For Immediate Release
Friday, August 28, 2015

Contact: Bob Schneider
517.485.9444
or Eric Lupher
734.542.8001

New CRC Report: Road Funding Options Could Affect State Budget

While state lawmakers continue to seek a compromise on generating additional funding for the state’s road infrastructure needs, a new report from the Citizens Research Council of Michigan suggests that any final deal will not only affect roads, but have important implications for future state budgets.

Current deliberations revolve around a key question: How much of the new road money should come from new taxes and how much should be redirected from existing state revenues? Recent proposals have all relied to some degree on redirecting more of the state’s current discretionary general fund/general purpose (GF/GP) revenue to the roads. But those revenues are the primary funding source for other important state functions such as higher education, Medicaid, corrections, and local government revenue sharing.

CRC’s analysis suggests that boosting GF/GP support for roads from the current $400 million in FY2016 to $600 million in subsequent years will cause an immediate budget crunch for other areas of the state budget. That would include an estimated $460 million in GF/GP funding cuts in FY2017 – almost 5 percent of current GF/GP appropriations for these other non-transportation programs.

“That kind of approach means you face a budget trade-off in FY2017,” said Bob Schneider, CRC’s Director of State Affairs and author of the new report. “You could start to restore part of those cuts the following year, but even then, GF/GP appropriations would be around 1.3 percent lower in FY2019 than they were in FY2016.”

Lawmakers are hopeful that projected GF/GP revenue growth will help provide additional revenue for roads while avoiding tough budget decisions, but the CRC report points to four key factors that are likely to offset much of this revenue increase, including increased state match requirements under the recent Medicaid expansion, the imminent loss of certain use tax revenues from Medicaid managed care organizations, and other general budget pressures.

“Our review suggests state GF/GP spending will have to increase around $450 million by FY2019 just to account for these known spending pressures,” said Schneider. “So, yes, revenue growth projections look as good as they have for many years right now, but these spending increases will eat up a lot of that revenue growth.”

The CRC report emphasizes that state policymakers will face tough trade-offs regardless of their approach to the road funding issue. Raising transportation taxes means less disposable income for Michigan’s citizens. But, diverting existing revenues comes with its own costs in terms foregoing public services elsewhere in the budget.

CRC’s report is available at no cost on the Citizens Research Council’s website, www.crcmich.org.

Founded in 1916, CRC works to improve government in Michigan. The organization provides factual, unbiased, independent information concerning significant issues of state and local government organization, policy, and finance. By delivery of this information to policymakers and citizens, CRC aims to ensure sound and rational public policy formation in Michigan. For more information, visit www.crcmich.org.

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