Opinion: Road funding needs fundamental fix

Eric Lupher
Then gubernatorial candidate Gretchen Whitmer fills a pothole during a campaign event Aug. 6. in Southfield.

Last summer and fall, then-candidate for governor Gretchen Whitmer made one pledge repeatedly – to “fix the damn roads.” It caught on as a catchphrase, and surely was a factor in propelling her to nearly a 9-point victory in November.

Keeping the promise, however, won’t be easy.

Gov. Whitmer has inherited a problem many years in the making, the result of years of deferring maintenance on highway and bridge infrastructure. Michigan’s decade-long single-state recession, followed by one the whole country endured, took a serious toll on residents’ pocketbooks and gave lawmakers pause over raising taxes to address state needs. Despite an improved economic picture, we’re reminded of what we neglected with every teeth-rattling mile.

The Citizens Research Council recently issued a report on funding possibilities for this vital chore. Now that our state finances afford us a little breathing room, it’s important that we don’t neglect vital infrastructure any longer.

Every Michigander who’s driven or ridden in a car knows the dismal condition of the state’s pavement infrastructure. Each spring, repair shops fill with drivers who’ve had tires flattened, wheel rims bent or even worse damage from gaping potholes that come with winter’s retreat. Last month, a stretch of I-75 in Oakland County had to be closed for emergency repairs, after about a dozen cars were disabled by flat tires. Our crumbling roads affect not only our national reputation, but our economic development and even our safety.

To give an idea of the challenge ahead, consider this: A little over two years ago, Gov. Rick Snyder convened the 21st Century Infrastructure Commission, and charged members with assessing and making recommendations for Michigan’s water, transportation, energy and communications infrastructure. In its report, the commission estimated the amount of new funding needed to bring most roads up to at least fair condition at $2.2 billion. The Senate Fiscal Agency estimates it could be even more.

A 2015 increase in fuel and vehicle registration taxes along with repurposing existing state funds, designed to generate $1.2 billion per year, is starting to pay off, but won’t be fully distributed until 2021. That amount was not going to be sufficient when it was set as the target and roads have continued to deteriorate during the prolonged phase in period.

Major policy action is necessary if the goal is to find the funds to fix state, county, and municipal roads. Here’s how we might go about raising it.

State government has, broadly speaking, three avenues to raise the necessary money – increase existing taxes and dedicate that new revenue to road repair; divert funds going to other programs and services; or borrow outright. All three have pros and cons, and none are an easy solution.

First, we’d recommend separating sales taxes from fuel purchases. Michigan is in a minority of states that charge sales tax on fuel. While our gas tax rate is competitive with peer states, applying sales tax to motor fuels makes the overall tax paid on a gallon of gas relatively high. And sales taxes don’t go to road repair. Those revenues fund schools and local governments with nothing going to highway investment. Taking fuel out of the sales tax base and replacing that levy with an equivalent gas tax would raise nearly $900 million a year. A good start, yes. But still short.

Let’s remember that taking fuel out of the sales-tax revenue pool would create shortfalls in funding education and local governments. Note what we said above: Not easy. The hole-patching will not just be in pavement, but in those budgets, too. It will require skillful policy work from both the governor and legislature. Their pledge to cooperate will be tested.

Where to find the rest? Casual observers of state government might suggest trimming other expenditures. They may not realize the state’s budget contains far less room for discretionary spending than they think, due to Michigan’s reliance on earmarking – splitting revenue into dedicated streams for education, Medicaid, local governments, etc. While this is useful to protect these vital government services from shifting political winds, it effectively walls them off in times like these, too.

As we explained in 2015, nearly two-thirds of the state’s General Fund is spoken for, either via constitutional provisions or by statute. This avenue should be explored, but diverting funds without causing pain to other state functions will not be easy.

Let’s not create more problems in addressing the pothole one.

How about borrowing? This is a possibility, but carries obvious caution: Borrowed money must be paid back with interest, so we’d end up spending tax dollars on something other than asphalt. And even well-built roads don’t last forever; we could find ourselves still paying for the last repair the next time they fall apart.

This is not to say bonding shouldn’t be considered. It is a useful tool for major projects such as the current I-75 rebuild in Oakland County. But the amounts needed simply don’t make it a realistic option to cover much of that billion-plus price tag.

Finally, we must point out that the road care apparatus and the way Michigan gets funding to the road agencies leaves much to be desired.

State road taxes are the primary funding source for more than 600 state and local road agencies all over Michigan, from Iron Mountain to Monroe. That is probably 500 more than we need. By statute, distribution of those funds treats a mile of two-lane road the same as a four-lane road, without consideration of traffic volume, the type and weight of the vehicles on individual roads or, most importantly, the condition of all these thoroughfares. This law has been in place for nearly 70 years, and has not undergone the full tune-up it needs given changes in technology, road use and shifting demographics.

Did we mention that changing the various funding formulas contained in it creates winners and losers among road agencies across the state? That’s something policymakers rarely have an appetite for.

The influx of new funding is the ideal opportunity to address the formulas. New funds can be directed to reflect need without taking away from jurisdictions with less need. If this statute isn’t changed, amended or sidestepped somehow, we’ll continue to misuse our scarce road-funding dollars, at a time when we need every last nickel for the crisis at hand.

Gov. Whitmer’s first budget proposal begins the discussion of how to pay for road fixes. Our research can illuminate the road ahead, which, like most in Michigan, is likely to be bumpy.

Eric Lupher is president of the Citizens Research Council of Michigan.