Diving deeper into the road plan
Published 9:11 am Thursday, November 12, 2015
The Michigan House of Representatives, Senate and Governor finally agreed on a plan to fix our roads and bridges, after several years of debate.
This compromise plan supplies $1.2 billion, on an annual basis, to go towards transportation funding. It supplies those funds gradually over the next several years rather than all at once.
There were fears that doing it in an “all at once” fashion would raise the costs of road repairs because of the sudden increase in demands on the road building industry.
The roads plan calls for increases in gasoline tax (7.3 cents per gallon) and increases in registration fees (20 percent). Those dollars bring in half of the total $1.2 billion. The other half of the funds ($600 million) will come from existing state general funds, requiring the Legislature to carefully prioritize its spending.
I would like to give readers a broad overview of the state budget, in order for you to understand what it means when the Legislature dedicates $600 million from our general fund. Readers should also note that, historically, all road funding came from “dedicated” revenue (gas tax, registration fees) rather than from the general fund.
We chose to spend $400 million from the general fund for roads in this year’s budget because we didn’t have a new transportation bill agreed upon yet.
There are a lot of numbers in this article, and they come from the state 2015-16 budget and some historical facts.
The total state budget is $53.6 billion. About $23 billion of that is money that comes from the federal government into our state, dedicated for certain purposes, such as health care. Another $20.25 billion of that money is constitutionally or statutorily dedicated to certain restricted areas, such as the School Aid Fund. Approximately $395 million of the total is also dedicated for certain purposes, coming from local governments and private industry for specific services.
That leaves $9.87 billion for the general fund.
The general fund in 2000-01 was $9.74 billion. It is only 1.4 percent larger this year, and there were no general funds used in 2001 for roads; this year’s budget dedicated $400 million to roads. This means that in real dollars not adjusted for inflation, the state is spending less in general funds, outside of roads, than it did 15 years ago. The number of state employees has dropped by 25 percent over that time.
Of the 50 states, only Indiana has seen less expenditure growth over the last 10 years than Michigan.
The Department of Corrections uses $1.9 billion of our general funds, overseeing more than 100,000 people either in prison, on probation or on parole. Higher education gets $1.4 billion. Health and Human Services uses $4.1 billion. The State Police are funded at $376 million this year. Debt service and building rent cost the state $411 million this year. About $400 million of general fund money went to fund roads this year. And $198 million went for Talent and Economic Development. The remaining funds totaling $1.03 billion are used to run 12 state departments, the Judiciary, the Legislature and the Executive Offices.
I apologize for all the numbers, but I know that certain readers will enjoy diving into the details. The bottom line for everyone to see, however, is that dedicating $600 million from the general fund to go to roads is a very big deal.
Almost everyone recognized that the entire $1.2 billion in needed road funding could not come from the general fund, but there was a strong desire to raise taxes and fees as little as possible.
The roads plan that has passed is a very conservative plan. It is not a “big government” plan, but rather limits the size of state government. The plan even includes an increase in the Homestead Property Tax Credit, and future cuts to the state income tax that will take place if there are certain levels of growth in state revenue.
I hope that these details help those of you who love the numbers.
If you have questions, as always, please contact my office at (517) 373-1796 or DavePagel@house.mi.gov.