June 16, 2014 at 8:22 am

Federal funding crisis may stall Michigan road fixes

Congressional impasse on replenishing trust threatens highway work after summer

Workers from all facets of the road construction industry take part in the third Rally for Roads last week in Washington, D.C. Michigan's federal road funding could dry up as early as next month. (Charles Dharapak / AP)

Washington — As state lawmakers fumble to find $1 billion for crumbling roads, Michigan faces a bigger potential highway crisis: Federal funding could dry up as early as next month, blocking new construction projects.

Members of Congress agree they must move quickly to resolve the insolvency crisis in the Highway Trust Fund that finances about a third, or roughly $1 billion, of Michigan’s transportation budget. But they disagree about how it should be paid for. It is similar to the gridlock in Lansing, where state legislators can’t find a consensus on how to raise $1.2 billion to $1.5 billion more annually to repair roads and bridges.

The GOP-led U.S. House is pushing a short-term fix that would funnel about $12 billion to the trust fund from savings by limiting Saturday mail delivery, and reimburse states for the remainder of the summer construction season. But Democrats have called it a gimmick and seek a long-term solution, including a 15-cent increase in the 18.4-cent federal gas tax, that would bolster a diminishing highway fund to fully invest in the nation’s infrastructure.

The impasse threatens Michigan’s worn, potholed highway system. If federal funding comes to halt, state officials said Michigan has enough money set aside to finish this summer’s construction. Without a congressional solution, however, state officials said future projects would be on hold and pavement would continue to decline.

“It’s going to be an embarrassment — some would say it already is,” said Michigan Department of Transportation spokesman Jeff Cranson.

Congress also is staring at trying to approve a multiyear transportation authorization bill before the current legislation expires at the end of September. Without an extension or renewal, federal funding would stop flowing to states because the legal authority to spend trust fund federal dollars would have ended.

A flurry of laborers, construction manufacturers and business owners flooded Washington last week to urge Congress to immediately fix the trust fund and pass long-term transportation funding legislation.

“We have a double-edged sword that’s hitting us twice this year,” said Kerri Leininger, organizer of the Rally for Roads demonstration last week on Capitol Hill. “The situation is dire because the money that goes to states to continue highway funding will completely end.”

Republican and Democrat lawmakers told transportation workers last week at a Washington hotel and rally outside the Capitol that they are committed to fixing the problem. But each offered a different solution.

House Republican leaders advocated the short-term patch extending the trust fund through May, giving Congress time to find a permanent solution. Sen. Barbara Boxer, D-Calif. and chairwoman of a key Senate public works committee, blasted the plan Wednesday as “a stupid idea.”

“I don’t want to see any gimmicks or short-term patches,” said Boxer, who prefers scrapping the gas tax for a fee on oil refineries.

'A very serious need'

The struggling Highway Trust Fund has revived the quest of U.S. Rep. Dave Camp. R-Midland, for tax reform. In his reform plan, the House Ways and Means Committee chairman proposed an eight-year window for international companies to repatriate income earned overseas back to the United States to shore up the Highway Trust Fund to the tune of $126.5 billion.

U.S. Sen. Patty Murray, D-Wash., pointed to Camp and U.S. Rep. Sander Levin of Royal Oak, the top Democrat on Camp’s committee, who have agreed on ending one “loophole” related to tax breaks for companies that issue stock options to executives.

“Let’s build on the common ground,” said Murray, who forged a bipartisan two-year budget deal this year with GOP Rep. Paul Ryan of Wisconsin.

Levin said he’s not advocating for a specific solution, except that it should not involve the Postal Service.

“What we need is to sit down on a bipartisan basis and talk about the highway bill,” he said. “... There’s a very serious need in Michigan. The roads are in the worst condition I’ve seen them.”

Increasing fuel costs with new taxes, however, is not popular among Michigan voters, according to a Detroit News/WDIV (Local 4) poll last month. The statewide survey found voters think there’s already enough state money spent on roads, and the funds need to be better spent.

Sen. Ron Wyden, Finance Committee chairman, said all options are on the table to finance roads. But he cautioned that repatriating income might not work.

Meantime, U.S. Rep. Kerry Bentivolio, R-Milford, has signed on to legislation that could eliminate the Highway Trust Fund by distributing highway block grants to states, while reducing the federal gas tax from 18.4 cents to 3.7 cents. It’s unclear how much Michigan would stand to get.

“It allows our state to keep more of the revenue from the gas tax by cutting out the middleman of federal appropriators,” Bentivolio said, noting he’ll soon be introducing his own legislation on road repairs.

But the state of Michigan supports keeping the trust fund intact with a steady funding stream.

“Michigan’s preferred solution is for Congress to address this structural imbalance so we don’t keep moving from one solvency crisis to another,” Cranson said.

Risk of insolvency

The Highway Trust Fund was created in 1956 to pay for the nation’s expanding infrastructure. It’s the main piggy bank Michigan taps to fund highway projects with 80 percent federal money and 20 percent state funding.

Michigan’s share of the trust fund has stayed stagnant at roughly $1 billion for about seven years as demand and the cost of projects rise. Michigan’s federal funding this year is 1.8 percent higher than it was in 2007, limiting state projects.

The trust fund is fueled by gas taxes — 18.4 cents a gallon for gasoline and 24.4 cents for diesel — which haven’t been raised since 1993.

The taxes don’t raise as much money as they used to because vehicles are more fuel-efficient, and construction costs have risen.

Since 2008, the trust fund has been at risk of insolvency several times, so Congress has to transfer more than $50 billion from its general budget to prop it up.

Business, labor and construction groups are advocating for increasing user fees on motorists and truckers.

A higher gas tax is the most common and simplest fix, but advocates are presenting options including new freight fees, a federal driver’s license fee and tire taxes.

“It’s time for America to raise the gas tax,” said U.S. Rep. Earl Blumenauer, D-Ore., who backs a 15-cent hike over three years and has the support of the U.S. Chamber of Commerce and the AFL-CIO.

But Rep. Bill Shuster, R-Pa., and chairman of a key House transportation committee, rejects the idea.

Sen. David Vitter of Louisiana, top Republican on Boxer’s public works committee, also told transportation builders and lobbyists last week that there’s no sentiment for an increase: “This is a non-recovery.This is one of the worst times possible to just raise the gas tax.”

mschultz@detroitnews.com