Tough Road Ahead

(Editor's note: This is an edited version of a commentary that Capitol Affairs Specialist Jack Spencer of Michigan Capitol Confidential writes for daily newspapers in Michigan.)

One thing that can't be said about Gov. Rick Snyder is that he's ducking tough issues. When he ran for office he promised change and reform. Like it or not, no one who has been paying attention can claim he hasn't delivered on that promise.

It's an irony of politics that so many voters say they want change, but when real change occurs it is always contentious. Most voters also say they want leaders who say “damn the torpedoes,” and do what they believe should be done. Gov. Snyder has clearly been doing just that.

In the governor’s first year he moved toward reducing the disparity between government employee salaries and benefits and those in the private sector, while also breaking the longstanding taboo against cutting K-12 per pupil spending. As if that wasn't enough, in the same year he pursued what was to be an unpopular bridge project and got rid of the tax deduction on pensions for those younger than 67 years of age.

He spent much of his second year dealing successfully with the political backlash from the unions. Then, as the year came to a close, he endorsed, asked for, got and signed right-to-work legislation.

Now, as he starts his third year in office, Gov. Snyder has set his mind on road funding.

Supposedly the administration and Legislature will look for $1.4 billion for road funding from existing resources. However, the handwriting appears to be on the wall. It's a sure bet the Legislature has no stomach for diverting $1.4 billion from existing government programs. In the end, the quest for road funding will take the form of tax or fee increases — possibly with a portion of the dollars coming from elsewhere.

Anyone who heard Gov. Snyder's State of the State address last week should have sensed that he and legislative leaders are all on the same page. What's not clear is whether all the details have been ironed out, but most of the basic concepts probably have been.

However, attempting to get lawmakers to vote for significant fee and/or tax hike is a dicey proposition. Perhaps the administration and legislative leaders already have the votes lined up. Perhaps the measures they want will easily zip through the process.

Also, keep in mind that many portions of Michigan's business community are in favor of raising fees or taxes for road funding. Considering that the business community is often the loudest faction that fights against higher taxes and fees, its advocacy for passing new road funding measures could cause the legislature to do so quickly.

Yet, complications can arise — and usually do.

There's an equal chance the effort to pass the legislation could be a rough trip, possibly even ending up with a detour. At this point we can make a pretty good guess that if the measures haven't passed by April or May that means they're probably in trouble.

Members of the state House and Senate will be running for re-election in 2014. This means that by May, all of the lawmakers' primary seasons will be just over a year away. It should also be noted that voting for tax and fee hikes can potentially hurt Democrats politically as much as Republicans.

Last year, a plan to increase the fee for auto registration had bipartisan support. But a lot has happened since then. Will the Democrats be onboard this time? Maybe, but maybe not. Overall, they are probably in a very uncooperative mood. What's more, they'd love to be able use the fee and tax hikes against their GOP rivals.

It seems unlikely that the Democrats would willingly give “yes” votes to Gov. Snyder for nothing. So, if enough Republican lawmakers can't be found to pass the road funding measures, some dealing and bargaining will have to take place. There's never a better time for deal-making than during the budget process — which plays out in the late winter and spring. That gives us another reason to expect this issue to be pushed earlier, rather than later.

Something to watch for is a Plan A and a Plan B. This is a tried and true method of getting votes from otherwise reluctant lawmakers and works like this: Gov. Snyder's administration would introduce Plan A, with the intention of letting the Legislature change it into a Plan B. 

This allows legislators to offer amendments that make the plan more palatable. Obviously, this lets the lawmakers to go back to their districts and say: “At least we stopped them from doing something worse.” In the end the final version of the legislation looks like a compromise. In reality, it's basically what was being aimed for in the first place.

A term we’re already hearing a lot regarding the road funding issue is “user fee.” The idea is that raising the gas tax or auto registration fees is not the same as increasing other taxes.

According to the user fee argument, those who use the roads are the ones who should be paying the fullest freight for their upkeep. Some say that hiking these taxes is just raising the user fee on them.

Some may balk at this as a distinction without a difference. Short of creating toll roads or some odometer-based payment system, the gas tax is much closer to a true user fee than say, financing road repair from the property or use taxes. Hiking auto registration costs is a step further away from a true user fee and this is perhaps one reason it has been dubbed the “birthday tax” by the Mackinac Center. Registration renewals happen around the time of one’s birthday.

The user fee argument would be easier to swallow if all of the taxes Michigan levies on auto fuel went to road and bridge maintenance. But they don’t. The state levies a 6 percent sales tax on fuel purchases that mostly goes to education spending.

If Gov. Snyder's Plan A on road funding were to include any diversions of that sales tax away from education, all bets would be off. Such a structural change could win support from some conservative groups and Republican lawmakers who would otherwise oppose the plan. In addition, it could bring the Democrats to the table in a hurry.

Under that scenario, a “compromise” deal that didn't include changes to where the sales tax goes might be a way the administration could get Democratic support. Of course, this strategy would only work if the Democrats were convinced Gov. Snyder wasn't bluffing.

All things considered, politically, a bipartisan vote would be better for the governor and the GOP lawmakers.

If Republicans alone were to pass the tax and/or fee hikes, the Democrats can be counted on to constantly remind the voters about it. What's more, the road repairs won't take place overnight. Voters could get mighty testy if they've been hit with higher fees and taxes but are still driving on bad roads.

Gov. Snyder might have already played the sales tax for education angle with the Democrats behind closed doors. If he has — and it worked — he'll get the votes he wants. It is also possible that his plan will include sweeping structural changes that might totally transform all of the dynamics.

However, if the initial strategy (whatever it is) goes awry, a protracted battle over road funding might be in store. Should that turn out to be the case, things could get very interesting.

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