Michigan has substantial current unfunded highway system investment needs. Based on the priority lists and overall spending requests, there is a potential need for an additional $375 million per year in state trunkline system investment, and a potential need for an additional $281.8 million per year in county and city investment, or a total of $656.8 million.

How can such a level of increased investment be justified?

First, the list of projects which have been identified on the state system have the potential to increase tourism and improve manufacturing productivity and competitiveness by reducing delays, decreasing travel time uncertainty, and reducing repair costs to vehicles and damage to cargo. The same is true for investment in local roads in the Southeast Michigan and Greater Grand Rapids area. Beneficial projects include reconstruction of major Detroit area interstates, the beltway around Grand Rapids, upgrades to U.S. 23, improvements to U.S. 31 and 131, and additional state and local lane mileage around Oakland and Macomb counties.

Several factors support an increase in direct investment. Most importantly, the condition of Michigan roads has deteriorated badly over the last ten years, with a 36% increase in the number of state system roads rated poor between 1982 and 1993. With over 36.5% of state roads and 32.0% of county roads rated poor, there is a pressing need to make improvements on these lanes to slow the deterioration of roads from fair to poor. Major savings in eventual repair costs can be achieved by fixing fair roads before they reach poor status. Improving the poor roads will also reduce damage to vehicles by more than $ 1 00.00 per vehicle per year.

Michigan's very low road spending per capita, per mile, and by percentage of personal income compared to other states suggests that additional investment may be necessary. On the other hand, the level of Michigan Transportation Fund revenue growth between 1982 and 1992 does not support the popular notion that revenues have not kept pace with at least unit inflation. While revenue growth has kept up with unit inflation, it has probably not kept up as well if mandated increases in design inputs are taken into account. These mandates require more cement, more environmental mitigation, and more safety factors per mile of road and increased costs over and above the unit inflation rate. Finally, even if revenue growth kept up with inflation, if the original base levels of revenue were insufficient there may still be a need for additional investment.

This does not necessarily mean that all or even a part of the additional $656.8 million of identified investment needs must be funded through fuel tax and/or registration fee increases. Other sources of funding include reductions to non-highway programs, cost reductions and other efficiencies at both the state and local level, and the securing of an increased share of federal transportation dollars collected from state users. These other "sources" of investment dollars are explored in the following sections.