By Craig Thiel/Anderson Economic Group
A long-term funding fix to Michigan’s deteriorating road and bridge infrastructure system can’t seem to catch a break. For much of the last decade, Michigan’s anemic economic performance made the prospect of raising the necessary revenues to fund road and bridge investment a “non-starter” for Lansing policy-makers. Today, even as the state economy awakens from its prolonged coma, a permanent funding fix remains just as elusive.
Good economy or bad, it appears that there is no right time to craft a long-term solution to years of transportation disinvestment.
For the second year in a row, policy-makers are poised to offer another short-term solution to the state’s ailing road and bridge system. Lawmakers signaled their intention to pursue this approach after giving up hope on meeting a June 1 deadline to place a long-term funding fix on an upcoming statewide ballot. Rather than raise dedicated transportation taxes (fuel and vehicle registration taxes) or re-prioritize existing spending to provide a permanent fix, they will rely on a stop-gap measure.
Lansing’s intentions were made clear with news of better-than-expected state general fund revenue collections for the current ($397 million) and upcoming year ($182 million). The budget that begins Oct. 1 directs $350 million of the additional funds to transportation needs in the coming year. This approach only ensures that the bare minimum will be done. Michigan will use $120 million to match all available federal road dollars, leaving $230 million in one-time funds to address a fraction of the total road need.
This approach does nothing to provide a permanent fix or address a growing backlog of system needs, which will have to wait at least another year.
Before settling on this short-sighted approach, Lansing must acknowledge a few basic facts.
First, the bad news about Michigan’s road problems only gets worse with age. Currently, Michigan is in need of at least an additional $1.2 billion per year for its roads, a figure that has been confirmed by a number of independent and bipartisan study efforts. This amount will certainly increase next year with inflation and the likelihood that a good portion of current needs will go unmet.
Second, a permanent solution will have to involve some type of tax increase or dedication of existing state funds spent elsewhere in the budget. While very few residents like to pay higher taxes, especially an unpopular one that drivers are reminded of every time they stop to fill up, using budget surpluses only delays the inevitable. Surpluses can serve as down payment; however, they cannot be relied on to provide a long-term fix as they are way too unpredictable from year to year.
Finally, fixing Michigan roads through a combination of dedicated fuel and registration taxes will not harm Michigan’s economic recovery. Findings from a recent Anderson Economic Group study (commissioned by the Michigan Chamber Foundation) suggest that increasing road funding by $1.4 billion per year will be a net positive for Michigan employers, adding more than 11,000 new jobs. That said, the ultimate goal of raising road taxes is not to create jobs, but to invest in long-lived assets that improve residents’ quality of life and Michigan’s business climate. The net employment gains accompanying a significant transportation tax increase could be considered a bonus.
The decision to avoid a tax increase during Michigan’s economic challenges of the past decade certainly could be justified from a political standpoint. For much of the 2000s, households and businesses were struggling under Michigan’s single-state recession, and increasing the tax burden was not going to help their economic condition. With Michigan’s economy improving, and road conditions worsening, the decision to continue years of transportation disinvestment makes no economic sense, either for the short or the long term.
The decision to use another short-term fix, while politically palatable, places Michigan at a competitive disadvantage for long-term growth. It sends a clear message that the state will allow its long-lived road and bridge assets to deteriorate and will not invest in its future.