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Negotiations are well underway in Michigan government as legislative Republicans and Gov. Gretchen Whitmer look to reach a compromise on the state budget, an issue closely tied this year to finding more money for fixing the roads.
Currently, high-level budget talks are primarily taking place among House Speaker Lee Chatfield, Senate Majority Leader Mike Shirkey and Whitmer.
The $56.8 billion budget signed by then-Gov. Rick Snyder on June 21, 2018, is set to expire Oct. 1, when the new fiscal year begins.
If a budget isn’t agreed to before then, the state government would go into shutdown, although Whitmer signaled last week she’d consider a stopgap measure to continue government funding past that date if “good-faith” negotiations about road funding were underway.
Some Republicans have favored the idea of addressing infrastructure funding separately from the budget, but Whitmer and outside groups like the Michigan Chamber of Commerce are pushing for state leaders to tackle a fix for the state’s crumbling roads and bridges at the same time.
A lot of different ideas on how to find more money for infrastructure have come up as conversations continue, but so far no formal compromise plan has been presented to lawmakers.
The ideas include:
Raise the Gas Tax by 45 Cents
Whitmer’s budget proposal hinges on a plan to eventually raise taxes collected at the pump by 45 cents.
It would raise the fuel tax by 45 cents per gallon by Oct. 1, 2020, in three, 15-cent increments.
Whitmer has said the state needs billions of dollars annually to adequately address Michigan’s infrastructure needs, and has said lawmakers so far haven’t presented a plan that would bring in enough money to fix the problem.
The total budget Whitmer proposed for fiscal 2020 clocks in at $60.2 billion, significantly more than the $56.8 billion budget the state is currently operating under. Part of the increase comes from the proposed gas tax increase.
House and Senate Republicans are a hard no on the 45 cent number, however. Chatfield called Whitmer’s proposal a “nonstarter” for his caucus.
Raise the Gas Tax, but Not as Much
Republicans in the Legislature are now discussing a multitude of options on potential alternatives for road funding, one of which is feeling out members’ opinions on a more modest gas tax hike.
Currently, there’s “no big, bold plans” for a budget or road funding compromise, said Sen. Wayne Schmidt, who told reporters Aug. 20 there are “plenty of ideas out there.”
“We’re not there yet,” said Schmidt, who chairs the Senate Appropriations Transportation Subcommittee. “Is it going to be a tax increase, is it not going to be a tax increase — these are things that are all being discussed, but there’s no specific plan out there.”
Hike Corporate Income Tax and Tax Trucks
House Democrats introduced legislation earlier this year that would implement a 2.5% corporate income tax hike, a flow-through parity tax of 4.25% and a new Vehicle Miles Traveled tax of 6 cents per mile on trucks weighing 26,000 pounds or more.
The legislation would also create a truck-only toll on Michigan bridges similar to the RhodeWorks tolling program in Rhode Island.
New revenue generated from the corporate tax increase and the Vehicle Miles Traveled tax would go toward a new “Fixing Michigan Roads” fund under the bill package.
The concept was quickly panned by Republicans and business leaders. In a statement, Dan Papineau, director of tax policy and regulatory affairs for the Michigan Chamber, called their efforts “irresponsible plans that aren’t grounded in political or fiscal reality.”
Swap Sales Tax on Fuel for More Road Money
Any tax increase for infrastructure could be a tough sell among House Republicans, whose budget proposed a transition away from collecting sales tax on gas and using all that money for infrastructure repairs, but did not call for any new outside revenue.
The House budget plan assumes all the funds currently collected as sales tax on fuel — which largely goes toward schools and local governments — would be shifted to roads over the next two fiscal years, ultimately generating an estimated $830 million.
In an effort to maintain existing funding for schools, the overall House plan shifts school aid fund dollars out of the university budget and back into the K-12 budget.
Accelerate the 2015 Plan
The Senate-passed budget called for accelerating the 2015 plan passed by the Legislature to fund Michigan’s roads by putting an additional $132 million into roads, but also avoided the prospect of a tax increase.
The 2015 plan sought to dedicate an extra $1.2 billion a year by 2021 to repair and maintain crumbling roads and bridges using a combination of fuel and vehicle registration fee increases and general fund dollars.
Bonding Money for Teacher Pensions
An idea brought to the Legislature from the West Michigan Policy Forum on bonding money to fund teacher pension obligations has also entered the conversation.
The concept involves using bonds to fund teacher pension obligations upfront, then paying back the bonds on a set schedule, and was considered by some as a possibility for freeing up additional money that could be used for roads.
Former House Speaker Jase Bolger, an adviser for West Michigan Policy Forum, said the group proposed the state issue a 30-year, $10 billion bond to pre-fund the Michigan Public School Retirement System, a move that he said could free up $600 million to $900 million a year.
Whitmer was cool to that concept, however, telling reporters the idea was “maybe retrieved out of Gov. Snyder’s trash can,” according to Crain’s Detroit Business.
Let Locals Collect Their Own Taxes
Another option some House Republicans are considering is giving local governments more flexibility to raise their own fuel excise taxes or local registration fees by putting it on the ballot, similar to a property tax millage.
House Transportation Chair Jack O’Malley said he’s preparing to introduce legislation to that effect next week.
O’Malley said offering a local option could ease some pressure on state coffers while also letting individual communities decide how much they want to spend on infrastructure.
“I think that’s a part of this discussion that Lansing and the state has not paid attention to, because everybody’s ‘Budget, budget, budget, budget, budget,’ ” O’Malley said. “It’s important, but how we spend that money is hugely important, too.”
Reappropriate Existing State Funds
Some lawmakers believe more can be done to find more money for roads in the state’s current budget instead of seeking additional outside revenue.
House Appropriations Transportation Subcommittee Chair Matt Maddock said he’s not a fan of most of the other ideas he’s heard floating around the Legislature, and remains firmly opposed to raising taxes.
He noted lawmakers should “put the emergency brake on” before approving another tax increase that he says Michigan voters don’t want.
“Everything’s a rush in Lansing when it comes to spending money and increasing taxes, and I think that’s very unfortunate,” he said. “If there’s a dozen different pieces on the chess board, I hope the king piece is going back into our budgets, identifying and finding the money in Lansing and using that money to fix our roads.”
Maddock was also supportive during the budget process of looking at whether the Department of Transportation could sell state-owned properties like the Blue Water Bridge, welcome centers or state-owned airports.