By John Lindstrom
Publisher
Posted: February 14, 2019 3:51 PM

We are now getting down the featured match of the year. Governor Gretchen Whitmer has held her State of the State Address and said she will offer a proposal on transportation funding in her budget which is expected in now less than two weeks. Of course, all anyone can imagine is she will call for a tax increase of some kind and has to call for a tax increase if the state is going to finance the more than $2 billion analysts say is needed to fix and maintain our road system, the $2 billion she promised to add for roads in her first budget.

And in this corner the Republican leaders of the Legislature have indicated they might go along with more revenue for transportation, but are not as yet cozying up to a tax increase.

Meanwhile, you have all the contenders in the preview fights – K-12 schools, colleges and universities, water infrastructure, mental health – trying to punch out some more money for their needs and wondering if anyone will pay attention to them.

Ah, so complicated. Former President Franklin Roosevelt had it so easy when he was asked how we would pay for World War II. "Tax and bond, and bond and tax," he told Congress. Try getting away with that now.

Do we need a tax increase to pay for what almost everyone agrees are critical needs to our roads and other services? How do you know when a tax increase is needed?

Again, so complicated. There are many people, one can find them easily, who will argue we don't need a tax increase because if we just get rid of the waste, fraud and abuse we would find gadzillions in loot. Yeah, no. Greater efficiency is always needed and one has to assume at least a few state workers aren't completely honest (we are all human, after all). But there is no $1 billion or more in the state side of the budget that can be realized through eliminating WFA.

Well, we could just stop spending on things we don't need. Sure, but define what we don't need and see if you can get unanimity on that. Spoiler alert, you won't. Every penny the state spends someone claims and trying to take it away from them will be another major fight. Especially if you are looking at cuts of, again, $1 billion to $2 billion.

Can you justify a tax increase based just on the numbers? Maybe, but that is still more a political than mathematical question.

From the 2000-01 fiscal year to the 2018-19 fiscal year, Michigan's total budget went from about $36.9 billion to $55.9 billion. Yowzer, many will say. You can't find $2 billion out of that? Well, the total budget includes federal money of which the state has no real option in how it is spent. From 2000-01 to the current year, federal revenues went from $10 billion to $22.4 billion, or 27.1 percent of the total budget to 40.1 percent. (These are all figures from the Senate Fiscal Agency).

Interestingly, since 2008-09 the federal share of the state's transportation budget went from 52.6 percent to 27.2 percent now. A big part of that is federal funds are down by about $1 billion from 10 years ago, and the state has raised the gas and registration taxes so state revenues are up by about $500 million in transportation.

To fix the roads, there are plenty of people who will say, sure, raise the gas tax. But by how much? A panel of former legislative leaders said over 10 years it should increase by 47 cents a gallon. Is that too much?

There are other options still. Moving the sales tax charged on gasoline to transportation from schools is talked about, but now you have a constitutional problem that has to be okayed by the voters, which is a political problem galore. And if it passed, estimates from the House Fiscal Agency are that $610 million could flip over to roads instead of schools. Which will mean the Legislature will have to find another $610 million to replace the lost school money.

.

You could do a kind-of sideways tax increase maybe. The state could extend the sales tax to more services and require any part not going to the schools go to transportation. Again, big political headaches. Anyone remember the ill-fated sales tax on services from 2007 that was repealed after about a month?

Or you could just say, look, the state is $10.4 billion below the revenue limit set under the Headlee Amendment, just let's raise taxes for crying out loud.

Either way, lace up the gloves and get ready for a slugfest of some sort.