LANSING – Governor Rick Snyder had said he would leave it up to the Legislature to decide how to pay for the added $1.2 billion, but as part of his budget proposal Thursday, he proposed a 33-cent per gallon fuel tax and specific registration increases to the mix of revenue sources.
The proposal would average $120 per year per vehicle to bring in the additional funds that Snyder and Transportation Director Kirk Steudle say are needed to bring the state’s roads into good condition.
The proposed budget, $4.57 billion, would be a 33 percent increase in ongoing funding for the department, though a 32 percent increase overall because some General Fund used for the current fiscal year is not continued. With the General Fund from the current year proposed to be eliminated, the department is again entirely funded with state transportation taxes and federal funds.
The increase would come from increasing the fuel tax to 33 cents per gallon, for both gasoline and diesel. That would mean 14 cents more per gallon for gasoline and 18 cents more for diesel. The proposal is equivalent to the administration’s prior proposal of a percentage tax on the wholesale price, but Steudle said the change was designed to make it easier for motorists to understand.
And he said they might not see fuel increase to exactly that 33-cent level, because the tax is added at the wholesale level and some wholesalers might absorb that cost to maintain a competitive advantage.
The part motorists will see is the registration fee increase: 60 percent on cars and light trucks and 25 percent on heavy trucks.
Under the plan, the new fuel tax would remain at 33 cents for two fiscal years, then be indexed to inflation, though capped at 5 percent annual increases.
Legislators appeared hesitant to support essentially doubling the fuel tax and substantially increasing the registration fee.
Rep. Greg MacMaster (R-Kewadin) asked the administration to allow the Legislature to first look for savings before imposing any revenue increases. “We can come up with half a million, maybe three quarters of a million,” he said.
Steudle said he would welcome any efforts to find efficiencies the department has not already located, but he noted after the budget presentation that the department has already found substantially more savings than MacMaster proposed.
“We in the last two years have generated $152 million in savings that we have pumped back into (road projects),” he said.
And Steudle said the goal of the proposal was to solve the state’s funding problem long-term, rather than, as has been the case the last several years, scrounging enough money to match federal grant funds.
“We’re talking about a holistic approach,” he said. “This is about more than meeting the federal aid.”
Sen. John Pappageorge (R-Troy), chair of the Senate Appropriations Transportation Subcommittee, urged the administration to support legislation (SB 6 ) that would dedicate sales taxes collected on fuels for transportation projects. The plan, he said, would generate $120 million for roads and would also provide funds for the dredging projects Snyder has proposed.
Budget Director John Nixon agreed that the sales tax on fuels should go to transportation projects, but said the change would mean having to find $120 million in cuts through the rest of the budget to pay for the shift.
“You can’t just pass the bill,” he said.
Sen. Roger Kahn (R-Saginaw Township), chair of the Senate Appropriations Committee, said the plan was a starting point for discussions.
“Mine are a little different than his, but his are OK,” Kahn said of proposals to raise transportation revenue. “This is a sausage-making process so we’ll see how much of it ends up his way, the speaker’s way or the Senate majority leader’s way or mine. I’m agnostic. I just would like to see us have enough money so that my chief of staff who drove in yesterday, the guy in front of her hit a pothole, kicked up some concrete and broke her windshield in her car.”
That the budget included spending based on the revenue increase was heartening to transportation groups.
“At least the administration is taking this issue seriously,” said John Niemela, executive director of the County Road Association of Michigan. “It sends a message to the Legislature that something actually has to happen.”
Mike Nystrom, executive vice president of the Michigan Infrastructure and Transportation Association, said Mr. Snyder’s leadership on the issue would make the difference between this and prior attempts to increase the fuel tax.
“When you have this type of leadership, people tend to start to believe in the message,” he said.
But he said legislators and residents also are seeing the need. “The need is to the point where we need to do something now,” he said.
Jonathan Byrd with the Michigan Laborers also said it was important for the Legislature to adopt Snyder’s proposal, or something close to it. “It’s time for our elected leaders to start working together to fix our crumbling roads and create good middle-class construction jobs,” he said in a statement. “With a skilled, trained workforce made possible by state prevailing wage laws at no cost to the taxpayer, our members are ready to get … started. Now the Legislature needs to step up and take action by passing a budget that makes road funding a top priority.”
Steudle said in his recent discussions with legislators, they have universally seen the need to perform more road work.
Niemela and Nystrom both saw the local registration fee included in the package as a good option, but not one that all counties would adopt.
“If they want to add another tool to the tool box, we’re encouraged by that,” Niemela said, though he said counties also have the option to request property tax increases to provide road funding as well.
In addition to adding funds, the budget proposal restructures the department’s various funding sources. The Michigan Transportation Fund would provide each road agency with essentially what it had for the current fiscal year. The Recreation Improvement Fund, Comprehensive Transportation Fund and Basic Industry Logistics Transportation Fund (which replaces the Transportation Economic Development Fund) would also largely be held at current year funding.
The remaining funds would pass through the Commercial Corridor Fund, the distribution formula for which is still under development.
The Comprehensive Transportation Fund would see a $113.9 million increase, providing a total of $211.7 million for transit operations, $89.9 million for transit development and $63.6 million for rail programs.
The budget does not provide the aviation fuel tax increase that program has been requesting for some time, but it does triple the registration fee to 3 cents per pound, generating $540,000,
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