The Building Tradesman Newspaper

Friday, May 15, 2015

Defeat of Proposal 1 moves state to 'Plan B' Prevailing wage repeal may be part of next package

By Marty Mulcahy, Editor

LANSING - The resounding defeat on May 5 of Proposal 1 tosses the road repair funding question back onto the collective lap of the state Legislature, where it was last December before the lawmakers voted to put the matter on the statewide ballot.

"The people have spoken," said Gov. Rich Snyder after Proposal 1 was defeated by an 80-20 margin among 1.4 million people who voted. "What do you do then? You learn from your experience. We roll up our sleeves and get to work."

Proposal 1 would have increased revenue to the state by about $1.9 billion, primarily through raising the state sales tax from 6 cents to 7 cents. Many voters said the ballot question was too complicated, as it took the sales tax off fuel sales, and raised fuel taxes, delivering about $1.3 billion for new road money. The plan would have also boosted school coffers by about $200 million a year, provided $116 million for transit and rail; sent $111 million more to local governments; and given a $260-million tax break to low-income families with a restoration of the Earned Income Tax Credit.

The over-riding questions following the defeat of Proposal 1 are, what lessons were learned from the vote, what?

Was it a no-new taxes issue?

Yes, said Michigan Sen. Jack Brandenburg (R-Harrison Twp.): “The taxpayers sent a very clear message today with their rejection of proposal 1 — no new taxes. Everyone, and I mean everyone, in the administration and the state Legislature should hear this message loud and clear."

Sen. Marty Knollenberg, (R-Troy), a member of the Senate Appropriations Subcommittee on Transportation, said the first step is to look at the state's existing budget to find savings. She told The Detroit News that additional revenue is "a last resort."

Even Democratic House Minority Leader Tim Greimel, (D-Auburn Hills) said voters were skeptical about having their taxes increased to fix the roads after watching Snyder and the Legislature cut taxes for corporations to the tune of about $1.5 billion and increasing taxes on senior citizen pensions by about the same amount.

But was it really about no-new taxes?

Not necessarily, says polling.

Bernie Porn, president of the Lansing polling firm EPIC-MRA, said a pre-ballot poll taken in April revealed that 64 percent of respondents would support a one cent increase in the sales tax - if all the money would be allocated to road repair.

Snyder himself said he didn't interpret the results as a voter statement against new taxes. "People want better roads," he said. "The question is, where do you get the resources to do that?"

Well, where do you get the resources to do that?

State Sen. Patrick Colbeck (R-Canton) has put forward a plan that he said would raise $869 million the first year utilizing several options, such as cutting spending elsewhere, taking from the state Rainy Day Fund, and using restricted DNR money. He is against raising any new taxes for roads.

State Rep. Peter Lucido, (R-Shelby Twp.), wants to use interest from the $18-billion Michigan Catastrophic Claims Fund to pay for hundreds of millions of dollars annually in road repairs. The Legislature is currently debating a related issue, overhauling the state's no-fault insurance law.

Another plan would cut state spending across the board by 10 percent to raise the money.

Snyder's original plan would have increased registration fees and the gas tax to raise the money.

Although Snyder said there wasn't a Plan B if Proposal 1 were defeated, House Speaker Kevin Cotter introduced his own road funding blueprint on May 5. His plan would shift state revenues from current economic development projects, strengthen warranties for road construction, and he raised the possibility of using limited new revenues devoted strictly to roads.

How does the lack of a funding plan affect the state's construction industry?

The Federal Highway Administration estimates that every billion dollars spent on road construction yields about 13,000 jobs. Michigan's total construction workforce in March amounted to 133,700. Would a 10 percent increase in jobs help the industry? Heck yeah, as well as the heavy equipment makers, and the concrete and asphalt industries. Passage of more road money would be a sure-fire jobs creator.

The Building Tradesman has been warning us that failure of Proposal 1 could put Michigan's prevailing wage law in greater peril. What's up with that?

The Michigan Prevailing Wage Act of 1965 is already in peril, with no less than six bills in place in the Michigan Legislature waiting to be taken up. Lawmakers who have the law in their crosshairs said they would wait for voters' up or down on Proposal 1 before proceeding, and now they have their answer. Repeal is almost certainly going to be taken up in the next few weeks, and the big fear among our trade unions is that with the road construction that would be created with new or reallocated dollars, alleged savings that could be made through prevailing wage repeal would be used as a bargaining chip to get Snyder to go along with repeal-minded Republicans.

But Gov. Snyder has said he supports prevailing wage, right?

Indeed he has. He has indicated he appreciates that the law sustains higher wages and retains people in the construction industry. But his self-proclaimed top priority is to get the roads fixed, and arguably, the voters have now given him and the Legislature a mandate to do it. And state Republican legislators have said repealing prevailing wage is their top priority.

It doesn't take a genius to see GOP lawmakers offering Snyder a deal he might not be able to refuse: legislation to provide new money for Michigan's roads, but only in exchange for Snyder's signature on repealing prevailing wage. 

Passage of Proposal 1, with all of its flaws, would have taken that potential trade- off, off the table. Now, the building trades have to hope that by "rolling up his sleeves and getting to work," Snyder won't roll over on his pledge to sustain prevailing wage.