Rarely has a catch phrase caught the attention of so many as Governor Whitmer’s campaign promise to “fix the damn roads” and now it is time to see how she intends to carry out her pledge. Next week we expect Governor Whitmer to reveal her recommendations for increased funding to fix Michigan’s long-neglected road infrastructure.

The Citizens Research Council of Michigan has evaluated a number of road funding options in a new report.

The stakes are high, with no easy route to improvement. The $1.2 billion the legislature directed for repairs in 2015 from road-related taxes and the General Fund was not enough. It was a lowball estimate to begin with and has yet to fully materialize. Without more resources, the number of roads in poor condition will multiply quickly affecting the cost of vehicle ownership, hampering economic development, and adding to the cost of doing business in Michigan.

A few years back, Governor Snyder’s 21st Century Infrastructure Commission pegged the amount of new funding needed to bring most roads up to at least fair condition at $2.2 billion. The Senate Fiscal Agency’s report says that might be not be enough because roads have deteriorated further since that estimate. Regardless of the amount, we need a lot of money to make up for the lack of care in the past.

What are the options for finding this much money?

Michigan has long held to a user-fee concept, with the taxes people pay to drive — gas and vehicle registration — directed to build and maintain the system. But taxes levied at the pump and vehicle registration fees are already relatively high compared to other states after the 2015 changes, so increasing rates further will be tricky.

As a first step, we need to disentangle fuel purchases from the state sales tax. Sales tax revenues fund schools and local governments with nothing going to highway investment. These both are important service providers that rely on state funding, but including fuels in the sales tax base makes it more difficult to raise the funds needed for roads. Replacing the sales tax levy on fuels with an equal gas tax rate increase would raise almost $900 million for roads. But this is still short of the identified need.

Toll roads are a possibility, but we’re pessimistic. Michigan doesn’t get a lot of traffic passing through it like the Pennsylvania or Ohio turnpikes. That means we’d largely be taxing ourselves and unable to export much of the financial burden. And federal restrictions complicate the ability to convert interstates into toll roads.

What else can we do?

If roads are a high priority, then lawmakers should certainly seek to use all available resources to address this need. Identifying money that can be diverted to roads will not be easy, though. Michigan’s heavy reliance on earmarking means that most tax revenue is dedicated to a particular service. Revenues related to current and future economic growth are committed to funding many of the policy achievements of the Snyder administration. Therefore, new revenue diversions are likely to come at the expense of another state service. Let’s not solve this problem by creating new problems.

Bonding is an option, but not a panacea. It provides a one-time infusion of funding. Some roads will be fixed, but the needs are so much greater than what can reasonably be borrowed. Without new funding, the amounts needed to repay the debt will leave little for road maintenance.

Finally, raising new money should be only part of the equation. It is time to address what is done with revenues once they’re collected. State road taxes are the primary funding source for more than 600 state and local road agencies. The distribution of those funds treats a mile of two-lane road the same as a four-lane road. It does not consider traffic volumes or the kinds of vehicles driving on those roads. And it certainly does not attempt to direct funding to the roads in the worst condition. As long as this inefficient structure and formula are in place, Michigan taxpayers will not be getting the most of their road-funding tax dollars.

We also need to take a long-term approach. Let’s increase funding in sufficient amounts to reconstruct roads to high standards and dedicate ourselves to maintaining them throughout their life cycles. Doing things on the cheap to stretch the scarce resources available to road agencies has ended up costing us more.

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1 Comment

    • Whitmer said the pothole “crisis” plaguing motorists “requires a bold, real solution that actually fixes the problem.”

      That bold solution is right in front of our noses. It just needs to go against the swift current of lobbyists that would end up being on the losing end. What is this bold solution?

      We have 23 billion sitting in a ill-conceived trust fund known as the MCCA (Michigan Catastrophic Claims Association) . We need to change the law via the legislature to defund the MCCA, and use the 23 billion to not only need fix the roads, but also address our high costs for automobile insurance. How to do it?

      An incentive is needed to change the bad practices, overcharging, fraud etc. The best incentive is the pocket book, and right now, that is ‘Pay as you Go’ with the MCCA fund. Why.? When consumers (drivers) see a direct correlation between lower insurance rates due to a cleanup of bad practices, such as immediate review of the medical bills the insurance companies (and Lawyers) are submitting on their behalf, and consumers/patients see and challenge these exorbitant costs, rates will come down. Of course the lawyer lobbyists won’t like it one bit…..there goes their gravy train.

      With respect to MCCA and transparency, if insurance regulators and alleged professionals are the only ones with special glasses to see the facts, and the public, who are paying the freight, are not allowed to wear those glasses and see for themselves, then something ‘smells’. That’s why the FOIA denial to see MCCA records was onerous. Plante Moran and their poor review of MCCA practices doesn’t help either.

      With respect to MCCA being governed by statute, required by law….what the legislature giveth, it can also change or take away. The main impediment to that happening is intense pressure from the lawyer lobbyists , the ones who chase ambulances…..such as LEE, SAM, MORSE etc.

      What about all those folk getting medical payments from the MCCA trust now? Nothing will change for them, their costs will still be paid. However, there is no need for a trust to make those payments, as current MCCA payments producing 1.7 billion in revenue are easily covering 1.2 billion yearly medical and other costs. Having a 5 billion dollar reserve fund to cover 4 years or so of ‘contingencies’ would be reasonable. The balance of the $18 billion in trust can be used to immediately fix the roads, or returned to the road users who paid into this misguided plan in the first place. No new taxes , fuel, state, or otherwise, are needed. The roads would be repaired with money taken from the folk who use the roads directly. When you do your car registration stuff, there was , for 2018, a $192 MCCA payment .

      I equate the MCCA as similar to the Social Security program. MCCA started out in the 70s’ with a $4 payment. SS did the same, very little paid into it at first. Then politicians and legislators started adding on, and costs ballooned. For those of us who own several vehicles, and make several MCCA payments, will I get several benefits as a result? Nope….so it is a redistribution of wealth of sorts…right? If you make the payment fee applicable to individuals only, not vehicles, the fee would be much more, and , instead of grumbling, folks would actually say NO and demand reform.

      We Michiganders are reaching that point. Time for the legislature to convert the MCCA to a ‘Pay as you Go’ plain and get rid of a trust fund that , while well meaning, is not viable in practice due to no control over the expense side of the equation. 49 other states somehow survive without a Catastrophic plan, Michigan can do so as well.

      We can use the 23 billion to fix the roads, the right way this time with better materials specified.

      Lee Jacobsen
      March 24, 2019, @ 3:49 am Reply

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