Snyder: Road fund talks hit dead end

Chad Livengood, and Gary Heinlein

Lansing — Gov. Rick Snyder and legislative leaders declared an impasse Tuesday on how to raise an additional $1.2 billion annually to improve Michigan roads despite months of talks.

Republican House Speaker Kevin Cotter of Mount Pleasant said a key sticking point in negotiations was offsetting hikes in the 19-cents-a-gallon state gasoline tax and vehicle registration fees with a broader tax cut.

Some Republicans lawmakers have been pushing for reducing Michigan’s 4.25 percent income tax rate to 3.9 percent — the previous rate before the Legislature increased individual tax bills in 2007 to balance the state budget during the economic recession.

But Snyder has not been so enamored with pursuing a tax cut because of uncertainty over the rising cost of the Medicaid insurance program for the poor and how much the state will have to shell out in tax credits owed to businesses.

Snyder declined to specify Tuesday why a deal remained elusive but said “it’s fair to say people have different perspectives on what tax relief might look like.”

The Republican governor, who has pushed for increased fuel taxes and vehicle registration fees to boost stagnant state transportation spending, told reporters after a private meeting with House and Senate leaders that he would schedule no further talks “unless I see progress.”

“I tried to remind people when you do compromise, hopefully there’s a lot of things you like. But obviously when you have the differences in political perspectives, you’re going to have some parts of the package you probably don’t like very much,” Snyder said. “Part of it’s saying this is a win for all of us so let’s move forward.”

Rep. Jeff Farrington, R-Utica, criticized fellow Republicans for pursuing tax relief and Democrats for trying to entangle a debate over repealing the prevailing wage for public construction projects with the need for more money for roads.

“It shouldn’t be about tax relief. It shouldn’t be about prevailing wage,” Farrington said. “The people of Michigan are demanding better roads. We’ve got a job to do, and we better start doing it.”

House Democrats have been pushing for targeted tax relief — an array of income tax credits for higher education, child care and home ownership to senior citizens and working-class families in Michigan at a price tag of $1 billion.

But Democrats have opposed an across-the-board tax rate reduction for all workers, arguing the rich would benefit most from shaving off the income tax rate by a third of a percentage point.

“I’m not going to support any approach that jeopardizes funding for public safety, education and health care just because Republicans want to add in a tax cut that will disproportionately benefit the wealthy and well-connected in this state,” House Minority Leader Tim Greimel, D-Auburn Hills, told The Detroit News.

Lobbyists split on impact

The road construction industry’s top lobbyist downplayed the significance of the impasse — the latest setback in Snyder’s three-year effort to boost the state’s stagnant transportation funding revenues.

“This is just a hiccup in the process,” said Mike Nystrom, executive vice president of the Michigan Infrastructure & Transportation Association. “I don’t get too hung up on these things on a Tuesday in Lansing.”

Nystrom said the Legislature’s Republican and Democratic leaders know the public’s patience about the state’s crumbling roads is wearing thin.

“That pressure in and of itself brings them all back together,” he said.

Denise Donohue, executive director of the County Roads Association of Michigan, called Snyder’s statement “kind of a jolt” but tried to remain optimistic.

“We all know the legislative process has its ups and downs,” Donohue said.

Donohue said the heads of county roads agencies are nervously anticipating the approach of what the Farmer’s Almanac forecasts will be a snowy winter — whose added plowing, salting and overtime costs will further challenge their strained budgets.

The breakdown in road funding negotiations comes more than five months after Michigan voters resoundingly rejected a 1-percentage-point increase in the state’s 6 percent sales tax by a 4-to-1 ratio.

While voters rejected the complex roads funding plan, Donahue said, they expect lawmakers to come up with an alternate solution.

“The public has called for Plan B,” she said, “and the people are waiting.”

House Republicans in June passed a plan that would largely cut or shift spending. The $700 million would come from projected extra state revenues in the years ahead along with money switched from a jobs fund and the elimination of an income tax credit for low-income earners.

In July, the Senate voted to increase both the state gas tax and 15-cent diesel tax to 34 cents and dedicate income tax revenue to roads while triggering income tax cuts if revenues rise by more than inflation. The $1.4 billion plan required a rare tie-breaking vote by Lt. Gov. Brian Calley.

Those differences led to summer-long talks the governor says now are at loggerheads. Snyder and legislative leaders recently discussed an unspecified $800 million increase in fuel taxes and vehicle fees and a shift of $400 million from other spending.

Senate Majority Leader Arlan Meekhof said his chamber remains committed to finding a solution.

“I am disappointed that months of discussion and progress at the leadership level have stalled, but a standstill at the leadership level is not an indication of unwillingness on the part of the Senate,” the West Olive Republican said.

In exchange for votes on a tax increase, some Democrats have been demanding the Republican majority not take action later this fall on a citizens’ initiative to end union-level prevailing wages for public construction projects.

“I’m not going to support anything until we get prevailing wage off the table,” said Rep. Marilyn Lane, D-Fraser. “Let it go to the (November 2016) ballot.”

Lawmakers exasperated

Republican Sen. Patrick Colbeck of Canton Township, who opposes any tax increases for road repairs, said lawmakers should commit to a plan that dedicates $700 million from the state’s General Fund budget.

“If people are looking for common ground on this, then let’s focus on what we do agree on,” said Colbeck, who has argued for a combination of budget adjustments and longer-lasting repairs.

Snyder has argued against dedicating the $700 million in general funding by saying it puts at risk funding for other key government programs. The governor has signaled he’s more comfortable with redirecting $300 million in general fund spending to the roads.

Other lawmakers were exasperated by the impasse, which comes after weeks of Snyder and legislative leaders saying they were making progress.

“An inability to get to an agreement on road funding at this point is unbelievable,” said Rep. Harvey Santana, a Detroit Democrat. “It’s just embarrassing at this point.”

“People are really starting to look at this Legislature in a negative way because of this issue,” Santana added.

The Associated Press contributed.