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Cotter’s Road Plan Dedicates $700M In Future Revenue, Ends EITC

May 18, 2015

House Speaker Kevin COTTER (R-Mt. Pleasant) unveiled a road-funding plan today that would eventually push $1.05 billion more to roads by “reprioritizing” state funds and by doing away with the Earned Income Tax Credit (EITC). 

Cotter’s plan, which would be phased in over four years, depends heavily on existing General Fund dollars, a pot of money that’s expected grow over the years. 

The four-year plan would dedicate $350 million more from the General Fund next year to roads, $525 million in 2017 and, $700 million in 2018 and 2019. 

Out of the state’s roughly $10 billion General Fund (GF), $284 million currently goes for roads. The Legislature passed a budget for Fiscal Year (FY) 2016 that more than halves that number to $139.5 million. 

Asked if moving $700 million to roads is realistic, Cotter responded that’s it’s “very realistic.” 

“We can do it,” the Speaker said, “if we have the will to prioritize.” 

During a press conference inside the Capitol, Cotter said the plan would dedicate those GF dollars to roads regardless of whether future growth in revenue takes place. But as estimates stand today, Cotter said, the plan would allocate only about 50 percent of the anticipated revenue from economic growth to roads. 

But others aren’t so sure the plan is feasible. 

For example, the House Democratic Caucus released a statement today, calling Cotter’s plan “smoke and mirrors.” 

“Relying on imagined future revenue growth is not a long-term solution that will take us into the future with a solid financial plan to fix and maintain our roads,” House Minority Leader Tim Greimel (D-Auburn Hills) said in the statement. 

Overall, Cotter’s proposal shows a drastic turn from the statewide ballot proposal that failed last week. That proposal, which Cotter supported, would have created $1.9 billion in additional state revenue by increasing the state’s sales tax. 

That ballot proposal would have also increased the state’s EITC at a cost of about $260 million. 

Cotter’s plan provides only minor tax increases and would eliminate the EITC for low-income workers to free up $117 million. 

According to Treasury Department data from 2013, 780,500 people received an EITC with the average credit being $140. 

“We are taking tax dollars from some taxpayers and giving it to others,” Cotter said of why the EITC should be eliminated. 

But Karen Holcomb-Merrill, vice president of the Michigan League for Public Policy (MLPP), called the Cotter plan MLPP’s “greatest fear.” 

“Too many workers earning low wages depend on this to give them a little boost in their meager earnings,” she said in a press release. 

Cotter’s plan also seeks fuel tax “fairness” among electric and diesel vehicles in comparison to regular vehicles. In that fairness, which would increase the tax on diesel fuel, he estimates there would be an additional $45 million in revenue. 

The plan would also shift funds from economic development to transportation, including $75 million in tobacco settlement revenue that goes to the 21st Century Jobs Fund and $60 million from tribal gaming compacts. 

Cotter has argued that road improvements are part of economic development. 

But in a statement today, Steve Arwood, chief executive officer of the Michigan Economic Development Corporation (MEDC), said the plan “severely limits the state’s ability to have an economic development strategy moving forward.” 

“Furthermore, it threatens to eliminate the entire Pure Michigan tourism effort — an industry which supports 214,333 jobs in our state,” he continued. 

In total, Cotter’s plan would phase-in the road funding increase over four years with $522 million in new revenue for roads in Fiscal Year 2016 and $1.05 billion by Fiscal Year 2019. 

The majority of the House Republican caucus stood with Cotter as he unveiled the plan inside the Capitol this afternoon. But those members being there didn’t mean they were endorsing the plan, and multiple GOP lawmakers said afterward that they believe the state likely needs more additional new revenue than the plan provides. 

On the other side of the aisle, Rep. Brandon Dillon (D-Grand Rapids) slammed Cotter’s proposal because of its reliance on future growth, calling it “less of a plan than a prayer.” 

He said dedicating $700 million from the General Fund to roads was not feasible unless lawmakers wanted to throw hundreds of thousands of people off health care, slash school funding or eliminate revenue sharing for local units of government. 

Michigan’s budget already faces a crunch because of $9.3 billion in outstanding business tax revenues and the fact that the state will eventually have to begin paying a share of its Medicaid expansion program. 

“Hopefully, it’s just a political document, and not actually a real plan,” Dillon said. He continued, “The reality is to fix the roads we’re going to have to find some new revenue.” 

Rep. Al Pscholka (R-Stevensville), chair of the House Appropriations Committee, said the plan announced today “is a good place to restart the conversation on road funding.” 

Pscholka continued, “It’s a simple, sensible solution that focuses on fairness now and in the future.” 

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