Proposal 1 will impact more than just sales tax

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By Jason Ruff
The Meridian Times

Is Proposal 1 right for Meridian?

That is the question everyone is grappling with, as the date of decision draws closer.

Cars dive past a construction cone in Meridian Township.

Cars dive past a construction cone in Meridian Township.

On May 5, Michigan voters will be heading to the ballot box and one of the items before them will be a proposed Michigan sales tax increase. The proposal would increase the sales tax from its current rate of 6 percent to 7 percent

The primary driver behind the proposed increase is the poor condition of Michigan’s roads.

“Michigan roads have been underfunded since 1997,” said Bill Conklin, managing director of the Ingham County Road Department.

The department, which maintains all the roads in Meridian Township, has been losing revenue to increased maintenance costs. The increase, according to Conklin, stems from the rising price of petroleum products. Further, the department’s primary revenue streams (fuel taxes and vehicle registration fees) haven’t been raised for inflation.

Rising maintenance costs and fixed revenue streams have inhibited the department and the state from adequately maintaining the roads and resulted in their current state of disrepair.

In fact, according to Conklin, more than 50 percent of Ingham County’s roadways are rated as being in “poor” condition.

Conklin says that Proposal 1 will help bring in much needed funds to save Ingham County’s roads.

However, the sales tax increase is not the entire story. The resolution also comes with several legislative bills that are tied to Proposal 1. This means that the bills will only take effect if the proposal is passed. If the proposal dies at the polling booth, then these bills die with it.

It is these bills that have some Meridian residents vehemently opposing Proposal 1.

“I am against the whole package!” said Meridian Township Trustee John Veenstra. Veenstra acknowledges that the roads are in desperate need of repair; but the current proposal, as he sees it, comes with too many negative impacts.

One is on higher education.

Part of the proposal stipulates that while a portion of the revenue, estimated to be about $300 million, generated by the sales tax increase will go to the School Aid Fund, funding for public universities would no longer be an allowable use for the fund.

This has caused some people, including Meridian Township Treasurer Julie Brixie, to be concerned. Because Michigan State University is a major employer for Meridian residents, Brixie believes that a decrease in funding could be a major negative impact of the proposal’s passage.

“Because the university is about the fifth largest employer for Meridian Township, and the proposal’s effect on higher ed is not necessarily positive and it appears that higher ed is a loser under this proposal. So the impact on the region for those people who are affiliated with the university could be negative,” said Brixie.

Officials from Michigan State were contacted but were unavailable for comment.

Another part of Proposal 1 would amend the current gasoline tax (19 cents per gallon of gasoline;15 cents per gallon of diesel) to a flat wholesale tax of 14.9 percent, which equates to about 42 cents per gallon.

While the wholesale fuel tax would generate a $1.2 billion annual increase for the Michigan Department of Transportation, according to information published by Ingham County, the majority of the money won’t be used for road repair for several years.

Instead, a significant portion of the revenue initially generated by the fuel tax would be used to pay off the state transportation department’s $2.5 billion debt, which Conklin says is necessary.

Gathered with information from the Governor's office

Gathered with information from the Governor’s office

“The first $800 (million) the first year and the $400 million the second year will be used to repay the debt, which will save the state interest,” said Conklin.

In addition to helping pay off the debt, the plan will help give the road construction industry time to react and prepare for the task of repairing Michigan’s roads. The downside is that Meridian residents won’t see major improvements to their roadways for at least a few years.

The other potential downside with the proposal is that patrons would have to pay more at the pump for a gallon of gas. This has caused mixed reactions among Meridian residents such as Maria Segac.

Segac says that while she is willing to pay 1 percent more in sales tax to help fix the roads, she does not want to pay a penny more for gas.

It is in fact the wholesale gasoline tax reform that would exclusively fund the repair of Michigan’s roadways. The increase in the Michigan sales tax would only make up for revenue lost in the gas tax reform.

Because several funds rely on the current state tax on fuel, the 1 percent sales tax increase would be necessary to replenish any lost revenue.

One such fund is the School Aid Fund.

One of the major sticking points of Proposal 1 would be that it would give $300 million to the School Aid Fund. The $300 million would come from funds the 1 percent sales tax increase. While $300 million is a substantial amount, some believe that the $300 million is not an increase, but rather a replacement.

“The big point is the $300 million for schools,” said Veenstra. “But the dirty little secret is it’s not a $300 million increase, it’s a $300 million replacement for removing the sales tax on gasoline.”

Under the current tax code, part of the gasoline tax goes directly to the School Aid Fund. If the proposal passes, however, then the fund would no longer receive revenue from the gasoline tax. The increase in sales tax to 7 percent would reportedly alleviate those concerns.

However, Meridian public school officials don’t know how, if at all, the $300 million will trickle down to districts.

Dr. Catherine Ash, superintendent of Okemos schools, could not be reached for a formal interview but did reply in an email that she had no indication of any additional funds coming to Okemos schools.

“We do not know the impact of the proposal on the Okemos Public Schools.  The legislature has not given any detail as to how the funds would be allocated throughout the State,” wrote Ash.

Steve Cook, director of finance for the Haslett School District, echoed Ash’s comments in that he has yet to hear of any additional funding coming to his district.

Furthermore, Cook expressed concern that the $300 million may be just a substitute for lost funding.

“Our main concern is that $300 million is going in, but we don’t know if there is going to be a reallocation of resources,” Cook said. “We just don’t know what’s going to happen.”

One thing’s for sure, whether Proposal 1 passes or dies in the May 5 election, the results will have far-reaching effects on not only Meridian Township, but the entire state.

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