Finley: Whitmer may drop road tax for bonds
Gov. Gretchen Whitmer is promising a new plan for funding highway repairs in Michigan when she delivers her State of the State address later this month, and speculation is that she will abandon a fuel tax hike in favor of borrowing the money needed for roads.
It's a safer play than the bold move Whitmer tried last year to fulfill her campaign pledge to “fix the damn roads.” Then, she asked for a 45-cent increase in the fuel tax to raise $2 billion for roads and $500 million for schools.
It never got off the ground. Leaders of the Republican-controlled House and Senate opposed the steep hike, preferring instead to fund a lesser road initiative with money taken from other areas of the General Fund.
Even House Democrats declared the 45-cent tax hike too extreme, and withheld their support. No bill to raise the fuel tax was ever introduced.
Getting a fuel tax hike approved will be even tougher this year, with House members facing elections in the fall. Public support for a sizable fuel tax increase still isn’t there.
Whitmer has in the past said if an increase in fuel taxes isn't possible, she would consider issuing bonds to fund road work.
“That's the alternative,” Whitmer said in an interview with The Detroit News during the 2018 campaign.
When asked how much debt she'd be willing for the state to take on, she answered, “$3 billion a year for 20 years, if that’s what it takes.”
Servicing such a debt load, she said then, would cost roughly $300 million a year.
I hear bonding is the route she’s now exploring. Issuing general obligation bonds would require a vote of the people, but may be easier to get approved than a tax hike, something state voters have only done once, in 1994, when they exchanged a property tax cut for a higher sales tax.
In her campaign proposal, Whitmer envisioned annual issues of revenue bonds, which are backed by a specific source of dollars — such as the fuel tax. That debt doesn't require voter approval, but it may still demand that lawmakers pass a fuel tax hike to service the bonds.
Former Gov. Jennifer Granholm issued revenue bonds to raise the funds needed to attract highway matching grants from the federal government.
“It’s a Lost Decade idea we should throw back in the trash can,” says Lansing-based economist Patrick Anderson. “It's not sustainable. We have a proven, reliable and fair method of funding roads, which is to charge gasoline taxes of people who actually use the roads.”
Issuing bonds instead of continuing to bang her head against a no-tax hike Legislature may be the most efficient path for Whitmer to take to raise the massive amount of money necessary to make Michigan's roads right.
But it’s the same path that got us into this mess. For decades, Michigan punted its obligation to maintain its infrastructure for the long-term, choosing instead to use the money to make other problems go away.
Fixing today's roads with debt that will have to be repaid by tomorrow's taxpayers is just another way to shirk our responsibility to the future.
Catch Nolan Finley on “One Detroit” at 7:30 p.m. Thursdays on Detroit Public Television.