CHICAGO — The Michigan Department of Transportation last week significantly cut its five-year construction plan, warning the state faces the loss of $2.4 billion in federal aid through 2014 because it lacks matching dollars.
Officials unveiled the updated five-year plan two days after a pair of state representatives introduced a bill that would raise gas and diesel taxes to help generate new revenue that would be used to match the federal funding.
The loss of federal dollars, combined with declining state gas tax revenue, means Michigan’s roads and bridges budget will drop to about $600 million from $1.2 billion, MDOT officials said.
“This is the cliff we’ve been talking about for a number of years,” said Mike Nystrom, a lobbyist for the Michigan Infrastructure and Transportation Association and a former member of a transportation funding task force assembled by Gov. Jennifer Granholm. “We’re about to drive over the cliff, leaving hundreds of millions of federal dollars for other states to use when Michigan is struggling not to fall apart.”
Starting next year, the state expects it will be unable to come up with the roughly $90 million that is needed annually to secure roughly $500 million in federal aid. The scaled-back five-year construction plan would cut 243 projects — meaning a loss of at least 8,000 jobs a year.
Even if the state is able to secure federal funding, it will still lack the local money needed to maintain its infrastructure needs, officials said.
Michigan derives roughly a third of its transportation funding from federal dollars. Another third comes from gas tax revenue and the rest from vehicle registration fees.
Declines in gas tax revenue and the threatened loss of federal aid would mean MDOT would reach “the point of not being able to maintain capital investments and system reliability that Michigan’s economy needs,” department director Kirk Steudle said in the presentation last week.
Nystrom and other transportation advocates have pushed the state for years to generate new revenue to fund the system. Raising gas and diesel taxes have been at the forefront of proposals.
Last week, Rep. Pam Byrnes, D-Chelsea, and Rep. Richard Ball, R-Laingsburg, introduced a bill to raise Michigan’s gas fuel tax by eight cents a gallon and the diesel tax by 12 cents a gallon.
The move, which would boost both taxes to 27 cents a gallon, is estimated to raise $240 million over the next few years and $480 million annually by 2013, according to reports.
Starting next year, the new money would be used to provide the $84 million the state needs to secure up to $475 million in federal aid. The House is expected to hold hearings on the bill this month.
Other possible measures include giving local governments more options to raise revenue and increasing vehicle registration fees, an action supported by Steudle.
A bill introduced currently in the House Transportation Committee would allow Michigan to partner with private companies to build or operate its highways and bridges.
“The [gas and diesel tax] bill introduced last week is a step in the right direction, and would help secure federal dollars,” Nystrom said. “But in order to solve the overall transportation funding dilemma here in Michigan, we have to come up with more ideas and have a comprehensive solution.”