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.