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April 27, 2015

Why we have to vote on Proposal 2015-1

This piece appeared on The Next Idea on Michigan Radio and in the Detroit Free Press
As we near the vote to raise the sales tax to fund our abysmal roads, we’ve heard this question come up quite a bit these last few months:
“Why couldn’t the legislature just do the job they were elected to do instead of passing responsibility off to the voters?”
The short answer — and you’re not going to like this — is that it is not their fault. It’s ours. We haven’t given our legislators the chance to do their jobs because we’ve cauterized a deep-seeded distrust into statues and amendments to the state constitution.
The idea of a democracy is to elect representatives to make the tough decisions on behalf of the rest of us. If those decisions run counter to the values and priorities of the people, democracy provides that those elected representatives should be replaced through the electoral process.
But in Michigan, our inability to trust this process is really holding us back.
More so than many other states, our heightened skepticism of government has created cumbersome and costly barriers that prevent our elected leaders from making the difficult decisions. These rigid measures set Michigan apart, and not in a good way.
Take the case of road funding. This is something that other states could address by asking its legislators to make the hard choice of voting for a tax increase. In Michigan, we are left with Proposal 2015-1, which requires:

  • A $10 million special election to seek voter approval for a constitutional amendment;
  • Special interest groups to contribute to advertising and political campaigns supporting or opposing the question;
  • Separate law changes to maintain “earmarking” levels for services unrelated to roads.

For years Michigan’s elected officials have been underfunding critical infrastructure. The usual excuse we the taxpayers have received is that the motor fuel and motor vehicle registration taxes have not kept pace with the increased cost of maintaining the roads. This misses the point.
The problem is that the fuel and registration taxes were earmarked to only fund the roads.
Sure, earmarking guarantees a minimum level of support, but too often it chills the political will to provide additional funding when it’s needed.
For example, the dedication of lottery revenues to the school aid fund in 1981 did not proportionally increase the total level of school funding. It simply allowed general fund money previously used for school aid to be spent elsewhere.
Michigan relies on tax-earmarking more than almost every other state. More than two-thirds of our state’s tax revenues are earmarked for specific purposes, leaving the legislature with only one-third of available funding to actually decide who gets what and how much.
These policies have few equivalents in the private sector. Suppose a family earmarked income earned on Mondays and Tuesdays for mortgage payments; Wednesday’s income was earmarked for food; Thursday’s income was earmarked for utilities; and Friday’s income was earmarked for the car note. Would a family opt not to pay the utilities because the wage earner was out sick on a Thursday? Would the bank accept less than a full mortgage payment because someone had a dentist appointment on a Monday afternoon?
We don’t run our personal lives this way and we don’t run our businesses this way, but the distrust in our elected officials has caused us to create a government environment in which new taxes have to be tied to specific purposes before they can gain our approval.
In the case of our roads, although the needs clearly were greater than the revenue generated by the earmarked taxes, the earmarking mindset of our legislators dictated that this is all that should be appropriated for this most essential of government services.
In an ideal situation, our elected officials would raise sufficient money through all means of taxation to provide all of the services the residents demand at the levels they desire. If money from a specific tax has been earmarked to a specific purpose, our elected officials would still be expected to provide the funding needed to deliver the service at expected levels, supplementing the earmarked money when necessary.
Michigan’s recent supplementing of gas and registration tax revenues with dollars from the General Fund was not driven by a desire to fund roads at a level needed to fill all the potholes. It was done because there wasn’t enough money required to match federal road funding. Even then, it’s still not nearly enough.
Now we can see very clearly how these earmarking policies, adopted in efforts to control the cost of government and to protect against future legislators diverting funding to less favored purposes, cost us more in the long term, not to mention breeding even deeper distrust in our elected officials.
So what’s the Next Idea?
Let’s say we all agree that this way of governing is problematic and destructive, especially in a rapidly changing economy like this one. Even then, undoing it might be even harder than living with it. Once these limitations on our elected officials are created, the people and the special interests that benefit fight hard to preserve them.
Even though the earmark on the sales tax revenues could be eliminated by just appropriating the same minimum amount of money, the school community, local governments, and other special interests would resist the change based on the fear that future elected officials might not maintain that level of funding.
On the other side, the provisions that put a cap on the sales tax rate could be taken out of our constitution, but people would fear they are losing control over state government.
Unfortunately, the only idea I have to rectify this situation would be to hold a Constitutional Convention and rewrite the state constitution. That hasn’t been done since 1961. With the current political climate, both in Michigan and nationally, such an effort is unlikely to produce a better way of governing, no matter how much we need it.
Instead, we’re left to swirl indefinitely in this vicious cycle that breeds escalating levels of distrust of our elected officials, which then leads to more limitations on their ability to govern. Someday we could arrive at a breaking point. If that day comes, what little trust we have left in our elected officials will be the only thing we’ll have available to fix it.
 

President

About The Author

Eric Lupher

President

Eric has been President of the Citizens Research Council since September of 2014. He has been with the Citizens Research Council since 1987, the first two years as a Lent Upson-Loren Miller Fellow, and since then as a Research Associate and, later, as Director of Local Affairs. Eric has researched such issues as state taxes, state revenue sharing, highway funding, unemployment insurance, economic development incentives, and stadium funding. His recent work focused on local government matters, including intergovernmental cooperation, governance issues, and municipal finance. Eric is a past president of the Governmental Research Association and also served as vice-chairman of the Governmental Accounting Standards Advisory Council (GASAC), an advisory body for the Governmental Accounting Standards Board (GASB), representing the user community on behalf of the Governmental Research Association.

Why we have to vote on Proposal 2015-1

This piece appeared on The Next Idea on Michigan Radio and in the Detroit Free Press
As we near the vote to raise the sales tax to fund our abysmal roads, we’ve heard this question come up quite a bit these last few months:
“Why couldn’t the legislature just do the job they were elected to do instead of passing responsibility off to the voters?”
The short answer — and you’re not going to like this — is that it is not their fault. It’s ours. We haven’t given our legislators the chance to do their jobs because we’ve cauterized a deep-seeded distrust into statues and amendments to the state constitution.
The idea of a democracy is to elect representatives to make the tough decisions on behalf of the rest of us. If those decisions run counter to the values and priorities of the people, democracy provides that those elected representatives should be replaced through the electoral process.
But in Michigan, our inability to trust this process is really holding us back.
More so than many other states, our heightened skepticism of government has created cumbersome and costly barriers that prevent our elected leaders from making the difficult decisions. These rigid measures set Michigan apart, and not in a good way.
Take the case of road funding. This is something that other states could address by asking its legislators to make the hard choice of voting for a tax increase. In Michigan, we are left with Proposal 2015-1, which requires:

  • A $10 million special election to seek voter approval for a constitutional amendment;
  • Special interest groups to contribute to advertising and political campaigns supporting or opposing the question;
  • Separate law changes to maintain “earmarking” levels for services unrelated to roads.

For years Michigan’s elected officials have been underfunding critical infrastructure. The usual excuse we the taxpayers have received is that the motor fuel and motor vehicle registration taxes have not kept pace with the increased cost of maintaining the roads. This misses the point.
The problem is that the fuel and registration taxes were earmarked to only fund the roads.
Sure, earmarking guarantees a minimum level of support, but too often it chills the political will to provide additional funding when it’s needed.
For example, the dedication of lottery revenues to the school aid fund in 1981 did not proportionally increase the total level of school funding. It simply allowed general fund money previously used for school aid to be spent elsewhere.
Michigan relies on tax-earmarking more than almost every other state. More than two-thirds of our state’s tax revenues are earmarked for specific purposes, leaving the legislature with only one-third of available funding to actually decide who gets what and how much.
These policies have few equivalents in the private sector. Suppose a family earmarked income earned on Mondays and Tuesdays for mortgage payments; Wednesday’s income was earmarked for food; Thursday’s income was earmarked for utilities; and Friday’s income was earmarked for the car note. Would a family opt not to pay the utilities because the wage earner was out sick on a Thursday? Would the bank accept less than a full mortgage payment because someone had a dentist appointment on a Monday afternoon?
We don’t run our personal lives this way and we don’t run our businesses this way, but the distrust in our elected officials has caused us to create a government environment in which new taxes have to be tied to specific purposes before they can gain our approval.
In the case of our roads, although the needs clearly were greater than the revenue generated by the earmarked taxes, the earmarking mindset of our legislators dictated that this is all that should be appropriated for this most essential of government services.
In an ideal situation, our elected officials would raise sufficient money through all means of taxation to provide all of the services the residents demand at the levels they desire. If money from a specific tax has been earmarked to a specific purpose, our elected officials would still be expected to provide the funding needed to deliver the service at expected levels, supplementing the earmarked money when necessary.
Michigan’s recent supplementing of gas and registration tax revenues with dollars from the General Fund was not driven by a desire to fund roads at a level needed to fill all the potholes. It was done because there wasn’t enough money required to match federal road funding. Even then, it’s still not nearly enough.
Now we can see very clearly how these earmarking policies, adopted in efforts to control the cost of government and to protect against future legislators diverting funding to less favored purposes, cost us more in the long term, not to mention breeding even deeper distrust in our elected officials.
So what’s the Next Idea?
Let’s say we all agree that this way of governing is problematic and destructive, especially in a rapidly changing economy like this one. Even then, undoing it might be even harder than living with it. Once these limitations on our elected officials are created, the people and the special interests that benefit fight hard to preserve them.
Even though the earmark on the sales tax revenues could be eliminated by just appropriating the same minimum amount of money, the school community, local governments, and other special interests would resist the change based on the fear that future elected officials might not maintain that level of funding.
On the other side, the provisions that put a cap on the sales tax rate could be taken out of our constitution, but people would fear they are losing control over state government.
Unfortunately, the only idea I have to rectify this situation would be to hold a Constitutional Convention and rewrite the state constitution. That hasn’t been done since 1961. With the current political climate, both in Michigan and nationally, such an effort is unlikely to produce a better way of governing, no matter how much we need it.
Instead, we’re left to swirl indefinitely in this vicious cycle that breeds escalating levels of distrust of our elected officials, which then leads to more limitations on their ability to govern. Someday we could arrive at a breaking point. If that day comes, what little trust we have left in our elected officials will be the only thing we’ll have available to fix it.
 

  • Permission to reprint this blog post in whole or in part is hereby granted, provided that the Citizens Research Council of Michigan is properly cited.

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    President

    About The Author

    Eric Lupher

    President

    Eric has been President of the Citizens Research Council since September of 2014. He has been with the Citizens Research Council since 1987, the first two years as a Lent Upson-Loren Miller Fellow, and since then as a Research Associate and, later, as Director of Local Affairs. Eric has researched such issues as state taxes, state revenue sharing, highway funding, unemployment insurance, economic development incentives, and stadium funding. His recent work focused on local government matters, including intergovernmental cooperation, governance issues, and municipal finance. Eric is a past president of the Governmental Research Association and also served as vice-chairman of the Governmental Accounting Standards Advisory Council (GASAC), an advisory body for the Governmental Accounting Standards Board (GASB), representing the user community on behalf of the Governmental Research Association.

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