New Michigan transportation budget raises matching funds, avoids loss of $500M in road funds

By Kathy Barks Hoffman, AP
Wednesday, September 29, 2010

Michigan takes steps to keep federal road funds

LANSING, Mich. — It looks like Michigan won’t lose nearly $500 million in federal road dollars after all.

A legislative conference committee came up with a compromise that will raise the $84 million the state needed to put up in matching funds to get $492 million in federal funds.

The state Transportation Commission had delayed hundreds of road and bridge projects scheduled for the next five years out of fear the state would lose out on the federal payments. The state spent roughly $1.4 billion on roads this year with federal help, an amount that could have dropped to around $600 million in three out of the next four years if it failed to raise enough of its own money to qualify for more federal funds.

The state will sell short-term notes, redirect some driver’s license fees and use savings in other areas to raise the money. The transportation budget bill was approved Wednesday in the House by a 60-45 vote and passed in the Senate 33-3. The bill now goes to Gov. Jennifer Granholm for her signature.

Business and road-building groups have called on legislators to raise the state gasoline and diesel taxes or vehicle registration fees or place a tax on wholesale gasoline sales to raise more money for roads and bridges. But lawmakers have been reluctant to raise taxes or fees in the bad economy, even though one-third of Michigan roads were in poor condition in 2008, based on the Michigan Asset Management Council Annual Report of Roads and Bridges.

Critics said it is a cosmetic solution to a much larger problem.

“It is a short-term, quick fix that allows the state to meet our federal matching requirement by borrowing $40 million. … The Legislature has kicked the can down the road for finding a sustainable transportation funding solution,” Michigan Infrastructure and Transportation Association Vice President Mike Nystrom said in a statement.

He noted it will be even harder to find enough in matching funds next year because the state will have to start paying off the short-term bonds.

Even though Michigan will get the full federal match in the new budget year, it will have 35 percent less in its transportation budget than just three years ago, he said, placing projects on hold and costing road construction jobs.

Most lawmakers were relieved to find a way to get the hundreds of millions of dollars in federal funds. The transportation bill was one of the last passed as lawmakers wrapped up work on the budget that takes effect Friday.

Associated Press Writer Tim Martin contributed to this report.

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