Headlee and the Road Funding Debate

In the SEMCOG report Running on Empty [link to library item], there is discussion about the measures Dick Headlee took to prevent the legislature from taking their financial problems and shifting them to local governments. The recent vote by the Michigan House of Representatives to divert money designated for local government operations into the road fund is the perfect example of what Headlee opposed.

Running on Empty details how the state has been divesting itself from supporting local government operations, this despite a constitutional requirement to do so. One of the first great shifts was breaking the legal promise to distribute 21.4 percent of the first four cents of the sales tax to local governments under the statutory revenue-sharing formula. About a sixth of all sales tax revenues generated in the state come from the sale of motor fuels.

Now the House wants to fund roads by shifting the revenue from the tax on gasoline into the road fund. In doing this, the House is shifting about $1 billion a year out of the school-aid fund and revenue sharing for local governments. Politically, this is a fairly easy vote. The legislature takes the credit for fixing the roads, no new taxes are raised, and the financial implications of the shift become someone else’s problem.

Running on Empty also looks at the growth of state revenues over the past decade compared to the growth in local revenues or, more specifically, the lack of growth in local government revenues. While the state has been struggling with six percent annual increases for state operations over the past decade, local governments have seen virtually no growth over the same period of time.

House members boast that their plan protects schools and local governments from decreases in yearly appropriations. They conveniently ignore that the House plan effectively siphons off the better part of revenue growth for schools and local governments for nearly the next decade. Impact on the state budget: Virtually none. Why wouldn’t someone vote for a plan where the person voting can take all of the credit and doesn’t need to deal with any of the consequences?

Article IX Section 30 was added to our constitution by Mr. Headlee to deal specifically with this type of proposal. The House did not violate the constitution, at least not this particular section, with their proposal. But that is because of a technicality. They certainly violated the intent of the language created by Mr. Headlee and approved by the citizens of the state.