Tax, funding formula overhaul to fix roads

March 27, 2019

Blowback from Governor Gretchen Whitmer's proposed fuel tax increase to “fix the damn roads” is expected in a state that has long championed tax cuts while neglecting to address serious – and downright treacherous, in some places – infrastructure needs to the point of creating a crisis. But pushback on the proposed 45-cent-per-gallon tax increase is nothing compared to decades of opposition from lawmakers to address the state's antiquated and inefficient road funding formula that must be changed in order to send money to where it's needed most.

 

In terms of revenue, an increased fuel tax is reasonable and appropriate. The proposal calls for raising state gas and diesel taxes by 15 cents on October 1, 2019; 15 cents on April 1, 2020; and 15 cents on October 1, 2020. The governor has said the plan would raise about $2 billion annually for roads.

 

The proposed fuel tax would cost the average driver about $6.30 more per tank of gas, based on a gas tank size of 14 gallons. Based on usage of one or 2 tanks per week, the increase would cost users between $327 and $650 more per year. Compare that to the average cost of the vehicle's wear and tear related to road conditions of $824 a year for metro Detroit drivers, as determined by the National Transportation Research Group. In total, the group found Michigan's poor road conditions cost residents about $14.1 billion a year.

 

Considering the price residents are already paying to use Michigan's roads, an increase in fuel taxes to fix those roads would be money well spent.

 

While the proposed fuel tax increase is reasonable and appropriate, the $2 billion a year it would raise by the end of 2020 is only one part of the equation. The revenue raised won't be enough to address the state's road crisis without fixing the flawed funding formula. Michigan lawmakers who have the guts to have motorists pay the highest fuel tax in the nation (after being one of the lowest taxed in the nation for years, let's remember, which got us into this situation) must also find the political wherewithal to finally change the state's road funding law that to date has been considered political suicide.

 

Enacted in 1951, Public Act 51 determines how state-raised motor fuel taxes and vehicle registration fees are distributed across Michigan. In general, 39 percent of funds are given to state highways, 39 percent to county road commissions and 22 percent to cities and villages (townships don't actually receive direct road funding from the state). When passed, the formula was intended to strike a balance between urban and outstate areas. From there, the formula takes into consideration miles of road in a community, its population and the number of vehicle registrations.

 

While intended to provide fairness in road funding, the formula ultimately fails to reflect the different needs across the state. It also is no longer relevant for a state where, in the almost 70 years since the legislation was enacted, residents have moved to cities at the expense of rural areas. Providing Otsego County, with a total population of 24,164 residents, with the same dollars as Oakland County, with 1.25 million residents, is not only out of balance – it's currently absurd. And it helps to explain why many of our roads and bridges are in crisis. 

 

No matter what amount of money lawmakers ultimately decide to throw at the problem, the formula guarantees that no more than 39 percent will go toward fixing crumbling roads and bridges that are used the most. Therefore, it's mandatory that any discussion of road funding should start with a commitment to address that formula. So far, the mere mention of changing Act 51 is enough to shut down discussions as outstate lawmakers refuse to give up any portion of the pie. 

 

It's understandable they want to keep the dollars flowing to their communities. But that doesn't make it right. And it's long overdue to change the formula for the good of all drivers in Michigan. 

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