October 3, 2025

New State Budget Provides Substantial Boosts to LBO and Public Transit Projects

New Overall Transit Investments Include $160 million More Per Year

LBO Expected to Be Funded at $300+ Million Into the Future

This week saw the Legislature finalize the FY2026 state budget - taking a few extra days to work through the details of the bipartisan road funding and budget agreement announced last week. Given the amount of outstanding work, the Legislature passed a short-term "continuation budget" a few hours after midnight on September 30, and came back into session on Wednesday and Thursday to pass the various pieces.

There were a number of budget bills as well as new revenue bills passed in the early hours on Friday morning. Ultimately, the FY2026 budget as passed funded local bus operating at $271.6 million - an all-time high and about the amount estimated to keep local reimbursement percentages level going into this year.

Details from the FY2026 transportation budget:

• Local bus operating will be funded at $271.6 million (all state funds) - an all-time high.
• Transit capital will be funded at $247.8 million (federal and state funds)
• The 5311 program will be funded at $41.1 million (mostly federal funds)
• Specialized services will be funded at $30.3 million (federal and state funds)
• MDOT transit service initiatives will continue to be funded at $20.9 million (federal and state funds)
• MDOT Office of Passenger Transportation will receive an additional 6 FTE positions
• The road usage charge study and pilot program (to evaluate the feasibility of per-mile transportation fees) was funded at $7.6 million
• The House's proposed farebox recovery requirements were reduced to nonbinding language that simply states: "It is the intent of the legislature that all transit agencies in this state should strive to achieve a farebox recovery rate of not less than 6%."

Importantly and additionally, the legislature also passed a new transportation funding bill (SB 578) that would allocate more than $35 million in additional LBO funding per year, as well as establish a new $65 million "Infrastructure Projects Authority Fund" to support larger-scale transit projects.

Details from the new "Neighborhood Roads Fund" Act:

• Local Bus Operating would receive an additional $35 million per year for the next five years, with $1.75 million of that specifically reserved for non-urbanized and rural transit providers. Starting in FY2031, that amount would increase to $52.5 million per year. 
  • Note: this additional funding was not included in the FY2026 budget as passed, which we believe is a legislative oversight that can likely be corrected in the coming months.
  • Still, taken together, this would establish a new "baseline" funding amount of $300+ million for LBO, with strong possibilities for future increases.

• A new "Infrastructure Projects Authority Fund" is created with $65 million per year for the next five years.
  • The investments are intended for the development, expansion, or enhancement of any of the following:
    •  A high-capacity mobility transportation project.
    • Regional or multijurisdictional high-capacity mobility transportation that connects major centers of population, employment, education, health care, or other activity.
    • Innovative and flexible mobility transportation to meet mobility needs in lower density areas, for first- and last-mile transportation solutions, or for other specialized purposes such as access to health care. 
  • Award criteria will include:
    • Support for the qualified investment in the affected region, including from the following:
      • Local government.
      • An eligible authority or eligible governmental entity.
      • Regional anchor institutions such as major regional employers, local and regional economic development organizations, and educational institutions.
    • Financial participation from affected regional entities, including local units of government and public transportation providers.
    • The readiness, financial feasibility, and financial sustainability of the qualified investment, with the qualified investment facilitating a complete capital and operating financial model for the project it supports, with the highest priority for financial assistance given when the qualified investment is necessary to meet a capital or operating matching requirement for federal funding.
    • Whether the proposed qualified investment will provide locally or regionally significant benefits for the movement of people or goods, provide regional economic growth, and increase the attractiveness of the region for population growth, job growth, or tourism, with priority given to a qualified investment that includes a transit, nonmotorized, or multimodal (i.e., movement using multiple forms of transportation) component. 
  • Up to 20% of the funding may cover supplemental operating grants.

There will certainly be more details to come about this new funding program, which calls to mind the proposed SOAR transit funding proposal from last year.

The MPTA continues to work through the details of these bills and to determine next steps for transit agencies to best utilize the funding. Still, we are SO THANKFUL for all the support of transit leaders who engaged with legislators this year. Your participation made the difference and we cannot thank you enough!