Minority leader: Road funding plan relies on 'gimmicks'
Lansing — House Speaker Kevin Cotter pushed a new plan Wednesday to generate $1.05 billion more annually for road and bridge repairs, mostly by redirecting existing spending and future revenue into the transportation budget.
Under the plan, $700 million of the state's roughly $9.5 billion general fund would be dedicated to roads through projected tax revenue growth.
One of the more controversial aspects of Cotter's plan calls for eliminating the state's Earned Income Tax Credit and redirecting the $117 million paid out annually to low-income families to repairing roads.
"We are taking tax dollars from some taxpayers and we're giving them to others and here we're putting them into roads," said Cotter, R-Mount Pleasant.
Cotter's plan is a response to Michigan voters resounding defeat of Proposal 1 last Tuesday, which would have hiked sales and fuel taxes in a complex plan to generate $1.2 billion more for roads. Proposal 1 also would have pumped more money into schools, cities, public transit and the Earned Income Tax Credit.
"I think the voters said very clearly: 'Give us just a roads plan,' " Cotter said.
House Minority Leader Tim Greimel, D-Auburn Hills, said Cotter's plan relies on an "imagined $700 million" in general tax revenue growth and "Band-Aid solutions" to the state's road funding deficit.
"Their plan relies on Enron-like accounting gimmicks, and it's unlikely to be taken seriously by any informed observer," Greimel told The Detroit News.
But Cotter's reliance on existing or future revenue got a slight boost Wednesday when the non-partisan House Fiscal Agency projected general fund revenue will be $82.1 million more this year than previously estimated. The fiscal agency also projects general fund revenue for the 2016 fiscal year will be up $76.6 million over earlier projections.
The Senate Fiscal Agency had a rosier outlook on general fund tax revenue, projecting a $257.9 million increase in the current 2015 fiscal year and a $79.6 million increase next fiscal year over January projections.
Any future growth in revenue and expected extra revenue from Friday's revenue-estimating conference would be dedicated to the Department of Transportation's budget, according to the Cotter plan.
The Michigan League for Public Policy said Cotter's plan represents "our greatest fear" because it "eliminates one of the few tax credits helping to bring low-wage workers out of poverty and paves the roads on the backs of our most vulnerable people."
Eliminating the EITC is part of a "tax fairness" aspect of Cotter's plan that includes raising the 15 cents per gallon diesel tax to the 19-cents-per-gallon tax most motorists pay for unleaded gasoline. A "diesel parity" tax hike has been a consistent part of past road funding plans in the Legislature that have fizzled in recent years.
Cotter's plan calls for indexing the 19-cents-per-gallon to allow for inflationary increases. The gas tax has not been increased since 1997. The diesel tax increase would generate $40 million, while a new fee on hybrid and electric vehicles would net $5 million annually, Cotter's office said.
Under Cotter's plan, another $185 million would be taken from the state's $20 billion in restricted funds — money dedicated by law or the constitution for certain uses such as community health and economic development.
The plan is to eliminate the $50 million film subsidy, redirect $60 million in tribal casino revenue and channel $75 million in tobacco settlement money away from the 21st Century Jobs Fund and into road funding. The national tobacco settlement from the 1990s already has generated hundreds of millions of dollars for spending priorities including a disbanded college merit scholarship.
Joseph Scott Anthony, an actor and producer who heads the Media Arts Coalition of West Michigan, said eliminating funding for the film incentives would be "driving Michigan backwards."
"Michigan must keep growing these jobs of the future and we must fix our roads," Anthony said. "We can do both."
Business groups have been lobbying heavily to end film incentives, while some GOP senators continue to defend the subsidies.
"If we can't pull the plug on that program, then the ability of lawmakers to find $100 million, $250 million, $500 million of cost savings (for roads) is a real question mark," said Rich Studley, president and CEO of the Michigan Chamber of Commerce.
Critics have questioned the legality of redirecting the tribal casino revenue toward roads because compacts former Gov. John Engler forged with Native American tribes stipulate the money must go to economic development.
But Cotter contends the Legislature has the power to define road repairs as a form of economic development. "I don't think there's a lot of strings attached to that in how the money is spent," Cotter said.
Redirecting the money would require lawmakers to rewrite existing laws.
Gov. Rick Snyder has been skeptical of tapping into restricted funds. Snyder's economic development chief said Wednesday Cotter's plan "severely limits the state's ability to have an economic development strategy moving forward."
"Furthermore, it threatens to eliminate the entire Pure Michigan tourism effort — an industry which supports 214,333 jobs in our state," Steve Arwood, chief executive officer of the Michigan Economic Development Corp., said in a statement.
Brad Williams, government affairs vice president for the Detroit Regional Chamber of Commerce, said efforts to raise the added road repair money from existing state funds "is in its essence a one-year solution" and not the long-term fix needed for the chronic shortfall.
"There is no guarantee a future Legislature will prioritize spending in the same manner," Williams said. "Our infrastructure requires a multidecade commitment to meet the expectations of job providers and citizens."
The Detroit business group wants taxes collected from road users — fuel taxes and vehicle registration fees — to fund road repairs, not revenues collected for other services that residents and the business community also demand, Williams said.
The additional aid for road and bridge repairs would be phased in before reaching the extra $1.05 billion a year in the fiscal year that begins Oct. 1, 2018.
Cotter said his plan would generate $522 million extra next year, $697 million in fiscal year 2017 and $872 million in fiscal year 2018.
Senate Majority Leader Arlan Meekhof, R-West Olive, considers Cotter's proposal "a good starting point," spokeswoman Amber McCann said.