Analysis: Political Reality May Flatten Snyder’s Tires
Friday, February 15, 2013
Let’s just say that when Gov. Rick Snyder made his most robust case yet for boosting the annual budget for fixing Michigan’s highways last week, no one on the Senate or House Appropriations committees asked what might be the most appropriate question:
“Why only $1.2 billion?”
Actually, a plan that raises the gas tax and registration fees by that amount and then departs from existing transportation funding formulas — so that the state receives nearly 100 percent of the new money instead of 39.1 percent — represents a big increase for the state’s road system.
It’s so significant that under P.A. 51, the statutory formula that directs the proceeds from state transportation revenue, Snyder’s proposed increase for state-managed roads in the package, more than $900 million, would require a tax increase of about $2.3 billion to account for the 39.1 percent of Michigan Transportation Fund revenue that counties are due by law and the 21.8 percent cities receive. But there aren’t the votes for $2.3 billion and besides, the locals aren’t complaining. The problem is that there may not be the votes for $1.2 billion either.
Snyder’s proposal for the first increase in transportation funding in 16 years is being challenged by the imperatives of base politics and 2014 state elections. There are many more reasons to oppose than embrace it. That on the eve of his presumed re-election campaign Snyder wants to run his first-term tax increase tab up to $3 billion — factoring in the 2011 income tax changes – suggests the governor believes the political payoff of a rebuilding economy is worth the risks.
But self-interested legislators apparently believe the bar charts of doom that Michigan Department of Transportation Director Kirk Steudle serves up in committee meetings don’t apply to them. Thanks to the magic of term limits, they’ll be out of office when the condition of the state trunkline system really goes south. It’s perhaps no accident that the gas tax was last raised, in 1997, the year before term limits began brooming veteran lawmakers out the door.
After Snyder made his budget presentation, Republicans suggested to Budget Director John Nixon that he could find as much as $750 million for road funding by rooting around the general fund for cash the administration apparently is wasting on less essential stuff. Nixon replied that, no, that probably wasn’t going to be possible.
House Democrats, who used to be OK with raising taxes, but oppose them now that a Republican governor they perceive to be vulnerable is pushing the idea, took a page out of the GOP’s messaging playbook.
Snyder’s 60-percent increase in annual vehicle registration fees, they helpfully contributed, is a “birthday tax.”
Perhaps with sabotage in mind, House Republicans prefaced Snyder’s sales effort with the introduction of prevailing wage legislation hated by construction union leaders who are critical supporters of higher transportation fees.
It’s fair to say there are Republicans who will never vote for revenue absent the savings they contend prevailing wage repeal would produce. And there are Democrats inclined to back more revenue, but won’t if they believe the GOP isn’t finished smacking around organized labor — Snyder’s disavowals notwithstanding.
Snyder counting on comparisons to win debate
While there are plenty of reasons to oppose Snyder’s plan, one policy objection is that it raises too little money given how often the opportunity comes around. The one lawmaker voicing that concern is Sen. Roger Kahn, R-Saginaw Township and chairman of the Senate Appropriations Committee, who wants to raise $1.6 billion and might have reasonably expected Snyder’s starting number to be higher than his, not $400 million lower.
The worry among advocates now is that the final number, if there is one put up for a vote, will be considerably less than $1 billion.
The particulars of how Snyder suggests the money be raised makes sense. More is generated from increasing fuel taxes than registration fees, which would be only a little more than Michigan’s Great Lakes neighbors. But in generating an estimated $728 million in fuel tax revenue, Michigan’s effective per-gallon levy, including sales tax, would exceed 50 cents. That is far higher than the other states, including Illinois and Indiana, which also apply a sales tax at the pump.
However, those states, Ohio and Minnesota also collected more than $1.4 billion in toll revenue in fiscal 2010, according to MDOT’s figures. That averages out to more than $360 million per state. In Michigan that represents about 8 cents of gas tax; Snyder’s asking for 14. Toll revenue in Michigan, restricted to upkeep of the Mackinac and Blue Water bridges, totaled only $39 million that year.
More important than comparisons with our neighbors, which aren’t peninsulas by the way, is whether a Michigan defined by its metropolitan regions will continue to be regarded as a state in decline. Or whether it’s seen as a state that has committed itself to reinvestment. That’s the choice for the Legislature and the window of opportunity to make the correct choice closes with the budget wrap-up in June.
Given the rise in gas prices with the summer driving season, the window is probably more narrow than that. A dip in prices below $3.25 in the next 10 weeks should trigger immediate action.
If the previous administration and lawmakers had simply switched over to a percentage-based fuel tax in the lame duck legislative session of 2008, when gas was under $2 a gallon, the current shortfall would now be much less. And if lawmakers in both parties can’t cobble together simple majorities for a revenue package offered up by a Republican governor that’s the minimum required, but probably the maximum attainable, the problem’s only going to get a lot bigger.
Snyder isn’t the first to make a public, objective case for basic investment in infrastructure, but he is the highest ranking official to take the lead on it. That merits something. Certainly more than ideological rigidity or political posturing.