LANSING – Senate Majority Leader Arlan Meekhof was very mild in his reaction to the road funding proposal passed by the House Wednesday night, largely saying he is grateful the House sent something over. But Senate Minority Leader Jim Ananich had more serious concerns.
“I think it’s a pretty major step backwards. I think it doesn’t address the issues we’ve been raising from the beginning. It’s not financially responsible for the long-run. It doesn’t fix roads,” Ananich (D-Flint) said after session Thursday. “I’m going to continue to try to work with Leader Meekhof and the governor and hope we can get back to the table. We were so close to a real solution. There’s no reason to pass a gimmick in order to say ‘well we’re done with it,’ and I think that’s what the House did yesterday. ”
The House passed late Wednesday a road funding plan primarily with Republican-only support (Rep. Harvey Santana (D-Detroit) was the only Democrat to join in yes votes on many components of the package) that involves $600 million in new revenue through a gas tax increase and registration fees, and $600 million from existing sources. An income tax rollback and an expansion of the Homestead Property Tax were also included (See Gongwer Michigan Report, October 21, 2015).
Specifically, HB 4370 earmarks a portion of the income tax revenue to roads; HB 4736 increases passenger and truck vehicle registration fees; HB 4370 increases the Homestead Property Tax Credit;HB 4738 increases the gas tax by 3.3 cents per gallon and increases the diesel fuel tax by 7.3 cents per gallon; and SB 414, earlier passed by the Senate, is the income tax rollback bill that provides for a rollback when General Fund growth exceeds the rate of inflation.
Initially, one of the many criticisms of the plan, especially from House Democrats, is that while the plan intends to provide the $1.2 billion pegged as necessary to keep the state’s current roads from deterioration, it doesn’t do so until fiscal year 2020-21.
Ananich on Thursday criticized that aspect too, as well as the lack of specifics on where the $600 million in existing revenue would come from.
“By 2021, there will be hardly any House members left, so when they can’t find the $600 million in cuts so then they’ll address it then. I don’t feel that’s a real solution to the problem,” he said. “We were really close to finding a solution that was long-term, stable, going to grow … this is another attempt to look like you’re fixing the roads and actually not doing it.”
Indeed, most of the Senate will be term-limited in the 2018 election, as will the governorship, and a House member would have to have been freshly elected for this term (and not in a special election) to be serving past 2018, assuming they stay the full three, two-year terms in the House.
And the tax relief component of the package only compounds the problem, Mr. Ananich said.
“When you’re looking at $600 million potentially, if they ever can find it … plus the over $100 million next year in (Health Insurance Claims Act assessment) problems that compounds as it goes on, you’re looking at about $1 billion from the General Fund in about three years,” he said. “Plus pretty drastic tax cut. I think you’re causing a bigger problem than actually fixing one.”
Asked if he thought the final solution to road funding would end up being a Republican-only plan, Ananich said if the final proposal looks like what came over from the House Wednesday night, then “I would encourage my colleagues to make it a Republican-only plan.”
But Meekhof (R-West Olive) was more optimistic about the proposal, noting very few concerns at all.
“There’s a couple things here or there that we found that were maybe a little bit hurried or rushed, and I don’t know, my caucus needs to look at some of the details,” he said. “It weighs heavily on registration fees and some of ours kind of weighed on the gas tax, so some opportunities to look at things here, but I’m just really grateful they sent something over.”
The Senate plan, passed in July (See Gongwer Michigan Report, July 1, 2015), increased the gas tax by 15 cents over time, with a sunset – a stark difference from the 3.3 cents cleared in the House – and creates parity with how the state taxes diesel fuel. It included warranties on certain projects and cut allowable Department of Transportation administrative costs as well.
The Senate plan had also created a special internal task force to create comprehensive public report evaluating the cost of construction the use of certain materials, among other things, to be reported to the Legislature. And it created a 50-year roads lock box fund within the Department of Treasury where 7 cents of the 15-cent increase is deposited and can only be released with legislative approval for higher quality, longer-lasting roads.
Asked if he thought the House’s proposal on registration fees weighed too heavily on lower-income earners, Meekhof said not so much, given those are user fees and some of that had been in the Senate plan as well, “just not to the extent they had,” he said. “There’s a mix of it there, I just don’t know where we’re going to end up.”
And Meekhof said he wasn’t too concerned about the $600 million General Fund shift given the Senate plan had proposed even more than that.
“I think we believe we can be better with the dollars people send us,” he said.
As to whether the House proposal provided enough money fast enough, Mr. Meekhof was unsure, noting that the Legislature had put “a bunch of money” in the 2017 budget already ($358 million specifically, he said). And the House plan is new, Meekhof said, needing further review.
And he simply said, “I don’t know,” when asked if the House proposal would serve as the basis for a new compromise.
When asked if the plan was fiscally responsible, Meekhof said, “I haven’t taken out my spreadsheets, so I haven’t delved into it that far. I think most people including myself and my caucus think government can do with less, and if it means taking it from existing funds and finding a way to do that and tightening our belts so we do the number one priority of people that we’ve heard from around the state, then we should do that.”
And he did not say whether the registration fee increases were too steep.
“We’re considering the plan they sent over in total and some of the things maybe we think are important, but great first step,” Meekhof said.
Senate Appropriations Committee Chair Sen. Dave Hildenbrand (R-Lowell) said the six-year phase-in from the House would “definitely be challenging, but I believe it’s doable,” noting the key to making that work is getting all of his budget people and the administration in the room to look at the big picture.
“You always hear legislators taking political shots about ‘we’re going to cut education’ or ‘we’re going to cut health care.’ Well they’re throwing out the things that resonate most with people. That’s not how this would work,” Hildenbrand said. “We would get in a room and sort out the $54.5 billion to find where we can make the reductions to invest this money into roads that would have the least impact on people.”
Since general income tax revenue doesn’t go to schools, Hildenbrand said School Aid Fund money could go to higher education to free up General Fund, or other ways to accomplish the same goal, but that money would certainly have to be moved around.
Asked whether that would in turn mean less money goes to schools over time, he said school funding is a priority to him and “that’s not the first place I would go.” But he said he could not throw out hypothetical reductions or cuts until a final plan is passed by the Legislature and signed by the governor.
And he denied the House plan was dumping the problem with road funding in someone else’s lap.
“I would say it’s a long-term plan. When we’re gone, the new legislators will have to look at what we did and they can make changes. If it doesn’t work, they can raise more revenue if that’s the will of the House and Senate and the new governor at that time,” Hildenbrand said. “But all we can do is set our long-term goal and hope that if it continues to work when we’re gone, they will continue it. But we just have to see how that plays out.”
Still, he would not go so far as to say he supported the proposal.
“I’ve been critical of raising revenue. I do want to continue to find unique was to put existing revenue into roads. I strongly supported the $400 million we put in this year, and as the economy continues to get better and there’s more revenue, I don’t see a problem,” he said. “I believe our infrastructure is a public good for everybody in this state, so I don’t always see it as just the user fee benefit.”
Such a large reliance on the General Fund is not a long-term, stable source of revenue, Hildenbrand said, but the amount of money the Legislature has so far dedicated to roads “isn’t something to sneeze at” either.
“It won’t be easy, but it’s doable,” he said of the impact to the General Fund, agreeing that the proposal is further complicated by growing pressures on the General Fund such as the HICA tax shortfall and Medicaid expansion.
As to how soon he would get his budgetary leaders together to discuss this proposal, Hildenbrand said he would wait to cross that bridge until a final proposal has been signed by the governor.
“We haven’t talked about this specifically because it’s not through the Legislature and signed into law yet, but when it is, we’ll immediately get to work on how to implement it,” he said.
The bills must layover in the Senate for five days, so the soonest the chamber could move on them would be next Tuesday, but Meekhof did not indicate whether that would be his plan.
This story was published by Gongwer News Service. To subscribe, click on www.gongwer.com
