House Passes Transportation Budget, Eliminates Sales Tax at the Pump

Posted on June 14, 2019 by John LaMacchia

This week the House swiftly moved the transportation budget out of appropriations committee and the full House passed HB 4246 on a party line vote, 57-52, with all Republican voting yes and all Democrats voting no.

The most significant component of the House transportation budget is that it begins a two-year phase-out of sales tax at the pump. This change would also require a corresponding increase in fuel taxes, which are constitutionally required to be spent on transportation, to ensure the equivalent of all taxes currently paid at the pump go to roads. In the first year this would result in $542.5M in new funding for roads. Between these new funds and cut that were made to MDOT operations and IT budgets, cities and villages would see an increase of $157M. This is approximately 28% more than the current fiscal year and all the revenue would flow thought the Act 51 distribution.

While finding new revenue for roads is a priority, this shift is at the expense of constitutionally protected revenue for schools and local government. Specifically, the hit to local government would be $81.3M. The legislature has committed to holding school and local government harmless. The General Government budget, HB 4234, lived up to that commitment and included an addition $81.3M in general fund revenue for a supplemental constitutional revenue sharing grant program. The funds would be distributed to cities, villages and townships on a per capita basis as described by the Constitution.

In addition to our continuing work to secure new transportation revenue, our lobbying efforts will also focus on ensuring that if this shift is included in the final budget, the $81.3M must be protected by statute in a way that is secure, sustainable and not subject to the appropriation process in the same manner as statutory revenue sharing. As a reminder though, the budget negotiations are still in the early stages, the Senate transportation budget did not reflect this same tax shift and no bills to implement these changes have been introduced.

Additionally, the transportation budget made several adjustments to public transit funding. Local Bus Operating did not receive the $6M increase recommended by the Governor and appears to be held harmless at $190M, but other programs run by the department that serve our seniors and disable population were cut. Funding for Van Pooling was eliminated, and significant cute were made to Specialized Services and Transportation to Work.

While this budget does not reflect the overall $2.5B investment the Governor has asked for, both the House and Senate continue to emphasize that the budget is only one step in the process and that a broader conversation about funding transportation will continue to happen. The League continues to be actively involved in those discussions and will continue to update you as these negotiations continue.

John LaMacchia is the Assistant Director of State and Federal Affairs for the League handling transportation, infrastructure, energy and environment issues. He can be reached at [email protected] or 517-908-0303.

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