Second year of session off and running, will roads be addressed this year?
With the holidays behind us, the Michigan Legislature is back in session. Road funding is once again likely to dominate both budget work and policy discussions as Governor Whitmer prepares to deliver her second State of the State address on January 29. With her 45-cent tax proposal failing to gain traction in the Legislature last year, Whitmer has stated she plans to return to the table this year with a somewhat scaled down proposal intended to invest the additional resources necessary just to maintain the infrastructure we have before assets deteriorate beyond repair. As such, the Governor has hinted at shifting from the “Fix the Damn Roads” theme of her campaign and first year in office to a message of “triaging” what we have as a way of highlighting not only the need to act, but the growing cost of inaction. The Michigan Department of Transporation (MDOT) has stated on multiple occasions that it needs an additional $1 billion annually just to keep state trunklines – “I-”, “US-”, and “M-“ routes, from declining further.
While the details of what Governor Whitmer intends to propose are not public as of this writing, she is expected to suggest a variety of ways to get to that number, and we will see further details when she releases her Fiscal Year 2020-2021 budget proposal on February 6. Recall that the Governor vetoed $375 million in General Fund support proposed for roads by the Republican Legislature this past fall, saying it did not go far enough, and the Legislature has indicated a desire to continue allocating General Fund revenue to roads in addition to restricted transportation revenue from gas taxes. House Speaker Lee Chatfield (R-Levering) has been adamant that any road funding proposal ensure that all taxes paid at the pump go to roads. Senate Majority Leader Mike Shirkey (R-Clarklake) has not ruled anything out, but has been hesitant to embrace bonding proposals to address roads similar to borrowing under the former Engler and Granholm Administrations. With Legislators eager to finish up budget work this spring in order to hit the campaign trail, we should be in for a busy and intense few months leading up to the new July 1 deadline for the Legislature to submit a budget proposal for next year to the Governor.
The Administration also met with the House and Senate Fiscal Agencies on January 10 at their biannual Consensus Revenue Estimating Conference (CREC), at which time the three parties revised estimates of available state revenue for the recently completed, current, and future fiscal years. The news was largely positive, with the state economy continuing grow and revenue estimates revised upward for both the General Fund and School Aid Fund. However, there is certainly no windfall apparent within either fund. State revenue continues to trend in the right direction, but spending pressures from increased road funding allocations, Personal Property Tax (PPT) reimbursement, and Medicaid caseload growth may indicate trouble on the horizon in the General Fund. Additionally, the Governor and Legislature have not yet indicated whether or not they intend to restore funding for numerous items vetoed in last fall’s budget standoff or if they will just leave that money on the state’s balance sheet to utilize in preparing next year’s budget, given we are already a third of the way through the current fiscal year.