Michigan could see half of its road construction budget disappear by 2012, taking with it scores of repair projects and thousands of jobs in a state that relies heavily on its freeways.

A freefall in gas tax revenue over the last decade has the Michigan Department of Transportation projecting its repair budget for 2012 to be $626 million, a slice of the $1.4 billion spent in 2010. And Michigan barely escaped the same fate for 2011, said Bill Shreck, MDOT director of communications, when it faced an $84 million shortfall in its effort to qualify for federal matching funds.

"Until the 2011 budget, we were never faced with actually leaving federal money on the table," Shreck said. "We'd move things back and forth and sometimes delay projects, as long they didn't compromise the safety of the public."

MDOT shaved funds from its departments and floated a one-year, $40 million loan to avert the crisis for 2011. But the measure only delays the pain for another year. In 2012, the shortage is expected to swell to $120 million.

"We keep kicking this can down the road," said Mike Nystrom, executive vice president of the Michigan Infrastructure and Transportation Association. "We need immediate short-term solutions to keep our system from crumbling, and then we need to move on to long-term solutions."

The 2012 construction season could be the first road budget below $1 billion since the state gas tax was raised in 1996, according to MDOT.

Ultimately, better gas mileage by vehicles using the state's roads and fewer miles being driven is why gas revenues have fallen over the past decade, experts say.

And Michigan can no longer count on the federal government's American Recovery and Reinvestment Act funds, which pumped an additional $252 million into Metro Detroit for 2009 and 2010, said MDOT spokesman Rob Morosi. The stimulus funds helped rehabilitate 46 miles of pavement and repair 34 bridges.
"The money really made a difference, but that's the last of it," Morosi said.

Devastating impact

Fuel consumption by state drivers began to decline once gas prices began to consistently break $2 per gallon in 2004. Between fiscal 2003 and 2009, Michigan fuel tax revenues declined an average of 2.1 percent a year. Combined with ever rising costs for fuel, maintenance, materials and equipment, the impact on Michigan roads is devastating.

According to an MDOT report, 65 percent of its budget came from gasoline taxes, while 32 percent was from vehicle registration fees in 1997. By 2007, it was 52 and 45 percent, respectively, and MDOT predicts the ratio will be 48 and 49 percent, respectively, by 2012. The remaining budget is made up by the diesel fuel tax, plus a diesel carrier tax and licenses.

An MDOT task force report released in late 2008 offered ways to boost road revenues, including raising the gas tax, equalizing the gas and diesel fuel taxes (19 cents and 15 cents per gallon, respectively), hiking registration fees and raising the state sales tax, with part of the revenues going to transportation.
"We pay a sales tax on gasoline here in Michigan, but that money doesn't go toward transportation, but maybe it should," said the transportation association's Nystrom. "If we pay taxes on auto-related items like gasoline, maybe it should be redirected to auto-related expenditures like the roads."

MDOT is predicting funding losses of $120 million to $160 million per year from 2012 to 2015. If it can't come up with matching funds, it could mean the loss of $575 million to $800 million in federal funds for each of those years.

"That will mean not fixing 600 bridges, the cancellation/postponement of 180 road projects covering 385 miles of roads. Plus, we will cancel maintenance projects slated for more than 600 miles of roads," MDOT's Shreck said. "In 2011, our budget will provide 15,800 construction jobs; but in 2012, that will drop to under 8,000 every year until at least 2015."

MDOT has made efforts to economize by reducing maintenance programs, including reducing the mowing of freeways, sometimes to only once a summer. It has also reduced winter plowing and salting and has told county road commissions — which are hired by MDOT to maintain state roads — to severely reduce overtime.

Gas tax hike considered

Four bills have been introduced in the Michigan House — all sitting in the Transportation Committee — to address the funding problem by incrementally increasing the gas tax to 27 cents a gallon, equalizing the gas/diesel tax at 27 cents a gallon and raising vehicle registration fees.

"There's a chance they could be acted on before the end of the year. The problem is getting enough support to do that," said House Transportation Committee Chairwoman Pam Byrnes, D-Lyndon Twp.

Gov.-elect Rick Snyder has repeatedly indicated he is not in favor of a gas tax hike, said his spokesman, Ron Nowling.

"It's not something we need to focus on," Nowling said. "It could bog us down from making tougher tax decisions, like how do we make the overall tax situation in Michigan more palatable so Michigan is a place where businesses can locate and grow?"

But Byrnes said she has seen some Republican support despite Snyder's stance on the gas tax.

"I think some of the Republicans see the need for it," she said. "And it was under the administration of Republican Gov. Engler that we had the last gas tax hike, so it's not like the Republicans would be setting a precedent."

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