Michigan officials this month hope to put the finishing touches on a blueprint for spending hundreds of millions of dollars in surplus revenue, a large chunk of which is expected to go to the state’s neglected roads and bridges.
Gov. Rick Snyder and GOP leaders in the House and Senate are working to complete the 2019 budget sometime in June. Most observers indicate that the lion’s share of the surplus funds will go toward public education and infrastructure.
“We are excited the surplus funding will be directed to the governor’s major budget priorities – hundreds of millions of dollars more to improve our roads, a major investment in Michigan’s Marshall Plan for Talent, and funding for school safety initiatives,” Anna Heaton, the governor’s spokeswoman, told Watchdog.org in an email.
The Marshall Plan is a partnership between companies, educators and others to help the state invest in ways to attract and develop talented workers to fill job openings in Michigan.
“The increasing economy has meant that the state has more money to play around with,” James Hohman, director of fiscal policy at the Mackinac Center for Public Policy, told Watchdog.org. Having a surplus of that size is not typical for Michigan, Hohman said.
A major portion of the state revenues may come in the form of state sales taxes on gasoline as fuel prices rise, he said.
“A major proportion of that is going to be the increase in fuel prices,” Hohman said.
The Mackinac Center has been largely in sync with the state’s priorities for the surplus. Michigan needs to spend more to maintain and improve local roads, Hohman said.
“Our roads will decline in quality without further investments …” he said, adding that the surplus funds that will go for roads and bridges represent only a fraction of what the true need is.
“This only stops some of that [decay] a little bit,” Hohman said. “You can’t just fix them all with one-year stuff.”
Schools are also the likely recipient of the extra cash, particularly efforts to improve school safety, state lawmakers have said.
“The state is going to spend more money on education than ever before,” Hohman said, indicating that some of that money will go toward the state’s pension fund, which remains in financial trouble despite recent reforms.
“That retirement system is $29 billion underfunded,” he said.
Hohman expects quick action on the budget issues since Snyder, a Republican, will be working with the Republican majorities in the House and Senate.
Some of the infrastructure improvements proposed last month by the governor and lawmakers might not be the best way to use the money, he said. One example is a proposal for the state to earmark $50 million to help jumpstart improvements to the federally managed Soo Locks in Sault Ste. Marie, which provide safe passage for cargo ships between Lake Superior and other Great Lakes.
A better way to fund the upgrades for the locks would be through federal user fees, Hohman said.
Kurt Weiss, spokesman for the Michigan State Budget Office, said the surplus fund projections are the result of revenue-estimating conferences that occurred in January and May. After analyzing economists’ updated forecasts, the state’s Treasury Department estimates the state will have $313.2 million extra for the 2017-18 fiscal year and $176.9 million available for 2018-19.
“We have about $500 million to play with,” Weiss told Watchdog.org.
So-called targeting sessions with officials from the legislature, Governor’s Office and the Budget Office have already been held, he said. A final agreement on the final budget numbers should come this week or next, according to Weiss.
“Half a billion is a significant number,” he said, noting that this year’s projected budget surplus is a little bigger than what has occurred in past years.
The numbers show that the Michigan economy has performed particularly well this year, Weiss said, noting that sales tax revenues have risen significantly.
“It was the sales tax revenues on this one,” he said. “They came in much higher than the original projections.”
But Weiss cautioned that the extra money should be considered one-time funds and shouldn’t be earmarked to increase the baseline funding for ongoing programs. The Budget Office has proposed that the money go toward things like the state’s rainy-day fund, short-term road projects and other one-time projects, he said.
“You should look at this as a bonus in your paycheck, not an increase to your base salary,” Weiss said.
He expects state officials to wrap up the budget agreements by about June 20.
A group representing more than 500 companies involved in construction projects in Michigan expressed optimism about how state officials were planning to disburse the surplus funds.
“We are extremely encouraged that state lawmakers have made infrastructures a priority and diverted as much surplus as possible,” Lance Binoniemi, vice president of government affairs for the Michigan Infrastructure and Transportation Association, told Watchdog.org in an email. “We still have much to do in investing in our infrastructure in Michigan and will continue to push for more long-term solutions to properly fixing Michigan’s infrastructure moving into the future.”