Road Funding Ballot Breakdown: What Your Community Needs to Know
On May 5,2015, Michigan voters will be asked to approve a 1 cent sales tax increase to help fund Michigan’s roads and schools.This proposal came about as a last-ditch effort by the Michigan Legislature to find a desperately needed road funding fix during the lame duck session in December 2014.
It’s All or Nothing
What will actually be on the May ballot is only a small part of the total package that is tied together in this proposal.The Legislature used an often depended upon process that ties all of the bills in a package together ensuring that for one to become law, all of them have to become law.Having done it in this situation means that if the May ballot issue doesn’t pass, the whole nine-bill package goes down too.
State Constitution Amendments Need to be Understood
The amendments to the State Constitution are relatively straightforward, but it seems that very little of the language has anything to do with roads or the distribution of road funding.The package of bills covered later in this article is where the distribution of funds really happens.It is anticipated that this will be where the difficulty in understanding this proposal will come.
House Joint Resolution UU proposes to amend Article IX of the Constitution in three sections:
- Section 8—changing the ceiling on the sales tax from 4 to 5 percent. The additional 2 percent that was added through Proposal A was done separately hence the increase from 4 to 5.
New language will also be added to Section 8 that states that after Oct. 1, 2015, no sales or use tax will be charged on the sale or use of gasoline or diesel fuel.Up until this point, sales tax was assessed on every dollar spent on these purchases and this change now guarantees all fuel taxes assessed to go to roads rather than the tax system that currently exists. - Section 10 also needs to be amended to reflect the 4 to 5 percent tax increase. This section deals with the portion of sales tax collection that goes to local units of government for revenue sharing.
- Section 11will be changed to eliminate access to the School Aid Fund by higher education, which currently receives ~$200 million from thisFund.However, there will be an expansion in where school aid money can be spent, including “public community colleges, public career and technical education programs, and scholarships for students attending either public community colleges or public career and technical education programs.”
The switch between funding for higher education to community colleges would take fewer dollars away from PreK-12 public schools and protect Michigan’s K-12 schools from a large state liability to fund higher education.
Also in Section 11, an earmark of 12.3 percent of the use tax would be designated for the School Aid Fund.The use tax is an area that continues to grow and should result in anincreasing revenue source for the School Aid Fund in the long term.
Tie-Barred Bills Explained
As mentioned above, nine other bills are a part of this tie-barred package, plus a couple of others that were passed, but are not contingent on the May 5 vote.
Following are the bills that,in addition to those that would implement the language covered in the constitutional changes, would go into effect when the ballot proposal passes:
House Bill 5477 will move Michigan’s current fixed rate of 19 cents per gallon to a tax based on 14.9 percent of the average wholesale price of gasoline and diesel fuel.This creates a projected revenue source of $1.2 billion for Michigan roads.
Senate Bill 847 would amend the Income Tax Act to increase the earned income tax credit from 6 to 20 percent of the credit allowed under the federal Internal Revenue Service code.The bill also reduces the income qualifiers for the homestead property tax credit for certain populations.These two changes are being made to help offset the regressive impact that an increase in the sales tax has on our lower-income citizens.
House Bill 4630 would implement increases in certain truck registration fees and eliminate “depreciation” of ad valorem tax rates for passenger cars, vans and light trucks.
Two other bills of great importance to education that passed as part of this discussion are Senate Bills 80 and 423.Senate Bill 80 is tie-barred to the rest of the package and includes an appropriation of $40 million to at-risk funding.
Senate Bill 423 requires the state of Michigan to conduct an adequacy study on education funding.Specifically, the Department of Technology, Management and Budgetwill have to enter into a contract for a comprehensive statewide cost study to determine the sufficient resources per pupil to provide a public education that enables a pupil to demonstrate successful completion, in terms of proficiency, of all of the credit requirements of the Michigan Merit Standards.
This study must be completed within one year of the effective date of the bill and is similar to those conducted in many other states in the country.It will give Michigan’s schools and legislators real data on which to base future funding decisions.
Money Talks
Based on estimates when the bill package passed, the state is estimated to see an increase in revenue of $1.7 billion.The distribution of those funds would be as follows:
- $1.2 billion per year for road agencies; includes the State Trunk Line Fund, county road commissions, road funding for cities and villages.
- $300 million in additional revenue for the School Aid Fund; equal to roughly a $200 per pupil increase.
- $130 million to the Comprehensive Transportation Fund for public transportation purposes.
- $95 million for constitutional revenue sharing payments to cities, villages and townships.
You can expect to see campaign materials and ads, both for and against the ballot proposal in the coming months.There is expected to be a diverse coalition of entities showing support, while most of the opposition is expected to come from state and national anti-tax groups like Americans for Prosperity.
Prepared by Michigan Association of School Boards, February 2015
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