JACK SPENCER: Blame detoured dollars for road funding pain

It is not uncommon to experience pain in one part of the body when the root of the problem is elsewhere. For instance, arm soreness and weakness might actually be a symptom of something amiss in the shoulder or neck area. This misdirected pain is called “referred pain.” Since this article is about road funding; we'll use the word “detoured” instead.

At a glance it seems that the state doesn't collect enough funds from fuel taxes to adequately maintain roads and bridges. A closer look reveals something quite different. A lot of tax dollars collected at the pump are detoured and used for things other than roads. That's the real root of the problem.

Gov. Rick Snyder has asked the legislature to find a way to increase road funding by $1.2 billion annually. Initially he proposed doing this in a manner that would raise the cost of fuel at the pump and, after two years, allowing the rate to rise or fall depending on market conditions.

Whether the Snyder administration really expected the legislature to go along with this proposal is an open question. Trying to get lawmakers to pass this proposal and face the wrath of angry voters was probably always a non-starter. It seems more likely that the proposal was meant to be a starting point for discussions.

Another option would have been the half-hearted (or chicken-hearted) approach, which would have been to pass the plan, or something similar, then put it on the ballot and let the voters decide. In all likelihood that would have been an empty effort.

There's no point in putting something on the ballot that voters would almost surely reject. What's more, the lawmakers would justifiably have been blamed for having gone through the motions for nothing.

On the other hand, if Snyder's plan was to force lawmakers to look closely at the road funding issue, he succeeded. They are now well aware that Michigan already collects enough at the pump to do the job, but too much of it is being detoured to K-12 education and local governments.

Of the 6 percent sales tax the state collects at the pump, 73 percent goes to K-12 and 24 percent to local governments. That's locked in the state constitution, but Michigan doesn't necessarily have to collect a sales tax on fuel. It could change to an excise tax and then spend all of the money that's collected on roads. However, from the point of view of many lawmakers, that would only transfer the funding problem over to schools and local governments.

This is a longstanding problem with government. Revenue streams aren't always earmarked in straight-forward, logical ways. What might have made sense years ago can make little or no sense as time goes by. As a result, making needed adjustments becomes maddeningly complex.

Sir Walter Scott is credited with the famous quote: “Oh what a tangled web we weave when first we practice to deceive.” Let's be generous and assume deception hasn't been the cause of Michigan's road funding woes. Still, we can safely borrow from Scott's rhyme to sum up the situation — “Oh what tangled web they weave when government sorts out who gets the money and from which tax they'll receive.”

Some would argue that the state should just focus on road funding, and if schools and local governments take revenue hits as a result, so be it. But apparently the legislature isn't willing to do this.

Republicans are considering a plan to boost Michigan's sales tax to 7 or 8 percent and then exempt fuel purchases from the sales tax. This way the one or two percent tax hike on everything else we buy would make up for the funding that schools and local governments would lose by exempting fuel purchases from the sales tax.

Meanwhile, fuel taxes would be calculated as a percentage at the wholesale level. As a result, fuel taxes would increase but the price at the pump would supposedly be offset by the absence of the sales tax. Funding available for roads would increase because what motorists pay for fuel would no longer be detoured away from that purpose.

There is a consistency to this plan. It gets the system back to the concept of what we pay at the pump being used for roads. However, a tax hike is a tax hike, and this one would have to go before the voters because boosting the sales tax is a constitutional change.

Timing is an issue as well. Lawmakers want to pass the plan soon enough to put it before the voters in May. It will require two-thirds super majority votes in both the Senate and House to place the proposal on the ballot. That means the Democrats will have to go along with the idea.

Legislative Democrats are posturing at the moment; saying “we're not so sure about this.” That's predictable. In politics giving away “yes” votes to the other party should only take place after every possible price can be exacted. Yet, in the end, the Democrats will probably go for the deal. After all, the sales tax hike would be for local governments and schools. These are entities that Democrats like to consider as being among their primary constituencies.

Democrats must realize that, if this plan fails, alternative road funding schemes could include school and local government funding cuts.

Even with the Democrats on board, it shouldn't be assumed that enough Republicans would support this plan to put it on the ballot. It's true that they could claim they were just voting to put it before the voters — but that explanation can be dicey when election time comes.

If the plan does make it to the ballot, what then? It seems probable that its backers are hoping for very little organized opposition. With many business groups apparently supporting the plan, and the Democrats joining them, the campaign for passage could dominate the issue.

However, persuading voters to increase taxes on themselves still wouldn't be an easy task. No matter how slick the campaign might be, it won't silence word of mouth or the Internet. Bringing up any example of the state wasting taxpayer dollars (which is very easy to do) could doom the proposal. Getting people out to vote “no” is always easier than getting them out to vote “yes.”

Medicaid Expansion

Snyder is facing stiff resistance on another huge issue facing the legislature. A few weeks ago when Senate Republicans refused to pass the Obamacare exchange bill, it signaled that the same fate is likely in store for Medicaid expansion.

Any vote by a Republican that gives the appearance of helping the federal government impose Obamacare is potentially toxic. An appropriate phrase might be: “resistance is not futile.” This year, the exchange is not even the primary issue at the state level involving Obamacare. Medicaid expansion is the bigger battle. If the exchange couldn't get through, chances that the Republicans would pass the expansion appear to be extremely slim.

It seems apparent that the only way Snyder could get the Medicaid expansion, would be to pull it out of the budget. He would then try to get it passed as a stand-alone supplementary budget bill. In this way, the Democrats could vote for it and, maybe, enough Republicans would go along for it to pass.

This would be very difficult to achieve politically. Senate Majority Leader Randy Richardville, R-Monroe, and House Speaker Jase Bolger, R- Marshall, would need to work against their own caucuses to make it happen.

Even if Snyder is willing to say “damn the political torpedoes, I want it anyway,” it could be an impossible task. Both Richardville and Bolger have political aspirations of their own for the future.

Jack Spencer is Capitol Affairs Specialist for Capitol Confidential, an online newsletter associated with the Mackinac Center for Public Policy (MCPP). MCPP provides policy analysis. The political analysis represented in this column does not necessarily reflect the views of the Mackinac Center.