Michigan Senate panel rejects Whitmer gas tax, as budget dance continues

A Michigan Senate panel Tuesday excised Gov. Gretchen Whitmer’s proposal to raise the gas tax by 45 cents to pay for road repairs, hardening the divide over road funding between a Democratic governor and a Legislature controlled by Republicans.

Senate Republicans said they instead intend to divert $600 million in state income tax revenue to road repairs in 2020, a year earlier than planned. That funding, earmarked in 2015 as part of a $1.2 billion road-funding legislative package, will be sped up with the use of $132 million in one-time money, according to a Senate transportation budget adopted on a party-line vote.

May 31, 2019: See how much a 45-cent Michigan gas tax might cost you

As expected, the seven-member Senate transportation budget subcommittee did not include Gov. Gretchen Whitmer’s proposal to raise $2.5 billion by hiking the state’s gas tax, currently at 26.3 cents per gallon, by another 45 cents over a year.

Republicans, led by Senate Majority Leader Mike Shirkey, R-Clarklake, have said they will develop a longer-term road-funding proposal this summer that will be considered separately from the budget for the 2020 fiscal year, which starts Oct. 1. That’s an idea Whitmer already said she opposes.

In a statement Tuesday, Whitmer’s office said the governor will veto the Senate’s roads budget if lawmakers send it to her as written.

“The governor stands ready to work with the Legislature but the Senate budget passed today won’t do anything to actually fix the roads, and could actually make things worse,” Whitmer spokeswoman Tiffany Brown said. “If this plan reaches her desk, the governor will veto it.”

In the short term, that means the Senate’s 2020 roads budget as adopted Tuesday does not include any new funding tool for roads, whether from a gas tax, a registration fee increase, or any other source.

“It’s money that we have in the budget. We know that it’s revenues that we’re getting,” said Sen. Wayne Schmidt, R-Traverse City, chairman of the Senate’s transportation budget subcommittee, of the 2020 budget adopted Tuesday.

The political dance over building Michigan’s next budget will continue throughout the week, as Republican-majority Senate budget committees begin to approve spending plans for a number of state departments. Whitmer’s gas-tax proposal was but the first step. Once the House and Senate each put forth their budget plans, the final details are negotiated between the governor’s office and Legislature, with no resolution expected anytime soon.

All five Republican subcommittee members voted Tuesday to pass the party’s roads budget for next year; both Democratic senators on the panel opposed it.

On top of $325 million in diverted income taxes that was scheduled to phase in next year as part of the 2015 roads package, the Senate transportation budget would dedicate another $132 million from the state’s general fund to county and city road agencies. It also would restore an earmark of $143 million from anticipated online sales tax collections, the result of a recent U.S. Supreme Court decision, to roads. Whitmer instead has said the state should use that money for public schools, budget spokesman Kurt Weiss said.

Of Whitmer’s gas-tax proposal, Schmidt said: “It’s money that we don’t know that we’ll have. No matter what your thought is on a gas tax — whether you want it higher, lower, whatever it is — that’s the future. We know what we have today.”

Whitmer is at odds with Republicans who control the state House and Senate over road funding.

The first-term governor, who rode into office on a campaign slogan to “fix the damn roads,” says legislators have the opportunity to cast a single vote and solve some of Michigan’s most pressing problems — repairing crumbling roads and improving struggling K-12 public schools.

Multiple expert analyses have pegged Michigan’s road-funding need at more than $2 billion, on top of the $1.2 billion lawmakers passed in 2015. The Michigan Department of Transportation has said the $1.2 billion needed four years ago was strictly for the state-owned network of freeways and highways, but that amount ultimately was divided among the state, counties and cities.

“If we don’t find long-term new revenue, there is no reason to think that the pavement is going to get any better in Michigan in the long term,” MDOT spokesman Jeff Cranson told Bridge after the Senate subcommittee passed its roads budget.

“We still like the governor’s plan,” Cranson added. “It gets the most pavement to the best condition in the shortest amount of time.”

Republican lawmakers have pushed back on the size of Whitmer’s proposed gas tax increase, as well as a related plan to give the bulk of the new $2.5 billion raised from higher gas taxes to MDOT and major local roads that carry the most traffic.

Schmidt, the subcommittee chairman, said he is exploring multiple options for long-term funding. He added that he would prefer to find a funding source for roads that could be dedicated and transparent, rather than one from which money could be diverted to pay for other priorities in the state’s $10.7 billion discretionary general fund.

“People want to know, when they buy something, where those tax dollars are going,” Schmidt said. “I think the clearer it is, the more dedicated it is, the more likely people will accept whatever the future road-funding plan might be.”

Either way, taxpayers need to see what Republicans intend to introduce as a longer-term alternative to Whitmer’s proposal to raise the $2.5 billion needed for road funding, said state Sen. Adam Hollier, D-Detroit, who voted against the Senate’s roads budget Tuesday.

Hollier said Whitmer’s road-funding proposal, which he supports, so far is the only option on the table that raises enough money to adequately fix the roads. Republicans, he added, have had months to put a long-term plan on the table and have not yet done so.

“We now have a budget that says that roads are no more important than they were last year,” he said. “Either they don’t have a solution, don’t have an alternative, or they’re not willing to discuss it.”

House Republicans, meanwhile, continue to make progress on a road-funding budget but have not committed to a deadline to release it, spokesman Gideon D’Assandro said. He declined to discuss details of what the House plan might include.