by Gongwer News Service
December 22, 2008

Amidst a heated debate, legislators and interest groups did their best to get bills passed that would increase funding for roads. But the complexity surrounding transportation funding restructuring and the controversy over the impact on the already struggling economy proved too much to work out a solution in the space of time allotted in lame duck session that lurched to a close late Friday morning after a 25-hour session.

The five-bill package that would raise revenue by, among other things, taxing the wholesale instead of retail cost of gas, has been the subject of debate for some time. But urgency to move the bills came about a month after the state’s Transportation Funding task force released a report saying Michigan’s economic problems will only get worse if lawmakers don’t act on increasing transportation revenues and addressing infrastructure needs.

Governor Jennifer Granholm acknowledges the structural problems in trying to finance the state’s road and other transportation issues with a flat tax, but says there is no appetite for a tax increase in the current environment. She also does not expect the issue to be resolved early in 2009.

She would support a shift to a different system, though the details of what she backs have not been made public, and the governor has called for modernization of the vehicle registration fees.

While Ms. Granholm said late last week that she doesn’t think the state’s inability to provide matching dollars will prevent it from receiving federal funding under a stimulus package expected to include billions of dollars in infrastructure projects, her administration has repeatedly said that getting the health of the state’s transportation fund in order in the meantime is needed.

Facing a constitutional deadline, the House passed the bills as shell measures in early December in hopes that some agreement could be reached on making changes to the transportation funding system in order to draw more money for road repairs, public transit and other systems.

But gas station owners and others in the trade have said that by increasing newly lowered gas prices, legislators would cut out one of the last economic stimuli left in the state.

The Michigan Petroleum Association/Michigan Association of Convenience Stores warned lawmakers that the bills would give Michigan the highest gasoline tax rate in the country, slapping an additional $1.5 billion in fuel costs on drivers.

In addition, the industry said, the idea of basing fuel taxes on the wholesale cost of gasoline and diesel fuel, instead of the retail price as currently done, will create a system “so complex and cumbersome, no one who will have to implement it or use it could explain it without charts, graphs, pictures and maybe divine intervention.”

But the transportation task force said not investing the minimum amount of money in transportation would cost the state 126,000 jobs, adding that it would also bring in $41 billion in other economic benefits yearly.

Michigan Petroleum, in a memo to lawmakers, said the group agrees that Michigan needs more road funding.

However, the group said, “Michigan’s economy is in far worse shape than its roads,” and there are less complex options to get the state needed road funding that wouldn’t put wholesalers and gas stations out of business.

Among the industry’s suggestions is that lawmakers eliminate gasoline and diesel taxes altogether and increase the state sales tax with the increase dedicated to roads.

Another layer of complication in the issue comes in the form of possibly trillions of federal infrastructure dollars in January that some say are at stake if the state fails to get its house in order.

While lawmakers have been intensely busy the last few weeks debating the merits of the governor’s preferred plans and all of the options on the table, a lack of time, coupled with increased pressure from interest groups last week meant the issue will have to wait until next session.

Officials said lawmakers don’t intend to ignore the transportation system, but because proposals to boost funding for the system were so varied, lawmakers wanted more time to review the ideas before moving ahead with a concept.

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