Added on July 1, 2019  Marsha Chartrand

Pressure builds on Michigan Republicans to share their road funding plan

By Lindsay VanHulle (Bridge)

Gov. Gretchen Whitmer is upping pressure on Republican lawmakers over road funding, criticizing them for approving a summer recess without first finishing next year’s budget, including a plan to raise billions to fix Michigan’s battered roads.

The first-term Democratic governor told reporters Tuesday she has not had any substantive talks with GOP legislative leaders toward a deal on her signature campaign issue, for which she has proposed a bold, if controversial, 45-cent-per-gallon gas tax increase.

Yet the lack of a counterproposal from majority Republicans pushes a resolution on the budget and roads closer to the start of the state’s new fiscal year in October — a prospect that worries state business groups.

“I am angry about this,” Whitmer said of the legislative break. “We’ve made some strides. We’ve done quite a bit in a short period of time. But the real work of getting the budget done is the most important work that we have to do, and they’re not even in town as a body in either chamber right now. And everyone should be mad.”

The Legislature is not in session this week, and is not expected to be in session next week for the July 4 holiday. A number of tentative session days have been added for July and August, in the event both sides reach a deal on road funding and the budget that could be brought to a vote.

House Speaker Lee Chatfield, R-Levering, and Senate Majority Leader Mike Shirkey, R-Clarklake, defend their continued lack of a counteroffer to the gas tax hike Whitmer unveiled in March.They say it takes time to reconcile differences between House and Senate ideas and come up with a longer-term solution that doesn’t impose significant new tax burdens on state residents.

“The goal is to be at the negotiating table with the governor and the Senate and reach a consensus soon, because I think that’s what the people of our state deserve,” Chatfield told reporters earlier this month.

Formal negotiations with Whitmer’s administration should start once the House and Senate work out their road-funding ideas and agree on a common legislative budget, Chatfield spokesman Gideon D’Assandro told Bridge.

“It would be very easy to rubber-stamp the governor’s plan and walk away,” D’Assandro said. “But that would be a terrible idea for the people of this state.”

Amber McCann, a spokeswoman for Shirkey, told Bridge: “The governor holding a press conference to accuse the legislature of being on ‘vacation’ is an old and tired political stunt. Maybe next she’ll buy space on billboards.”

Outside pressure has been building on GOP legislators to counter Whitmer’s gas tax proposal and generate the billions of dollars state and independent infrastructure experts say are needed to reverse the decline of Michigan roads.

Leaders of statewide business groups and regional chambers of commerce, from Grand Rapids to Flint, entered the fray last week, releasing a joint statement declaring that “meaningful progress needs to be achieved prior to recessing for the summer.”

Business groups contend there is no disputing Michigan’s roads need an added annual investment of between $2 billion and $2.5 billion, and the Legislature should not waste critical time before the 2020 election cycle begins in earnest, when tough votes become more difficultfor lawmakers up for reelection.

So far, Chatfield and Shirkey have not offered much publicly.

“I can’t get into what is and is not on the table,” D’Assandro told Bridge, adding that no timeline has been set for completion of a roads proposal.

Several business leaders who signed on to last week’s statement, along with some Lansing political consultants, say it’s not entirely surprising that GOP legislators aren’t ready to unveil how they propose to fix roads beyond next year’s budget.

Among contributing factors: high legislative turnover in last year’s general election, the product of term limits that forced out dozens of experienced state representatives and senators. Much of the first half of this year included bringing new lawmakers up to speed on big issues and the workings of state government.

Weeks of negotiations on legislation to reform Michigan’s auto no-fault system also delayed roads and budget discussions, though several people noted the bipartisan compromise that ultimately won Whitmer’s signature on no-fault could be a harbinger for compromise on roads.

Public trust in state government is already low, making it more difficult for Whitmer to gain traction with a gas tax increase less than five years after policymakers adopted the last one, some insiders said. 

Which is partly why Republicans continue to suggest added roads revenue can be found elsewhere the state budget. But $2.5 billion more?

“It’s really easy to run a campaign talking about how we’re going to squeeze every last dime out of state government,” said Brad Williams, vice president of government relations for the Detroit Regional Chamber. “It’s harder when you get to Lansing and realize that there’s not a lot of waste, fraud and abuse in state government — certainly not $2.5 billion worth.”

Had the House and Senate been able to work up transportation budgets that included $2 billion or more for roads without increasing revenue, they would have passed them, Williams said.

“There’s no political jeopardy” in raising revenue, said S. Evan Weiner, president and CEO of Edw. C. Levy Co. in Dearborn, a construction materials firm that specializes in road construction, and chairman of former Republican Gov. Rick Snyder’s appointed 21st Century Infrastructure Commission.

It was that commission that first determined Michigan needs to spend more than $2 billion above current funding levels on roads and bridges. And Weiner said that likely means new revenue from gas taxes or user fees to meet the challenge.

“What we need for road funding, the numbers, the word starts with a B. It’s billions,” Weiner told Bridge. “Are you really going to find that kind of savings someplace? Let’s not kid ourselves. We need the revenue because we’ve been underspending.”

Few details public

House Republicans recently shared a kernel of their road-funding proposal when they passed a 2020 transportation budget that includes phasing out the collection of Michigan’s 6 percent sales tax at the gasoline pump — a priority of Chatfield’s. Sales tax revenue from gas does not currently pay for roads; rather, it primarily funds schools and revenue sharing for local governments.

The House concept would replace the sales tax with an equivalent amount of gas tax starting in 2020, so drivers would see no net increase in what they currently pay. The House budget would offset lost revenue from schools and local governments by moving universities from the School Aid Fund to the general fund, freeing up more money for K-12 education, and by cutting other parts of the state general fund to cover higher education, D’Assandro said. 

The move would raise roughly $850 million for road repairs by the second year “without raising taxes one penny,” he said, “so I think there’s a lot more flexibility to ask government to pitch in and fix the roads instead of Michigan families.” That would still leave the state more than $1 billion short for repairing roads, though House Republicans have said that won’t be the only part of their proposal.

The Senate, meanwhile, has not provided details beyond its 2020 transportation budget, which accelerates the phase-in of the 2015 road-funding package a year earlier than scheduled. That also would produce far less money than needed.

Gongwer News Service, citing sources, reported last week that Shirkey is considering delaying some state debt payments to free up money for roads. Shirkey recently told Crain’s Detroit Business Senate Republicans also are considering allowing some municipalities to levy local fuel taxes.

McCann confirmed to Bridge both are among many options under consideration, and Senate Republicans have not made a decision on a final policy.

Last week, House Democrats offered other ideas, trading Whitmer’s proposed gas tax hike for a 2.5 percent increase in the state’s corporate income tax, along with a new tax on pass-through businesses whose owners report their business income on personal income tax returns.

Whitmer has said she would have had to more than triple the corporate income tax rate, from 6 percent to 19.5 percent, to raise the required $2.5 billion. The revenue also would not be dedicated to roads the way the gas tax is, she added.

House Democrats’ proposal also includes charging trucks weighing at least 26,000 pounds a new tax based on the miles they drive, and charging bridge tolls.

A spokeswoman for House Democrats said the ideas would generate $1.2 billion, and are meant to be a starting point, not a fully funded plan. They’re based on feedback from constituents and other considerations now that Republicans have rejected Whitmer’s gas tax proposal, said House Democratic Leader Rep. Christine Greig, D-Farmington Hills.

Businesses received more than $1 billion in tax cuts in 2011 early in Snyder’s first term, she said, and should now pay a larger share toward roads.

Greig said the Democrats’ proposal should not be viewed as a sign Whitmer doesn’t have the support of lawmakers from her own party for her gas tax proposal. Rather, she said, Democrats will wait to introduce a bill until a specific gas tax increase is negotiated.

“(If Chatfield got) half the Republicans to put up the votes for 45 cents, I’d be more than happy to put up half the votes, too, and make that happen,” Greig said.

Work to continue

House and Senate leaders from both parties say they intend to continue working behind the scenes on the budget and roads, even during a break from session.

“It’s not great optics for the Legislature to leave without something done, but I think it’s one of those things where the practical and political reality of the situation is they will continue to work,” said Matt Resch, a Republican communications strategist and president and owner of Lansing-based Resch Strategies.

If lawmakers are in session all summer without a budget deal to vote on, Resch added, “there would be ample room for people to criticize them for that.”

Multiple business and chamber leaders told Bridge they don’t anticipate a communication breakdown. They said their statement last week was intended to apply pressure.

“As long as we keep making progress and we’re all still talking, again in a meaningful way, I’m less concerned than I would be if we were to stall out on these talks,” said Josh Lunger, senior director of government affairs for the Grand Rapids Area Chamber of Commerce.

One Republican option — replacing the sales tax on gasoline — puts public schools and municipalities that have already absorbed funding cuts over the years at additional risk of losing revenue, said Jen Eyer, a Democratic strategist and partner at Lansing-based Vanguard Public Affairs.

“From a purely political standpoint, I think a lot of our Republican legislators are afraid. They’re afraid of what will happen if they raise taxes. They’re afraid of getting primaried. They’re afraid of angering their constituents,” Eyer said.

“If we want nice roads, we’re going to have to pay for them,” she added. “If we want nice schools, we’re going to have to pay for them.”

From a messaging standpoint, Whitmer’s gas tax proposal is clean and easy to understand, Resch said. Republicans, meanwhile, are likely to propose “a hodge-podge of different revenue sources and spending cuts.”

But, Resch said, Whitmer’s gas tax proposal is unpopular among voters, despite its simplicity.

“The public is clamoring to have the roads fixed, but I don’t think they’re clamoring for the details of the plan,” Resch said. “I think the public blames Lansing. I don’t know that they blame a party at this point.”