CHICAGO - A sales tax hike to support $1.7 billion in annual transportation and education funding will go before Michigan voters under a plan lawmakers approved early Friday.
After months of wrangling over how to raise new funding, Gov. Rick Snyder and legislative leaders announced an agreement Thursday on the last scheduled day of the Legislature's session.
Voters will be asked in May to approve a constitutional amendment raising the sales tax to 7% from 6% for the primary purpose of fixing and improving the condition of state roads and bridge in dire need of more aid, supporters said.
The House acted first early Friday and then the Senate. The House easily reached the two-thirds vote needed to place a constitutional amendment on the ballot while the Senate vote was narrow.
If voters approve, the package of bills would eventually raise $1.3 billion annually for transportation spending, directing $1.1 billion to roads and bridges, $100 million to transit, and $100 million to local governments.
Another $300 million would go to education. The legislation would also hike fuel taxes by about three cents per gallon while removing the sales tax from fuel sales and increasing fees on vehicle registration and heavy trucks. Through an increase in the earned income credit, low income taxpayers would see relief.
The state would gradually increase transportation funding using $1 billion collected in the first three years to retire existing state road bonds and reduce $220 million in annual debt service, according to the Michigan Department of Transportation.
"This is a significant proposal that I'm very excited to be supportive of," Snyder said after announcing the compromise plan. If the ballot measure is shot down, "we have to start over again," Snyder said.
Snyder defended his decision to forgo a funding plan that relied solely on a legislative vote, as he had originally sought.
"It's about compromise," he said. The Senate and House adopted alternative plans and couldn't resolve their differences raising concerns that the Legislature would adjourn without acting.
Snyder has pushed for three years for the Legislature to raise at least $1.2 billion of new annual revenue, which he says is needed to maintain the state's roads. Lawmakers, both Democrat and Republican, until Friday had been reluctant to raise any taxes or fees, but they had passed one-time appropriations.
Snyder had lobbied a proposal to impose a wholesale tax on fuel and raise truck registration fees. Generating revenue from registration fees is important because the gas tax revenue is vulnerable to the economy and evolving fuel efficiency standards, state officials had said.
Information on state borrowing plans was not immediately available. State budget director John Roberts said recently that under the governor's previous plan the state would issue bonds to cover maintenance and construction for roughly the first 18 months, while the new revenue flowed into coffers. After that, the goal was to operate a pay-as-you-go program unless a large project was being funded.
