LANSING – Michigan’s legislature punted on its final opportunity in 2014 to raise money to repair our state’s crumbling roads, opting to let voters decide in a May special election if they will hike their own taxes to raise $1.3 billion a year for smoother commutes.
Gov. Rick Snyder has made it a priority since nearly the beginning of his term in office to raise money to fix the roads, but it has been impossible to convince a majority of Republican lawmakers, who control both houses of the Legislature, to go along. So the Legislature voted at the year-end lame duck session on Dec. 19 to let the voters decide.
“The plan we arrived at today was created in the true spirit of bipartisan compromise that can make a real difference,” Snyder said. “We listened to everyone and took into account everyone’s key concerns. Now we have a solution to support and it’s up to all of us to continue working together, along with our residents. This is an opportunity to get something done to fix our roads and make Michigan a better place.”
The let-the-voters-decide plan came about because a group of Republican lawmakers, led by House Speaker Jase Bolger, insisted that the road repair money be raised through a scheme that would raise an extra $1.2 billion a year for roads without increasing taxes, by shifting tax revenues away from schools and local governments. Anticipated tax revenue increases would keep school and local government income levels the same, according to Bolger’s plan, which was blasted by state Dems and others.
With Bolger’s caucus unwilling to move, the plan to put the issue on the ballot became the only option, and it was embraced by both sides of the aisle and industry stakeholders, including labor unions and their contractors. The plan leaves the Michigan Prevailing Wage Act in place – which is the No. 1 legislative priority for the state’s building trades unions.
Here’s a synopsis of the plan, according to MITA, the Michigan Infrastructure Transportation Authority, which includes union representatives.
“Although MITA was let down not to resolve the transportation funding issue through a pure legislative fix,” said a statement by the group, “the proposal is a seismic shift on a number of levels that will ultimately ensure that all taxes paid at the pump will actually go to transportation for the first time in decades.” Here’s how the proposal works:
The Legislature approved bills to change the current 19 cents per gallon state fuel tax to a 14.9 percent wholesale tax on motor fuels (including newer fuels such as compressed natural gas). This will generate $1.2 billion per year for road funding that begins in October of 2015, if the public approves a ballot proposal in May.
This ballot proposal would eliminate the sales tax on motor fuels, leaving a $900 million hole for schools and locals. To offset this loss, voters will need to approve a 1 percent increase in the general sales/use tax, thus raising it from 6 percent to 7 percent on most purchases. The sales tax increase would raise $1.3 billion, which fills the $900 million hole for schools and local governments that was created by eliminating the sales tax on motor fuels. The sales tax increase also provides an additional $300 million for schools and $100 million for local governments.
The proposal also includes $95 million in registration adjustments and truck fees. It adds an additional registration fee for electric and hybrid vehicles. In addition, it restores the state’s Earned Income Tax Credit, saving another $260 million for low-income individuals.
“All of these changes add up to huge opportunities for the industry,” MITA said.
*The governor has committed to accelerating forward more than $400 million in projects so construction can begin immediately following a “Yes” vote on May 5th.
*As construction ramps up in a three-year build-up of projects, a significant portion of the revenues will be used in the first two years to pay off over half of MDOT’s debt, thus allowing for an even greater number of projects to be let in future years.
*The opportunity for growth in revenue is significant in future years as the wholesale tax allows for inflationary increases, while the floor and ceiling that are set in the law protect against wild fluctuations.
*The warranty legislation that was passed only expands that which is already in use at MDOT to be allowed for consideration at the local level.
“We’re very thankful that our state’s leadership was able to come to the table together and hammer out an agreement that will keep Michigan moving forward,” said Patrick “Shorty” Gleason, legislative director for the Michigan Building and Construction Trades Council. “We need to do everything we can to make sure our economic engine continues to gather momentum.”
Now comes the work of convincing voters to vote yes on the plan. Passing it is no slam dunk, and there is no back up plan. Inside Michigan Politics newsletter editor Bill Ballenger told a Lansing radio station that prospects for passage is “a 50-50 jump ball.” He said “all the polls taken over the past few years show the citizenry are really conflicted about how to handle this issue. They want the roads maintained, they want them fixed, they want them improved, but they don’t want to pay for it.” If it doesn’t pass, he said, “the whole thing falls apart and we’re right back to ground zero, and nothing will have been done.”