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Road Funding Package Signed by Governor

Aaron Keel

By Aaron Keel, MASB Assistant Director of Government Relations

DashBoard, Nov. 11, 2015

The House and Senate finally agreed on a process to increase funding for our roads, and it was signed into law by Gov. Rick Snyder yesterday. The plan includes annual use of $600 million from the state’s General Fund and $600 million in new revenues.

Fuel tax increases will make up $400 million of the new revenue. Beginning Jan. 1, 2017, the unleaded gas tax will be increased by 7.3 cents, bringing it up to 26.3 cents per gallon. The current 15-cent per gallon diesel fuel tax will also be increased to bring it to the same level. The remaining $200 million in new revenue will come from increasing vehicle registration fees by 20% beginning Jan. 1, 2017.

However, the plan also calls for a “lock box,” which sets aside the first $100 million of the fuel tax increase each year until the Legislature passes a Concurrent Resolution to approve the release of the funds at a later date. The Legislature is asking the Michigan Department of Transportation to look into ways to build higher quality roads that could last 50 years before opening the lock box.

The General Fund contribution to the plan will not be fully implemented until 2021. In FY 2019, the General Fund will dedicate $150 million, $325 million in FY 2020 and $600 million in FY 2021.

Finally, the plan calls for an expansion of the Homestead Property Tax Credit in 2018 and an income tax rollback beginning on Jan. 1, 2023, if General Fund growth exceeds a specified amount.

According to the Senate Fiscal Agency, the total plan will cut the state General Fund by $356 million in 2019, $531 million in 2020 and $806 million in 2021, all before the implementation of the income tax rollback begins in 2023.

“We are gravely concerned about the large amount of money coming from the General Fund with no indication on the exact origin of those cuts,” noted MASB Executive Director Don Wotruba. “Additionally, these funds will need to be appropriated every year so there is no guarantee that where they came from one year will be the same for the next. Particularly concerning  is that as pressures on the General Fund increase, more money could be used from the School Aid Fund for universities and community colleges.”

We do not see the plan passed last week as a long-term solution to the crisis facing our roads because it relies too heavily on the General Fund. This plan places our schools, our roads and our General Fund all in a precarious position that will not come to fruition until the current Legislature has been termed out of office. This issue will need to be addressed again in the future.

MASB will continue to monitor and report on how the General Fund monies are allotted. If you have any questions or concerns, please contact our Government Relations team at masbgov@masb.org or 517.327.5900.

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