For Republicans who will be in charge of state government next year, twin pledges to improve Michigan’s economy and cut taxes fit neatly within the frame of what voters want while holding true to the core mission of their party.

Gov.-elect Rick Snyder and the Republicans with fat majorities in the House and Senate will find it tougher to reconcile the obvious: There are times when the economy demands financial support for the services government inarguably has to provide.

Michigan's economy can't get better when its infrastructure is deteriorating. The Granholm administration’s last five-year plan for guiding state transportation spending, released on Nov. 18, may be a draft for now, but when the final document is adopted early next year as the incoming Snyder administration gets started, the facts will remain the same.

A systemic decline in transportation revenues offset by years of borrowing, federal stimulus and budget gimmickry has reached the point that Michigan no longer can improve the state’s road system faster than it is deteriorating.

Revenues from the state’s three main sources -- gas tax, diesel tax and registration fees -- are down a quarter billion dollars from peak collections seven years ago. In the 2012 budget, the state will be short $120 million needed to leverage some $700 million in federal highway aid.

About 180 highway projects would be delayed or scrapped. Thousands of well-paying construction jobs would be lost.

The 2011 year was saved only because lawmakers chose one-time solutions to match that federal aid rather than tackling the core set of problems.

Adjusted for inflation, the purchasing power of transportation revenue collected next year will be half that collected in 2003.

Motorists, however, are not wrong when they assume that they are already paying enough as it is. While Michigan has the 34th highest gas tax rate in the country, it’s in the top five when you factor in the 6-percent sales tax on gas purchases. At a $2.50-per-gallon retail price, the combined per-gallon tax is 33 cents.

Because about 39 percent of all transportation revenue collected under the 1951 formula goes to the state with the rest earmarked for counties and municipalities, lawmakers would have to pass a 7-cent increase in the 19-cent gas tax just to match federal aid. That would bring the effective rate to 40 cents.

Transportation advocates wanted lame duck lawmakers to take up a bipartisan House bill that would add 8 cents to the gas tax rate by 2013. Snyder, who said during the campaign that he was opposed to a gas tax hike, isn’t lobbying that the job be done before he takes office on Jan. 1. House Democrats aren’t going to push through a tax increase before they give up control of the chamber. Senate Republicans aren’t interested, anyway.

One alternative would scrap the sales tax on gas purchases and replace it with a gas tax. That would generate more than $600 million, $234 million for the state. It would also create a $500 million hole in the school aid fund for K-12 education that receives the bulk of sales tax revenue.

So Snyder and lawmakers have a limited set of options. Pass a tax increase, cut the K-12 foundation allowance by $300 per student or allow the roads to go to seed. Since all three are unappetizing politically, you can see why the issue has remained unresolved since the last gas tax increase in 1997.

When jobs are vanishing by the hundreds of thousands, tax hikes can be criticized as counterproductive. But with new projections by University of Michigan economists that the state finally will be adding jobs by the tens of thousands over the next two years the choice becomes whether the state will assist that private-sector growth with legitimate and crucial public investment -- or not.

Can Michigan’s economy get better if its critical infrastructure gets worse? Under what calculus does business conclude that it makes financial sense to invest in the state if Michigan’s political leadership can’t make the same commitment?

http://www.mlive.com/politics/index.ssf/2010/11/peter_luke_republicans_have_3.html