Michigan House OKs New Roads Plan With Gas Tax, Fee Hikes

By DAVID EGGERT/Associated Press

LANSING, Mich. (WWJ/AP) - The Michigan House for the second time in four months has narrowly approved a funding plan to improve deteriorating roads, though it appears doubtful that the legislation currently has enough support to become law.

The Republican-controlled chamber late Wednesday passed the bills that include a 3.3-cent gasoline tax hike and 40 percent vehicle registration fee increase. The legislation also authorizes a transfer of money to roads spending from elsewhere in the state budget.

For some, higher fuel taxes would be offset with an expanded tax credit included in the legislation. Many could also see future income tax cuts under the proposal.

The largely party-line votes came about a week after talks broke down between GOP Gov. Rick Snyder and legislative leaders to resolve differences between earlier House- and Senate-passed bills. While Republican Speaker Kevin Cotter said the latest House plan is a "grand compromise," the governor said he has "some concerns" and House Democratic Leader Tim Greimel called it an "embarrassment."

"We just have to make sure that any solution is fiscally responsible and viable," Snyder spokeswoman Sara Wurfel said.

The nine-bill package - parts of which passed in close 55-51 and 56-50 votes - would generate nearly $400 million more for the transportation budget starting in the next fiscal year and, once fully phased in, $1.2 billion more annually by 2020-21.

The main components include:

- a 3.3-cent increase in the state's 19-cents-a-gallon gas tax in October 2018, with annual inflationary hikes in 2022 and after;

- a 7.3 percent hike in the 15-cent diesel gas in October 2017, with inflationary increases in 2022 and beyond;

- a 40 percent boost in license plate fees in October 2016, averaging $40 per passenger vehicle and more for commercial trucks;

- a dedicated annual shift from the general fund to the roads budget, starting at $150 million in 2018-19 and rising to $600 million in 2020-21.

Also included are:

- a yearly reduction in the 4.25 percent personal income tax, starting in the 2022 tax year, whenever revenues outpace inflation. If the provision were currently in effect, the rate in the 2016 tax year would have dropped to 3.92 percent and reduced revenue by $680 million, according to the House Fiscal Agency.

- an expanded income tax credit for homeowners and renters, so more are eligible and the credit is bigger.

Democrats criticized the bills for a host of reasons, including that it would not raise for five years $1.2 billion - the minimum amount Snyder says is needed just to get roads up to par. They said the income tax rollback would have no floor, so the rate could potentially drop to zero in the future and, combined with the general fund shifts to roads, cause unrelated budget cuts down the line.

"I don't think this package is going anywhere," said Rep. Jim Townsend, D-Royal Oak.

Majority Republicans defended their plan, calling it a responsible way to gradually pump more funds into infrastructure.

"Road funding talks reached an impasse last week largely because everyone was so bound to their own preferred solution. Today, the House took a big step away from that and passed a plan that is far outside our comfort zone. That's what it took to find a solution, so we did what needed to be done," said House Speaker Kevin Cotter in a statement.

"First, the House passed a plan the Senate couldn't accept, and then the Senate approved a plan the House didn't like. This is the compromise that fixes our crumbling roads, meets in the middle and covers almost every priority the House, Senate and governor all said they wanted in a plan. Hopefully, we will see quick action on this compromise and a permanent solution to Michigan's road funding crisis," added Cotter.

It is "a simplified and viable solution that provides $1.2 billion of long-term dedicated funds for our crumbling roads and bridges," said Rep. Jeff Farrington, R-Utica.

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