Washington — The coronavirus pandemic has decimated state and federal road funds, and that means less money for future highway and bridge projects in Michigan.
When stay-at-home orders in Michigan took hold in mid-March due to the COVID-19 outbreak, few had reason to fill up their gas tanks as often as they usually did. As a result, collections from taxes collected for every gallon at the gas pump — 26.3 cents from Michigan taxes and 18.4 cents from federal taxes — have fallen steeply.
Michigan expects to have enough cash flow to sustain the state’s 2020 construction program, which was mostly put out for bid for construction work prior to the coronavirus shutdowns, according to Jeff Cranson, a spokesman for the Michigan Department of Transportation. But there are no guarantees beyond that.
“As stay-at-home orders were taking effect, we saw huge decreases in the amount of driving,” said Jim Tymon, chief operating officer and director of policy and management for the American Association of State Highway and Transportation Officials. “And as a result, we saw a corresponding decline in the amount of revenue for transportation projects.
“For state and local governments, the pandemic has been a huge hit to the core revenue source for transportation projects.”
In April, money going into the Michigan Transportation Fund that pays for repairs and construction of state highways — those that begin with the prefix M-, such as M-1 and M-22 — fell nearly 15% from the same period a year ago, from $249.2 million to $212.8 million, according to Cranson. That followed a nearly 12% decline the month before — from $282.6 million to $249.5 million.
Money for that state highway fund comes from the Michigan gas tax, along with vehicle registration and auto dealer fees, which slowed to a trickle after dealerships were forced to lock their doors. From 2016 to 2019, Michigan averaged about 931 miles of reconstruction and rehabilitation and 2,057 miles of capital preventive maintenance on state highways annually.
In addition, Michigan typically receives about $1 billion per year from the federal highway trust fund, which is supported by federal gasoline taxes. That money funds repairs on the state’s U.S. highways and interstates.
Nationwide contributions for that fund dropped from over $3.5 billion in April 2019 to a little over $3 billion in April 2020.
Cranson said Michigan has heard nothing from Washington yet about reductions in federal highway funding.
With Michigan and other states beginning to gradually reopen, traffic has been picking back up, and funds are expected to grow as factories, retailers and other businesses reopen. But Cranson said Michigan will still feel the impact of the lost revenue as it plans for future construction seasons if Congress does not step in.
“As in many states, Michigan officials have had to explore various means of raising revenue at the state level because Congress has neglected the issue for so long,” he said.
Calls for federal help
The federal government usually spends about $50 billion per year on roads nationwide, but the federal gas tax only brings in $34 billion. The gas tax has not been raised since 1993, and there was little appetite in Washington for hiking it even before the economic turndown caused by the pandemic.
Congress has turned to other areas of the federal budget in recent years to close the infrastructure funding gap, most recently transferring $70 billion to help cover five years’ worth of transportation spending that will run out in 2020.
Michigan is hardly the only state experiencing gas tax woes due to the coronavirus pandemic. Sixteen states have requested assistance from the federal government for their transportation departments, according to the American Association of State Highway and Transportation Officials, which is calling for a $50 billion bailout for state transportation departments.
Michigan did not submit a letter, but the state is supporting the organization’s efforts to build support for the transportation department bailouts.
The Democratic-controlled U.S. House of Representatives has included $15 billion for state transportation departments in a proposed $3 trillion-dollar rescue package. The idea of bailing out state governments has faced resistance in the Republican-led U.S. Senate, where GOP leaders have suggesting letting states in financial trouble declare bankruptcy.
Tymon said Congress has a responsibility to step in if it wants to see the kind of construction projects that typically take place in the busy summer months.
“If the federal government doesn’t step up and provide kind of backdrop, it’s going to result in some states pulling back on projects that they planned to do this summer,” he said. “And some state DOTs are going to have furlough employees.”
Some in Washington have begun calling for an infrastructure corps to put people back to work, similar to the Civilian Conservation Corps of the Great Depression. That has gained little traction so far.
President Donald Trump has pushed for an infrastructure bill that could spend as much as $2 trillion over 10 years. But so far little has been done to address larger infrastructure problems.
U.S. Rep. Andy Levin, D-Bloomfield Township, said he is “very optimistic” that Congress will take up a major infrastructure package in the summer.
“We have to do something to save our state and local governments,” he said. “It’s an absolute must, and now with this crisis, it takes on an added dimension of helping our economy recover.”
U.S. Rep. Bill Huizenga, R-Zeeland, believes President Trump is still interested in signing a large infrastructure package, despite false starts that have put such endeavors on the back burner.
“I think he truly still does believe infrastructure can and should happen,” he said. “Most economists will tell us that if you’re doing deficit spending or stimulus, spending money on infrastructure at least has a lasting impact. The question is, will there be a different way to fund some of these plans?”
Larry Willis, president of the AFL-CIO’s Transportation Trades Department, said Congress should be looking to backstop state transportation departments immediately and preparing to reauthorize the law that allows for gas tax collection at the same time.
“We’re in the greatest economic distress since the Great Depression probably,” he said, “and investing in infrastructure and doing it today is absolutely the right approach.”
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