The Michigan Constitution dictates that taxes and fees collected on items used "for the operation of a motor vehicle on the state highways," including fuel and registration taxes but with the exception of general sales taxes, are to "be used exclusively for 'transportation' purposes." Not less than 90% of these taxes must be spent on the planning, designing and construction of roads and bridges designed primarily for the use of motor vehicles using tires.

Public Act 51 of 1951 (MCL 247.667) governs how transportation revenues are to be raised and spent in Michigan. The Act establishes a number of state funds that receive and distribute transportation monies and establishes a formula which governs the disbursement of state collected monies to the state highway system, county roads, and city and village roads. The most important fund is the Michigan Transportation Fund, which receives most state monies. These monies are then allocated to the other funds by formula. The formulas in Act 51 require that monies be spent first to pay administrative costs, primarily of the Michigan Department of Transportation (MDOT), and to pay the principal and interest due on outstanding bonds and notes.

Secondly, monies go to funds required for special projects, such as the Critical Bridge Fund and the Rail Grade Crossing Account, and the Recreation Improvement Fund. Ten percent of the remaining money is allocated to the Comprehensive Transportation Fund, which is primarily for mass transit. This fund also receives a small portion of state vehicle sales tax fees which is then also used for mass transit. The balance of money is used to finance snow removal and construction and maintenance of the highway system by apportioning 39.1% for state highways, 39.1% for distribution to counties, and 21.8% for distribution to cities and villages.

Michigan's total state user fee revenues dedicated to transportation for fiscal 1995 are budgeted at $1,364.6 million, with the Michigan Transportation Fund representing $1,308.2 of the total.5 Figure 4 indicates the disposition of these funds. $176.7 million (12.9%) of the funds are budgeted for mass transit and other non-highway projects, with $56.4 million of this total coming from auto related sales taxes and the remainder coming from the 10% of Michigan Transportation Fund monies dedicated to non-highway purposes under Act 51. Of the $1,187.9 million budgeted for highway infrastructure, $349.0 million or 25.6% of the total transportation budget is for the State Trunkline Fund to support state roads. An additional $36.8 million is budgeted for the Economic Development Fund to support all types of roads, and $5.0 million and $3.0 million, respectively, are budgeted for critical bridges and railroad crossings. $444.0 million is budgeted for counties, or 32.5% of the total state revenues, and $247.5 million (18.1%) is budgeted for cities and villages. The county and city percentages relate to total revenue sources including the auto sales taxes going into the Comprehensive Transportation Fund. This is somewhat less than the percentages relating to the Michigan Transportation Fund stated in Act 51. State transportation administrative costs are budgeted at $89.9 million.