By DANIEL OPSOMMER
Capital News Service
LANSING – Michigan is at risk of losing nearly half a billion dollars in federal aid for transportation funding in 2011 due to declining income from fuel taxes.
Beginning in October, the state faces an $84 million shortfall in fuel tax revenue to receive federal matching funds, according to the Department of Transportation (MDOT).
But fuel tax hike proposals are stalled in the Legislature.
Without full federal aid, the state transportation budget for 2011 would be $601 million, a 58 percent decline from 2010 when it was $1.4 billion.
“If we don’t resolve our revenue shortfall, we aren’t going to have funding for road and bridge repairs, much less for snow removal and salt,” said MDOT Director Kirk Steudle.
“Drivers pay an 18.4 cent per-gallon federal tax so it would be a shame if we don’t receive our share of funding,” he said.
Projections from MDOT show the state could lose nearly $2.1 billion through 2014 because Michigan won’t be able to match all the funds it’s eligible for.
Those matches provide $8 from Washington for every $2 the state raises.
Reps. Richard Ball, R-Bennington Township, and Pam Byrnes, D-Lyndon Township, are the sponsors of tax hike legislation to close the gap.
Their proposal would initially increase the gas tax from 19 cents to 23 cents a gallon, and the diesel tax would rise from 15 to 21 cents. Then on Jan. 1, 2013, both taxes would rise to 27 cents a gallon.
Ball blamed Michigan’s shrinking population, tightening family budgets and the emergence of more fuel-efficient vehicles for the drop in revenue.
“The people who don’t want taxes of any kind at anytime won’t like this but they need to face reality,” Ball said. “The roads and bridges are deteriorating every year from traffic and the freeze-and-thaw cycles, and the state needs funding to repair them.”
Rep. Wayne Schmidt, R-Traverse City, who sits on the House Transportation Committee, said he opposes a tax increase.
“Transportation funding is a serious issue for our state, but I believe we need to look at alternatives to increasing the fuel tax,” Schmidt said. “We just can’t place anymore burden on the citizens of Michigan.”
Schmidt said he supports a plan by the House Republican Caucus to allocate money to transportation from other areas of the budget to ensure that Michigan receives federal aid without higher taxes.
Meanwhile, Sen. Judson Gilbert, R-Algonac, is sponsoring legislation that would eliminate the gap between gas and diesel fuel taxes by increasing the diesel tax from 15 to 19 cents.
The diesel tax hasn’t risen since 1984, while the gas tax rose in 1997.
According to MDOT, more than 90 percent of the 10,000 miles of state highways and bridges are in good condition today.
Steudle said less than half will be in good condition by 2020 even if the state receives the maximum possible federal funding, and only a quarter of the mileage will be in good condition if the state doesn’t receive federal match dollars.
In addition, he said more than 90 percent of the bridges will be maintained if the state receives all possible federal aid, but only 84 percent will be in good condition by 2020 without the money from Washington.
“Highways would deteriorate immensely if we lose our federal funding because we have to place a greater emphasis on bridge repair, which is also more expensive,” Steudle said.
Under the House legislation, all the extra tax revenue would go into a new transportation investment fund that could be used only for road and bridge repairs.
Ball said, “I want to ensure that the departments receiving this money put it entirely toward road and bridge repair and start tightening their budgets.”
The House proposal would also create a commission to study and recommend long-term alternatives for the current fuel tax system.
And that’s an issue gaining attention in the push for electric and hybrid vehicles.
Sarah Hubbard, senior vice president of government relations for the Detroit Regional Chamber, said the current decline in gas tax revenue will accelerate as the number of electric and hybrid cars increases.
Mike Nystrom, vice president of government and public relations at the Michigan Infrastructure and Transportation Association, said, “Altering and raising vehicle registration fees is one option being discussed because those vehicles still have four tires on the road, and they’re a user of our transit system.”
MDOT’s Steudle said implementing tolls isn’t a practical solution because the revenue wouldn’t be enough to cover current shortfalls and because Michigan’s highways were built with federal subsidies under an agreement they would remain free. Under that agreement, the state would have to repay the federal government for highways converted to toll roads.
Steudle noted that most states collect tolls to tax people traveling through their state.
“A lot of the driving we do in Michigan is just us because we’re a peninsula,” Steudle said. “In Ohio and Indiana, 70 percent of the traffic on interstates is driving straight through.”
Ball and Byrnes’ legislation is pending in the House Transportation Committee, while Gilbert’s bill is pending in the Senate Transportation Committee.
© 2010, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.
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By DANIEL OPSOMMER