Engler’s (political) road not taken

Gov. John Engler was in no mood to raise taxes.
But by 1997, Michigan’s highways were among the worst in the country, with only one state having a higher proportion of structurally deficient bridges.

Those who were part of the discussions in 1997 recalled that Michigan’s business leaders were urging Engler to ask the legislature for a gasoline tax increase.

At first Engler, a conservative Republican, was unmoved.

“I think the tipping point for John Engler was when he saw the roads and bridges deteriorating and saw how it was hurting our economy,” said Rich Studley, who was then a lobbyist for the Michigan Chamber of Commerce and is now its president.

Business leaders and others urged Engler to go for a 10- to 12-cents-per-gallon increase. He agreed only to 4 cents, and that’s what the Legislature approved in 1997, the last time the tax on gasoline and diesel fuel was increased. (Engler, now president of the Washington-based Business Roundtable, did not respond to a request for comment.)

“It was the best we could do at the time,” Studley said. “Often in the legislative process, making progress is the art of the possible.”

It wasn’t enough, he and other business leaders, as well as some politicians and independent researchers, now say.

MDOT had set a goal to bring 95 percent of its freeways and 85 percent of its other roads up to good or fair condition. By 2007, it had come close to that goal for freeways and exceeded it for other roads.

By 2012, both types of roads had begun sliding back toward their 1990s conditions. One-third of Michigan’s state highways and major county and local roads now are rated in poor condition. Forty-eight percent are rated fair, and only 19 percent are in good condition.

That’s because the 4-cent increase was not nearly enough to improve and maintain the roads, a 2013 study commissioned by MDOT concluded. Instead of 4 cents, MDOT needed a 14-cents-per-gallon increase to meet its goals and keep the roads in good and fair condition, according to the study, “The Road Not Taken,” by Gordon Proctor and Associates.

Between 1997 and 2012, the 4-cent increase brought in $2.85 billion, but less than half of that went to MDOT, with the rest going to local governments, as required by state law. Only about one-third of MDOT’s share went to major road and bridge improvements, with the rest paying off loans and for routine maintenance, such as snow plowing.

Competition from China and India for building materials drove up prices by 55 percent, further eroding MDOT’s ability to meet its goals, so in 2001 the state began borrowing money to pay for road improvements.

A Catch-22

As a result, MDOT is paying $240 million a year on a $2.5 billion debt. Had Engler and the Legislature approved a 14-cents-per-gallon increase in 1997, the state could have avoided most of that debt, and it would have more cash flow to pay for road improvements, the study said.

Borrowing money “was a good idea at the time,” MDOT Director Kirk Steudle said. “Then, all of a sudden, you’ve got to pay it back. In retrospect, it wasn’t prudent.”

It was a classic Catch-22. Had MDOT not borrowed money, the state’s roads would be in even worse shape than they are now. But because it borrowed so much, it has nearly maxed out its credit card, just short of the debt cap set by state Transportation Commission policy. It is spending money on interest that otherwise could go into better roads.

“Easy solutions such as additional borrowing or federal bailouts are unlikely,” according to “The Road Not Taken” report.

“Without substantial new investment, the Michigan state highway conditions will degrade rapidly, and many of the gains of the past 16 years will be lost,” it said, adding ominously: “Otherwise, Michigan will be on a path to return to the pot-holed pavements and load-limited bridges of the 1990s.”

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Tue, 04/08/2014 - 8:56am
Politicians will do anything to avoid making a decision. So, I/we are paying out MILLIONS every year in interest costs. The perpetrator has left the state. The no fault insurance fund is (supposedly) going broke. The same convict sent me a refund check from the fund, because it had TOO much money. Cynics think it was because it was an election year. Lies, damn lies and politicians. Capitalism beats Democracy every time.
Tue, 04/08/2014 - 11:31am
While mistakes were made in then intervening years, there is not much wrong with Michigan today that cannot be traced back to the Engler regime.
Wed, 04/09/2014 - 9:05am
To be fair the lack of proper funding goes back to the Milliken years and was further ignored during the Blanchard years before the partial but inadequate fix during the Engler years.
Mike R
Tue, 04/08/2014 - 11:55am
Let's see: Roads underfunded. School finance restructured and now chronically underfunded. Appointed Justices that made Michigan's Supreme Court the laughing stock of the nation. And to add insult to injury, he reneged on his promise to serve only two terms. What did John Engler do that was positive? I certainly cannot recall anything. Oh wait, there was one thing he accomplished: he set himself up to become wealthy first as a lobbyist and now president of a group that concocts new ways to make its members wealthier at the expense of the rest of us. The Tea Party and those who cower before them would be well advised to learn from history: you pay now or you pay much more later.
Tue, 04/08/2014 - 3:56pm
Roads and our inability to fund improvements are the result of our convoluted SALES tax system with leaves us paying more in tax on fuel purchases than almost any one else in the country while at the same time raising less revenue for our roads than anyone else either! To reform this we should consider broadening and lowering the sales tax to include services and food purchases sufficiently to replace revenue and leave the fuel taxes to fund to roads.
Tue, 04/08/2014 - 4:07pm
Tax on food (grocery stores) ended I think in 1970, since food is a major purchase for most people on a weekly basis the chances of taxing it are most likely DOA. I don't thing the legislature would want to touch it.
Wed, 04/09/2014 - 11:05am
Beyond some additional revenue the point is that exempting some items and not others just ends up causing problems and distortions. Buy a T-bone steak- no tax. A round of golf, Tigers tickets - No Tax. Buy shoes for your kid, food for your cat or a tomato plant - TAX. Further food is one thing that almost no one will buy on the internet and many other states do tax food purchases. By dropping the rate significantly but expanding the coverage, would that do bring courage and logic to voters or legislators? That is another question.
Tue, 04/08/2014 - 4:33pm
Engler blew his political capital he could've used on roads just like Snyder did. You can only do so much in a term.
Wed, 04/09/2014 - 2:47pm
The reality is that we can't change the past. At best we can learn from the past. It appears Pat Sheelnnenbarger is most interested in placing blame. The possibility of changing the funding in the intervening years seems to have escapes this reporter. It appears from this article that there was Engler in 1997 and there have been no politicians (at least not mentioned by Pat Shellenbarger) since that did anything about the road funding. I wonder if that was a convenient oversight or something the reporter failed learn about. I really don't want to know the names of previous politicians, I want reporting of information (such as how are other states addressing the funding issue) I can use in making my choices come Novemeber so we can ask candidates what they plan to do and how their approaches compare to other states in our climate.
Wed, 04/09/2014 - 3:21pm
Granholm tried to get a tax on services, it went nowhere. I doubt it would go anywhere with Snyder and the legislature these days as well. Wish I had a solution to all this fiscal mess.
Wed, 04/09/2014 - 4:19pm
Granholm tried to substantially raise sales taxes by extending sales tax to services without any significant reduction in rate, a big tax increase! My suggestion is to go across the board (include food and services) with a sales tax rate only high enough and designed to replace the sales tax revenue generated on fuel sales. This should give us a sales tax rate significantly less than current 6% while at the sale time lowering the overall tax paid per gallon of fuel. This would give an opportunity to raise the actual fuel tax portion up to in line with amounts charged in neighboring states +10 cents. This should actually give us a lower gas price to boot! Obviously this won't happen in an election year.
Thu, 04/10/2014 - 8:03pm
These are the same people that are wasting time telling the feds to pass a balanced budget amendment. It is a lot easier to balance the state budget when you choose to let the state infrastructure/ road system fall apart.
Sun, 04/13/2014 - 5:38am
MDOT has the authority to borrow money! That's the biggest surprise in this article. For me, that's too much power.
Sun, 04/13/2014 - 11:56am
I onder how much better our roads would be had Governor Granholm spent the Hollywood movie Monet and the bad investments in all renewable energy projects, and money poured into k-12 education to no discernable performance improvement the on road repairs?