In his recent special message delivered to Michigan citizens and the Michigan Legislature, Governor Snyder calls for changes to Public Act 51 of 1951 (commonly referred to as PA 51), the law that governs the distribution of nearly $900 million in annual state transportation tax receipts among local road agencies.  The Governor recommends a number of changes that are aimed at improving the efficiency and effectiveness of the transportation revenue distribution system.  One suggestion involves targeting highway and bridge investments at those assets that experience the greatest use.

CRC examined how to improve the efficiency of the highway revenue sharing program in a 1997 publication (www.crcmich.org/PUBLICAT/1990s/1997/rpt321.pdf) and again in 2008 (www.crcmich.org/PUBLICAT/2000s/2008/memo1085.pdf).  These publications highlight CRC’s analysis that discussions about increasing transportation investment (which the Governor also recommends) should be teamed with changes to PA 51 that will ensure the most efficient use of limited resources each year.

Despite considerable changes in the use of Michigan’s highway system over the last 60 years, there have been very few substantive modifications to the PA 51 statutory allocation of state-raised revenues among the county and municipal road agencies.  As a result, the system of distributing state tax revenues to local road agencies is unable to address highway needs across Michigan in the most efficient manner.  A critical flaw of the system is that in order to get dollars to the areas with the greatest need and with the most travel, a significant level of resources has to be sent to areas of the state where roads experience less travel and do not exhibit as high a need.  As a result, the state has some roads in terrific condition that get very little traffic and some very horrible roads that receive a massive amount of traffic.

CRC suggests using metrics such as vehicle miles traveled or commercial traffic on each road as opposed to, or in tandem with, the current factors (population, lane miles, and revenue collection) to improve the revenue sharing program.  The use of these alternative factors would ensure that dollars more closely follow highway use and need.

Making PA 51 formula changes at the same time that additional resources are being provided to the entire system (the Governor recommends up to an additional $1.4 billion annually) would mitigate the negative fiscal effects that individual recipients might experience when the revenue sharing formula is modified alone.  In the absence of these additional resources, formula changes would likely result in “winners” and “losers” among the various road agencies.  The Governor’s proposal recognizes the potential deleterious effects to some entities and suggests a seven-year phase-in of a new formula. 

Ultimately, it is policymakers’ responsibility to ensure that the “winners” from any PA 51 reform will be the motoring public and the business firms that rely on the transportation infrastructure to move people to jobs and goods to market.  Distributing state transportation tax dollars among local road agencies based on highway use is a long over-due reform that will improve the efficiency of the revenue sharing program.

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