Budget Process Underway, Will Year 2 of Split Control of State Government Differ (Hopefully) From Year 1?
Governor Whitmer released her proposed state budget for Fiscal Year 2020-2021 on February 6. While the budget does not propose a gas tax increase, it comes right on the heels of action taken just the week before by the State Transportation Commission (STC) adopting her Rebuilding Michigan proposal, a $3.5 billion bonding program to fund road construction on state trunklines and highways.
State law allows the STC to issue bonds up to a certain amount for road projects without legislative approval. Those bonds are required to be repaid out of revenues going into the State Trunkline Fund, but with the caveat that the proceeds can only be utilized on state trunkline routes, or routes with I-, M-, and US- designations. Therefore, most of the additional $3.5 billion in revenue will go to MDOT's Metro region, comprised of Wayne, Oakland and Macomb Counties, with 5 of 122 projects directly impacted by the bonding program slated to occur north of Roscommon County. MDOT intends to phase-in the $3.5 billion over four years, and the bonds are expected to have a term of roughly 25 years with interest rates between 2.5% and 3.5%.
The Governor has argued she had no choice but to act unilaterally to ensure roads in Michigan do not slide further into disrepair and result in exponentially increased costs down the road given the inability of both sides to reach agreement on a comprehensive road funding proposal last year. However, Republican leadership in the Legislature has criticized the proposal on multiple fronts, noting it adds more debt on the state’s credit card without identifying a funding source and none of the new bonding revenue is allocated toward county or local roads. Republican leadership also has continued to point out the Governor vetoed $400 million in General Fund support last fall that would have been dedicated to all roads in Michigan utilizing the current road funding formula. The Governor’s FY 2020-2021 transportation budget does include increased ongoing transportation revenue from restricted funds (registration and gas taxes) but has a notable absence of General Fund support.
Shifting gears, the House Natural Resources and Outdoor Recreation Committee held a hearing on legislation sponsored by Rep. Greg Markkanen (R-Hancock), House Bill 5333, which would restrict the ability of the DNR to utilize Forest Development Fund (FDF) revenue for purposes other than forestry-related activities. GLTPA submitted written testimony in favor of the bill, and it is our understanding that with some minor changes the legislation, and as of this writing it is our understanding the DNR is supportive of the bill, though it has not yet moved out of committee.
The Governor’s proposed DNR budget includes an additional $8.1 million in spending authority and 7 full-time positions dedicated to increased Good Neighbor Authority (GNA) timber sales on federal property, $5 million for a new 32,000 square foot multi-division facility in Newberry utilizing mass timber construction, and $500,000 in FDF revenue for research on alternatives needed to diversify the age of white cedar stands.
With a new deadline of July 1 for the Legislature to submit a budget proposal to the Governor, expect budget action to be fast and furious over the next four months as both sides seek to turn the page from last year and negotiate a budget well in advance of the end of the state fiscal year on September 30. We will keep you updated, and as the budget process moves forward, please be on the lookout for requests from GLTPA to contact your legislators to share industry input on various policy or budgetary items of concern if and when the need arises.