Pressure mounts for road funding fix as GOP leaders preach patience
Mackinac Island — Gov. Gretchen Whitmer wants to reach a road funding agreement with legislators by the end of June and a completed budget by the end of July, but the GOP chamber leaders aren’t committing to a timeline for adopting spending plans.
Senate Majority Leader Mike Shirkey doesn’t want to rush a roads solution and wouldn’t rule out the possibility that a road funding agreement could drag into the next fiscal year, which begins Oct. 1. Shirkey and House Speaker Lee Chatfield have yet to unveil an alternative road aid plan to Whitmer's proposed 45-cents-a-gallon gas tax increase that they have panned.
Regardless of timing, the trio of Michigan leaders expressed confidence in finding a solution to the state’s crumbling roads, using the signing into law Thursday of no-fault auto reform as proof that they can find common ground.
The auto no-fault reform was touted almost as often as the pressing urgency of $2.5 billion needed in new revenue for roads at the annual Mackinac Policy Conference this week.
Whitmer used her Thursday keynote address to urge business and thought leaders gathered at the conference to hound lawmakers about road funding as they mingled on the porch of the Grand Hotel.
“Be a part of getting this done,” she told them. “Act like your future depends on it because it does.”
Waiting on alternate plans
Early in the conference, Whitmer stressed that she had yet to see an alternative plan proposed by legislative leaders despite their vocal opposition to her proposed 45-cent per-gallon gas tax increase.
Whitmer’s gas tax increase would raise $2.5 billion a year for roads. But her budget also proposes ending the $600 million general fund diversion, meaning total road funding would increase by $1.9 billion over planned levels.
To raise a similar amount, the state would have to raise its corporate income tax from 6% to 19.5%, or raise the personal income tax from 4.25% to 5.3% or ask voters to increase the state sales tax from 6% to 7.4%, she said.
Beyond roads, the governor noted Michigan has more than 11,000 bridges, including 1,000 that currently have weight restrictions because of age, 800 that are in poor condition, more than 400 in serious to critical condition and 49 that have been closed because they pose an imminent threat to safety.
“We can’t wait until after a tragedy for us to solve the problem,” pointing to a 2007 bridge collapse in Minnesota that prompted lawmakers there to raise fuel taxes for repairs. “We know it exists. We know it’s real. We know the human consequences. We know the economic consequences as well.”
In an interview, Chatfield, R-Levering, said he expected the House and Senate to produce alternative ideas “very soon,” but stopped short of setting a date certain for the proposals.
Chatfield has argued that the 6% sales tax paid on gas, which currently goes toward state school aid and revenue sharing with local governments, should instead be preserved for roads so all revenue generated at the pump pays for infrastructure repairs.
His plan would hold schools harmless. Public schools, he has estimated, receive about $500 million to $600 million of the $830 million diverted from the gas sales tax.
“I will not have a conversation about new revenue until every penny paid at the pump in taxes goes toward roads,” Chatfield said. “Michigan has a road funding problem, and until that component is addressed we’ll always have a road funding problem.”
Ensuring every tax penny paid at the pump goes to road is an “absolutely critical” first step in building trust with taxpayers who are under the impression their gas taxes are going solely toward infrastructure, Shirkey said in an interview.
Shirkey has acknowledged that new revenue would be necessary to repair Michigan roads, but he has not supported Whitmer’s 45-cent hike.
“Probably not of that magnitude, at least not in the near term,” Shirkey said of new revenue. He argued the conversation around road funding should shift from the “perfect number” to making road aid a continuous priority in the budgeting process.
“Nobody should have it in their mind that a road solution is a package that we put a bow around and put on the shelf and never have to look at it again,” Shirkey said. “We have to change the culture in Michigan and make roads and infrastructure, just like education, something that is a high priority in every budget.”
Deadlines and past attempts
The no-fault auto insurance reform bill was barely signed Thursday before talk turned to the pot holes those insured drivers are navigating. On the Grand Hotel porch, Whitmer told reporters she would like to adopt a road funding plan by the end of June and adopt a budget by July 31.
“We shouldn’t go on break until it is done,” she said.
But Chatfield and Shirkey don't want to be boxed in by Whitmer’s timeline.
“Frankly, I’m fine with the governor keeping the pressure on and putting goals out there, but I’m not going to impose that on our team,” Shirkey said.
He would like to adopt a budget this summer and solidify a road funding plan soon after. But Shirkey said a roads solution should not be rushed and didn’t rule out a roads funding package after Oct. 1.
“I really don’t know how long it’s going to take before it becomes fine wine like the insurance reform,” he said.
Chatfield anticipated leaders could reach an infrastructure solution sometime this summer, at the same time or just before adopting a budget.
“The budget is required to be done by Oct. 1 and certainly with the way the governor proposed her budget, roads are tied up into that,” the House speaker said.
While Chatfield and Shirkey won’t commit to hard and fast deadlines, they’re also taking issue with arguments that legislators exaggerated the effectiveness of a $1.2 billion 2015 road funding law.
The 2015 law is generating $600 million a year in additional revenue through increased fuel taxes and registration fees. It also included a $600 million diversion from the state general fund that lawmakers are still phasing in. Still, annual ratings show Michigan roads got worse in 2018 and are not projected to improve over the next decade.
Michigan voters were “sold a bill of goods” on a 2015 road funding law that “didn’t change the trajectory, it just slowed our decline,” Whitmer said during her Thursday address.
“I think it’s much better to take a hard vote that fixes a problem than to take a hard vote that actually just mitigates the damage that’s being done,” the governor said. “And that’s why I said, if I’m going to lead with a tax to fix this, it’s got to be big enough to actually fix the problem.”
The 2015 spending bill was temporary, Shirkey said, and represented what the GOP-led Legislature could accomplish at the time.
“I strongly, strongly react to the notion that anybody thought that that was going to be the final solution,” he said.
Mutual problems, mutual goals
Despite the challenges ahead, officials agree the prospect of finding common ground on road funding is perhaps as close as it has ever been especially after the successful passage of no-fault auto insurance reform.
There was an element of optimism at the conference and in communities as residents saw “government operate the way it was intended to,” Chatfield said.
Still, he said, “we’re not going to fix this overnight. We’ve under-invested in our infrastructure for the past 30 years, and it's going to take time to get our roads to a level where they’re all safe.”
If there is consensus on road funding, it is in the magnitude of the problem. Whitmer has suggested the problem needs $2.5 billion in additional revenue to fix the roads and Shirkey and Chatfield were not protesting the estimate.
“The target is always changing from year to year,” Chatfield said. “As long as there’s a pothole in the road, people are going to believe that the roads are not being funded enough.”
Shirkey estimated the tally may be even more, “but we have to balance the appetite of tax payers with the capacity to deploy assets."
The pressure is mounting for a funding fix from groups ranging from the Michigan Chamber of Commerce to the city of Detroit to Quicken Loans, whose ballot petition threat during the no-fault auto insurance reform debate put pressure on the issue.
“We’re going to lean in very hard to the effort to get an infrastructure funding solution,” said Jared Fleisher, vice president of government affairs for Quicken Loans. “We need it for our competitiveness. We need it for our safety.”