Michigan Fails to Fund Roads, Again
By Paul Egan Detroit Free Press
Gov. Rick Snyder met Thursday with House and Senate leaders from both parties as they tried to pick up the pieces from another failed attempt to strike a long-term funding deal to repair Michigan's faltering roads and bridges.
The inability of state lawmakers to reach an agreement during Wednesday's session means legislative action to commit at least $1.2 billion a year more to repairing and maintaining highway infrastructure has been pushed back until after Labor Day.
Still, Snyder returned from a trip to the Upper Peninsula Thursday to hold an earlier scheduled meeting with Senate Majority Leader Arlan Meekhof, R-West Olive; Senate Minority Leader Jim Ananich, D-Flint; House Speaker Kevin Cotter, R-Mt. Pleasant, who participated by phone; and House Minority Leader Tim Greimel, D-Auburn Hills.
The governor and lawmakers said little after the 35-minute meeting, except that constructive talks are continuing.
"We're committed to finding a solution," said Meekhof.
Snyder, who has pushed hard for a road deal for more than three years, leaves Friday on a trade mission to China. He said Lt. Gov.Brian Calley, who also attended Thursday's closed-door meeting in the governor's ceremonial Capitol office, will lead road funding talks with the Legislature while he is away.
Although Republicans control the governor's office and both chambers of the Legislature, it has been impossible to pass a road funding plan because of resistance among a bloc of House Republicans to raise fuel taxes, registration fees or other taxes and fees that could fund the roads.
Democrats, recognizing the administration's need for some of their votes to pass a road-funding measure, have in the recent past used the opportunity for leverage to attempt to extract concessions such as tax relief for low-income earners, more money for K-12 education, or the blocking of what they see as anti-union measures in the Legislature.
Nonroad issues, such as the prevailing wage law, were again raised by House Democrats this week. But officials said Wednesday's failure was primarily due to a lack of consensus over the compromise formula that served as the framework for the discussions -- a plan to raise the $1.2 billion by approving $600 million in new revenues and taking the other $600 million from the general fund by changing spending priorities, which was expected to result in cuts to unspecified programs.
House Democrats especially -- but also the governor -- had concerns about the effect on the budget of dedicating $600 million a year to roads on an ongoing basis. And Meekhof and Senate Republicans signed off in July on a plan that would generate about $830 million in new revenue by 2017-18, thereby allowing an amount below $600 million to come from the general fund.
The $1.5-billion Senate plan, which does not have the support of House Republicans, would have increased the 19-cent-per-gallon tax on regular fuel and the 15-cent-per-gallon tax on diesel fuel to a tax of 34 cents for both, which would be indexed to inflation.
The $1.2-billion plan the House passed earlier this year included only about $100 million in new revenues, with most of that coming from equalizing the tax on regular and diesel fuel at 19 cents per gallon and indexing the tax to inflation.
Cotter, who was having no easy time getting his caucus to approve $600 million in new taxes, was resistant to seeing that number go higher.
"Gov. Snyder and I share a very serious concern about whether ($600 million) is sustainable over time, to actually fix the roads, and where those funds would come from," Greimel said Thursday.
"If we're going to use general fund dollars to fix the roads, we should identify now where those cuts could come from," he said. Instead, Cotter and House Republicans want to "kick that can down the road," he said.
Snyder, in a scrum with reporters Tuesday, declined to set a cap on how much general fund money he felt could be put toward roads on an ongoing basis, but he did not explicitly embrace the $600-million figure that has been frequently cited.
"We've put general fund money already towards a solution," Snyder said. "This year it's $400 million, but not all of that is ongoing money. There's about $140 million ongoing," so "there's a commitment of general fund dollars already that could be available."
After Thursday's meeting, Snyder said; "I'm not willing to have a solution for transportation that jeopardizes ... other good things we're doing."
Part of the concern is that despite healthy economic growth, Michigan faces severe pressures on its general fund, largely due to business tax cuts since 2011 and an unexpected surge in the redemption of corporate tax credits, mostly issued by prior administrations, which are costing the state hundreds of millions of dollars a year more than earlier anticipated.
The state budget is also facing a shortfall related to the Health Insurance Claims Assessment, a tax paid on certain health insurance claims that is now set at 0.75%. The administration has faced opposition from the House GOP over plans to increase it to 1.3%. The tax raised $220 million less than expected in 2015 and $140 million less than expected in 2016 and is set to disappear at the end of 2017 unless the Legislature acts to extend it. That issue also came up in road talks this week, according to three people close to the talks.
Cotter believes $600 million in general fund revenues can be dedicated to roads primarily as a result of growing tax revenues in an improving economy and without the need for the Legislature to necessarily cut programs, spokesman Gideo D'Assandro said Thursday.
Cotter said Wednesday the failure of the talks was due to too many demands unrelated to roads coming from House Democrats, such as a demand from Rep. Brian Banks, D-Detroit, who is chairman of the Detroit caucus, that a business-backed petition drive to repeal Michigan's prevailing wage law -- which requires payment of union wages and benefits on public projects -- be suspended.
"The people of Michigan spoke loud and clear when they rejected Proposal 1 by a record margin," said D'Assandro, referring to a May ballot proposal that would have increased the sales tax and fuel taxes to put about $1.3 billion more toward roads, but also would have put hundreds of millions more into schools, transit and the Earned Income Tax Credit for low-income working families.
"They want a simple plan that just fixes the roads without including a lot of spending on unrelated items and personal priorities," D'Assandro said Thursday. "After making significant concessions, we had an agreement in place, but some people demanded to bring unrelated items into the discussion at the last moment and sunk the deal."
Greimel confirmed his caucus is concerned about the possible repeal of prevailing wage. But he said that although "some of our members" had raised the issue in connection with the road talks, it was not an official caucus position.
Asked whether higher taxes on businesses was a Democratic condition for a road deal, Greimel said the talks had not advanced to the point of discussing specifics on where new road revenues would come from.
Though talks are continuing, it's not clear what can break the current impasse.
"I think it will be solved because we're going to get a little more creative," Rep. Klint Kesto, R-Commerce Township, said Thursday.
Staff writer Kathleen Gray contributed.
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