May 5 ballot proposal on transportation funding
The May 5 ballot proposal would amend the state constitution and trigger a number of state statutes impacting transportation funding, school funding and local government revenue sharing.
On May 5, 2015, Michigan voters will decide the fate of Proposition 15-1, a ballot proposal commonly referred to as the “road ballot.” But this ballot proposal is more than just fixing the roads. It asks Michigan residents to support a constitutional amendment and a number of statutory changes to existing laws.
These statutory changes will occur only if the constitutional amendment on the ballot passes, similar to the Personal Property Tax ballot proposal (Prop 14-1) last August. For the official language that will appear on the statewide ballot, see the Michigan Secretary of State.
Nearly everyone, lawmakers and citizens alike, agree that Michigan’s roads are in terrible shape. Many others also agree there is a structural problem with the way our transportation infrastructure is funded long-term. Currently, a state tax on fuel ($.19/gallon for gasoline, $.15/gallon for diesel) and a percentage of annual vehicle registration fees are the primary funders of maintenance to Michigan roads and bridges. This brief video from the Michigan Department of Transportation explains how these sources of revenue have been insufficient to finance the structural improvements needed on Michigan roads.
Disagreements arise in exactly how this structural funding problem should be fixed. Many people want taxes paid at the pump to go directly to transportation infrastructure improvements. But, under the current system, motorists pay a six percent sales tax on fuel purchases, in addition to a Federal and State fuel tax. A portion of the sales tax revenue is directed to local governments, public education and the State’s General Fund. Therefore, removing the sales tax from motor fuel purchases would take this revenue away from these entities. Proposal 15-1, in all its complexity, is meant to provide a long-term solution to transportation funding by changing the way fuel is taxed so that taxes paid at the pump are directed to transportation, without shorting funding to local governments, education and the General Fund.
What effect would the Proposal have on consumers buying fuel? Would Proposal 15-1 raise prices at the pump? According to a white paper published by Glenn Steffens at Senate Fiscal Agency (SFA) (“The Long and Winding Road: Proposal 1 and Road Funding Reform”) in the long run, prices would not change much. The removal of the six percent sales tax on motor fuel but the additional tax at the wholesale level would about cancel each other out once the retail price of gasoline reached approximately $4.15/gallon. Estimates for current per gallon prices are an additional 8 cents per gallon.
As for the effect on actual road improvements, according to the same Fiscal Agency paper, Proposal 15-1 would have an uncertain effect. First, a significant amount of revenue raised under the reform package in the first two years would be used to pay off debt owed for past road projects. But in fiscal year 2017-18, once the debt was paid off, the amount of new revenue going to state roads is projected to be between $1.25 (analysis from the Citizens Research Council) and $1.35 billion (SFA) or a little higher than the 1.1 billion MDOT has indicated it needs annually to improve state highways to an acceptable level by 2025. Local road agencies would see an increase under Proposal 15-1, but their funding needs are less clear, making it difficult to predict whether Proposal 15-1 would generate enough funds to meet local road needs.
It does seem that local governments, public schools and the State’s General Fund would stand to benefit under the Proposal.
For additional information on this ballot proposal, visit Citizens Research Council of Michigan at www.crcmich.org.