Package Deal Politics

How road funding and Medicaid are connected

The Michigan House recently passed a $48.9 billion budget plan for Fiscal Year 2014, which is roughly $2 billion less than Gov. Rick Snyder wanted and is about the same spending level as the 2013 budget.

What the House passed is not the final version of what will come to be the state's 2014 budget, but it reflects the budget plan upon which House Republicans were able to agree. Think of it as the opening offer they have put on the table for the bartering, arguing and politicking process that eventually will lead to a final budget.

Conspicuously absent from the House budget was the $1.2 billion in new funding for road and bridge maintenance, and $1.5 billion in federal dollars the state would get if it expands Medicaid.

All along it was known that Gov. Snyder was going to have trouble getting his way on those two big-ticket issues. With only a few weeks remaining before the governor's self-imposed deadline for finishing the budget, it is quite possible neither item will be part of it.

However, that doesn't mean the issues are dead. There's a better than even chance they'll be pursued outside of the budget. What's more, it's possible, perhaps probable, that the two are strategically linked.

According to reports out of Lansing, a closed-door meeting between legislative leaders and Gov. Snyder last week included heated discussions. A reasonable assumption is that House Speaker Jase Bolger, R-Marshall, is on the hot seat. That's because at the moment Speaker Bolger appears to be holding the linchpin that might give the governor a chance of getting his policy goals.

At the heart of the dilemma is that Gov. Snyder needs votes from legislative Democrats to pass Medicaid expansion and most likely he needs them to at least make a run at getting additional road funding dollars.

At this point, if Medicaid expansion moves it probably won't be Gov. Snyder's plan — it would be a hybrid plan that would still qualify for the federal dollars. Legislatively, Medicaid expansion is a straightforward proposition. If the House and Senate both pass it, Gov. Snyder will have it.

That's not the case with road funding, which legislatively speaking has several moving parts. Medicaid expansion is probably one of those parts.

It appears that the most likely road funding plan to pass would be the one that exempts fuel purchases from the 6 percent sales tax and changes the fuel tax calculation to one based on a percentage at the wholesale level. It's estimated that these changes would basically cancel each other out. The price motorists pay at the pump would remain relatively unchanged.

The additional road funding dollars Gov. Snyder wants would come from the second stage of the plan. That would be to increase the state sales tax on every other purchase —probably by 1 or 2 percent. Approval of voters through a statewide ballot proposal would be needed to do that. Putting a sales tax hike on the ballot requires a two-thirds vote of both the House and Senate. That could potentially be achieved in the Senate without the Democrats. But to do it in the House, a whole lot of Democrat votes would be needed.

Democrats can't like the idea of exempting fuel purchases from the sales tax, because most of the revenues from that at-the-pump tax go to K-12 schools and local governments. However, in both chambers the Republicans could pass that part of the plan without Democratic votes. If that happened, the Democrats would be likely to go along with putting the sales tax increase on the ballot —to at least have a chance of getting the revenue dollars back.

But it is doubtful that the Democrats would commit to providing those votes ahead of time. Instead, they're likely to try to extract as much as possible from the situation. One of the legislative items they want badly is Medicaid expansion. On that issue their interests parallel those of the governor.

With Medicaid expansion tossed into an overall deal that includes the road funding issue, even if the voters turned down the sales tax increase, the Democrats could at least get something they wanted as a result of playing ball with the Republicans.

Speaker Bolger might seem to be holding the linchpin on any chance of Medicaid expansion passing and thereby possibly also on road funding, but it's just the first linchpin in a chain of linchpins. He’ll have little or no control over most of the other ones.

One has to also wonder whether Senate Majority Leader Randy Richardville, R-Monroe, is rooting for Speaker Bolger to give in to the pressure from the governor. After all, if Speaker Bolger does so, Sen. Richardville would probably be the next one on the hot seat.

(Editor’s Note: Jack Spencer is Capitol Affairs Specialist for Michigan Capitol Confidential. He is a veteran Lansing-based journalist. His columns do not represent viewpoints of the Mackinac Center for Public Policy or Michigan Capitol Confidential.)