The City of Hillsdale expects to receive $51,000 less in state road funding than promised during its current fiscal year, according to Assistant City Manager Sam Fry.
The State of Michigan planned to give $407,000 to the City of Hillsdale for road maintenance beginning in October 2025, according Fry, but that the city has not received any of the money yet — and is now expected to receive a total of only $356,000.
“There are a lot of unanswered questions about how much funding and the funding sources that contribute to this bucket of new money and the timeline for getting it,” Fry told the Collegian. “So we’ve just advised a more cautious approach of waiting for direction from the Department of Transportation.”
Fry said Michigan’s Department of the Treasury has informed the city that it will likely not receive the road funds until near the end of the state’s 2026 fiscal year, which runs from October to September, or the beginning of the 2027 fiscal year, a sentiment that was iterated in a March 3 city council meeting.
“The likelihood of us getting what was originally promised is diminishing as the year goes by, and we’ve received no funds,” Councilman Greg Stuchell said at the meeting.
The funding delay comes during a financially difficult construction season. In February, Hillsdale residents shot down proposals to use special assessment districts to fund road maintenance, and the city currently requires about $900,000 to complete the projects.
Without special assessment districts, Fry said, the state funding for roads will be invaluable for next year’s construction season.
“This reduction in expected state revenue will come into play next construction season,” Fry said in an email. “The funding amount we receive will certainly have an effect on how much road work can be done, because we won’t be able to rely on having special assessments as a revenue source.”
This issue is not particular to Hillsdale — many local Michigan transportation agencies have experienced major delays in receiving promised road funding from the state.
According to a report from the Citizens Research Council of Michigan, Michigan’s 2025 transportation funding package promised to increase road funding for road projects by more than $1 billion, beginning in October.
But according to Eric Dennis, an infrastructure research associate at the CRC, Michigan road agencies have instead experienced a 15% decrease in funding from the state over the months of October-January, with incoming data for February and March expected to show a similar trend.
“Back in October, these agencies were told they were getting more funding, and it turned out they were getting less funding,” Dennis said. “So that’s a pain for a lot of local road agency planners and people who have to try to figure out how to make the money work to get their projects done.”
According to Dennis and his report, this funding delay is the product of inaccurate financial assessments within the 2025 transportation package.
Dennis said the promised money might still be distributed in the future, but it is difficult to know when. For Hillsdale, it may not be until the city has started its next fiscal year.
“It’s a temporary decrease that will be made up in later months,” Dennis said. “Probably not at least until July, when Hillsdale will be in their next fiscal year. There’s still a lot of uncertainty, but the city will eventually be getting more money, more than enough to make up for what they were shorted in this fiscal year.”
The $1 billion package relies on three new road funding sources: an increase in gas taxes, a new earmark of the corporate income tax, and a new marijuana tax, and all three failed to increase funding in October, according to Dennis, for a variety of reasons.
Dennis said the legislature set the new gas tax to apply in January 2026, but at the same time, it removed an earmark of a personal income tax, which took effect in October. The result is a net decrease in road funding from October until March, the earliest month the tax funding can reach road agencies.
“It will be April of 2026 before that revenue is distributed to local road agencies,” Dennis said.
The funding coming from the corporate income tax has a high amount of uncertainty because the revenue must first be distributed to other higher-priority uses before the road funding, according to Dennis.
“It’s not clear when that funding is going to happen, and it’s not clear when local road agencies, like the City of Hillsdale, might be getting any of that,” Dennis said. “It will come eventually, but probably very late in 2026.”
Last week, Michigan’s Department of the Treasury announced it would start collecting the new 24% wholesale marijuana tax in April, so Dennis said Hillsdale could expect to start seeing these funds in July. However, the tax is currently facing a lawsuit in court, which, if it succeeds, would eliminate it as a source of funding.
Dennis said he thought the delays were caused by oversight during a rushed budgeting process last year.
“For fiscal year 2026, Michigan didn’t have a budget until like three days into the budget year, so it was all made very last minute,” Dennis said. “And that’s never really happened before. This was a really unique situation. They haven’t had to deal with these problems before.”
But Dennis said there is a silver lining — Hillsdale will receive an increase in funding for road projects, enough to make up the deficit, over their fiscal year, beginning in July.
“They will be getting more money in the next fiscal year,” Dennis said. “But during the 2025-2026 fiscal year, they will probably be getting about $100,000 less from the state than they would have expected, even though they were told they would be getting more money from the state.”
