Michigan House passes $1.2B road funding plan
Lansing — The Michigan House rolled out and narrowly approved a roads funding plan Wednesday night that combines higher fuel taxes and vehicle registration fees with a shift in state funds.
The Republican-controlled House voted along party lines after road-funding talks among legislative leaders and Gov. Rick Snyder broke down last week. The governor said he has “some concerns” with the new legislation.
The nine-bill package now goes to the Senate, where Majority Leader Arlan Meekhof welcomed the House action but was noncomittal about its prospects there.
The bills would raise $1.2 billion a year to bring repair funding up to the level transportation officials say is needed to halt the state’s road condition decline, but not until the 2020-21 fiscal year.
The plan calls for $600 million in new revenue from fuel tax and registration fee hikes and $600 million that would be earmarked in the state’s General Fund budget for road repairs annually.
Its General Fund dollars could come from expected annual state revenue increases, but might have to be shifted from other purposes in years when revenue increases are insufficient.
The plan would raise $400 million when it started in the 2017 budget year but could boost funding by even more than $1.2 billion after 2021 because of a built-in inflation factor allowing automatic fuel tax increases.
The 19-cents-a-gallon state gasoline tax would be increased by 3.3 cents in 2018. The 15-cent diesel tax would rise by 7.3 cents in 2017.
License plate fees would increase by 40 percent starting in October 2016.
“It hits all the key points the Senate said it wanted in a plan,” said Gideon D’Assandro, spokesman for House Speaker Kevin Cotter, R-Mount Pleasant. He added that it gets House Republicans “out of our comfort zone” because many have opposed tax increases.
Following passage, Cotter defended the plan against Democratic criticism, saying it reaches a reasonable middle ground.
“We literally had people at all ends,” he said. “We had people who said this had to happen with no new taxes. We had people who said it had to happen with all new taxes. What we ultimately did . . . (is) said this is the time for a grand compromise.”
But Democratic leader Tim Greimel of Auburn Hills called it a potentially a budget-busting plan with risky income tax rollback provisions and a too-meager increase in roads funds that would be fully realized too far in the future.
Provisions of the plan include:
■ A 40-percent across-the board registration fee increase, boosting the annual cost per vehicle to $140, up from $100 on average now. There would also be a surcharge on electric vehicle registrations.
■A 4-cent diesel fuel tax increase to 19 cents a gallon in fiscal 2018 and to 22.3 cents a gallon in fiscal 2019; 3.3-cent gasoline tax boost to 22.3 cents a gallon in fiscal 2019.
■Phased increases in the income tax deductible Homestead income tax credit, including the level of income allowed before it starts to phase out, beginning in 2017. The phase-out income range, now $41,000 to $50,000, would be boosted to $51,000 to $60,000 in 2018 and beyond.
■Automatic annual fuel tax increases keyed to the inflation rate, but limited to a maximum of 5 percent.
“I am happy the House sent over an idea for the Senate to consider,” said Meekhof, R-West Olive. “I look forward to talking with the governor and legislative leaders about the proposal ... The next step is for my fellow caucus members and I to review the details.”
It might be a challenge for Snyder to accept. He has opposed relying on more than $400 million in General Fund revenue, saying higher amounts could be risky and force cuts in other mjaor programs.
In a statement late Wednesday, Sara Wurfel, a spokeswoman for Snyder, said passage “represents forward progress and that's a good thing.”
The governor “will want to talk and work with the chambers and leaders” in the “next steps to fixing our roads and ensuring a solution is fiscally responsible and viable, and doesn't inadvertently jeopardize the state's comeback.”
The organization Business Leaders for Michigan, a group representing 80 of the state's leading corporations, blasted the plan as “fiscally irresponsible.”
“Rather than relying primarily on fees paid by the users of our roads and bridges, the House plan would require that half of the $1.2 billion provided to fix our roads will come from existing General Fund dollars,” the group said a statement.
“The state General Fund has not grown in real terms since 1999. Redirecting $600 million from the General Fund to roads means fewer dollars would be available to make college more affordable, train Michigan workers and incent job creation.”
Republican Rep. Jeff Farrington of Utica, citing the tax-relief provisions, said the proposal ends Michigan’s embarrassingly long wrangle over infrastructure investment.
“Today we vote for investing in our future,” Farrington said. “Today we vote for ending the political gamesmanship . . . that has been evident in recent years.”
But Democrats hit the proposals as too little, too late and a lurking “tax bomb” with its open-ended potential for income tax reductions they said would particularly benefit the wealthy. They said the fuel tax and registration fee hikes would hit low-income residents hard while they’d get scant relief through the proposed homestead exemption increase.
Rep. Henry Yanez, D-Sterling Heights, called it a “mini-Proposal 1” referring to the complex plan voters overwhelmingly rejected in a special election May 5.
The House plan comes as a response to calls from Senate GOP and Democratic leaders who had been pushing for convening a House-Senate conference committee to hash out differences after road funding talks, which included Snyder, broke down a week ago.
Road funding talks broke when Snyder said negotiations reached an impasse on the issue of tax reductions, which would be attached to a comprehensive package that would include a fuel tax hike and a shift in state spending priorities.
Senate and House Republican and Democratic leaders had been meeting with the GOP governor in road funding talks during the summer and fall.
Staff Writer Mark Hicks contributed to this report.