well, thank you, John, for your insight and for your support for this and help in at least thinking about what we can do next and what the future holds for funding transportation in Michigan, which is going to be an ongoing discussion for a long, long time, I'm afraid. So um I appreciate your insights.

John Peracchio:

It's my privilege to help. Um, you know, it's a way to give back to the state of Michigan.

Jeff Cranson:

You know, I was thinking when you said I'm not uh a political analyst, it's kind of like everybody who drives is a traffic engineer. I think everybody who does anything in government is a political analyst, whether they admit it or not. So

John Peracchio:

I won't respond to that. Yeah, that's probably true.

Jeff Cranson:

All right. Thank you, Jen.

John Peracchio:

Of course.

Jeff Cranson:

I'd like to thank you once more for tuning in to Talking Michigan Transportation. You can find show notes and more on Apple Podcasts or BuzzSprout. I also want to acknowledge the talented people who help make this a reality each week, starting with Randy Debler, who skillfully edits the audio, Jesse Ball, who proofs the content, Courtney Bates, who posts the podcast to various platforms, and Jacke Salinas, who transcribes the audio to make it accessible to all.