CHICAGO – The Michigan Senate will begin reviewing the $1.2 billion transportation plan passed by the House the week of Oct. 26.
It’s unclear whether there’s sufficient support to win passage and whether the legislation moves state leaders any closer to agreement on a specific plan that can pass both chambers and win Gov. Rick Snyder’s signature.
The House on Oct. 21 passed legislation on a party line vote led by the Republican majority that raises fuel taxes and registration fees to generate half of the funds needed for road repairs with the other half coming from the general fund.
If natural revenue growth fell short to support the use of general funds, the state would need to cut spending elsewhere. Under the plan, the state would increase its per gallon gasoline tax by 3.3 cents with automatic increases down the road tied to inflation but capped at 5%. It would also phase in increases in the homestead income tax credit.
Snyder and lawmakers held talks throughout the summer and early fall on a transportation package but haven’t been able to resolve differences over how to pay for it and the role of tax cuts.
A late August report warned that revenue growth from the state’s rebounding economy would not be enough to offset budget shortfalls if the state ends up tapping general fund dollars to finance road repairs.
The report from the independent public affairs research organization Citizens Research Council of Michigan examines the long-term impact of diverting that chunk of money out of the general fund in light of other spending pressures facing the general fund through 2019.
With a decade-long recession now in the rear window, Michigan has enjoyed revenue growth over the last few years, with forecasts predicting $1 billion in new revenue coming in over the next few years.
Rising employment, a growing rain-day fund and balanced budgets prompted Moody's Investors Service to upgrade the state To Aa1 from Aa2 in July and Standard & Poor's to revise the outlook on its AA-minus rating to positive from stable.
Using general funds also could imperil Snyder's push to rebuild the state's rainy-day fund, a key factor in recent ratings upgrades.