Sound Road Funding

(Author’s Note: In last week’s Detroit News editorial, “Second term agenda focused on right priorities,” Gov. Snyder noted that a road funding package “was pretty much done.” We hope some of the sound ideas below are contained therein.)

Last May, the Michigan House of Representatives passed a legislative package that would permanently increase annual road funding by around $462 million without a significant tax increase. Some of the measures could theoretically lead to modest restraints on other state spending. The Senate should adopt this or a similar package to move the ball forward on road funding.

Several components passed by the House are worthy of applause, such as dedicating $130 million in sales tax levies currently imposed on fuel purchases to roads. This revenue currently goes to other state spending, but most drivers would probably agree that taxes levied on fuel should be used to maintain roads.

A key bill in the package would redirect one-sixth of the 6 percent use tax levied on gas to roads. This would make around $239 million available for road repairs and construction with no tax increase.

Another bill would require more competitive bidding on road projects, while others would impose performance standards on contractors and require warranties on pavement projects costing more than $1 million. (A 2002 essay by registered professional engineer and current Mackinac Center President Joseph G. Lehman explained why road warranties are “an idea whose time has come.”)

Potential savings from those reforms may be sufficient to roll-back some modest tax hikes that are also included in the package, including $35 million worth of higher vehicle registration fees, and between $8.6 million and $11 million in added fees and fines on oversized and overweight vehicles.

That last item engages a longstanding debate regarding the impact of very heavy trucks on Michigan’s roads. Evidence suggests that heavy trucks may do less damage than people realize because the weight is spread out over more axles and thus, current limits are sufficient.

To the extent some of these levies represent legitimate user fees or reimbursements, they are unobjectionable and may simply be covering costs for services rendered (or road damage inflicted).

If the increase in the revenue from these fee hikes seem all too large, consider that lawmakers have called for between $1.2 billion and $1.5 billion in net new taxes and fees in the past couple of years alone. The Mackinac Center has long said the state should make good roads a higher priority and we believe these ideas provide a path forward. The Legislature has demonstrated a willingness to tackle tough fiscal issues (Michigan Business Tax, Personal Property Tax) in ways that improve the system without unduly burdening taxpayers on net balance.

Now that the election has passed, attention is being drawn again to Michigan roads. The House package passed last May represents a good starting point for translating those demands into action, and in a manner that does not jeopardize the state’s economic recovery. Reprioritizing current state spending to free up more resources for roads could readily complete this project.

For an exhaustive treatment of Michigan’s transportation system and related funding, see the 2007 Mackinac Center study, “Road Funding: Time for a Change.” For a list of 35 major budget reform ideas see the essay “$2.1 in Michigan Budget Reforms.”