News Story

Media Echo Chamber Repeats Same Misinformation on Road Funding

Reducing a program’s rate of increase is not a 'cut'

A media echo chamber was in full effect recently as MLive, the Detroit Free Press and Michigan Radio all published articles inaccurately asserting that the just-passed Senate road funding plan would result in “cuts” to other parts of the state budget.

What’s not in dispute: The Senate road plan would earmark $350 million of state income tax revenue for road repairs starting October 2016, and $700 million in the following and subsequent years. For context, the state income tax currently brings in around $8 billion annually, and total state tax collections are $30 billion. The latter number includes around $2.7 billion for transportation from fuel, vehicle registration and similar taxes.

Media Echo Chamber says: This proposed income tax earmark means a cut to other government programs because millions of dollars in tax revenue that could be spent on them will instead go to road repairs.

Why the Media Echo Chamber is wrong: In the first year of the Senate's income tax earmark — it doesn't start until Oct. 1, 2016 — the plan actually uses less general tax revenue for roads than the $400 million already appropriated for next year. In other words, other programs could have an additional $50 million to spend in the plan's first year; they would not face a "cut."

More importantly going forward, official state estimates suggest that state revenue is likely to increase $1.6 billion in the next two years. That's more than enough to cover the proposed income tax earmarks without reducing other state spending.

How reliable are those revenue projections? The $1.6 billion growth estimate is the consensus that the Department of Treasury and legislative fiscal agencies delivered at their May revenue estimating conference, and considers the 19 major state revenue sources.

The projection is in line with recent budget history. Overall state spending and revenue have increased for five consecutive years due to an improving economy.

James Hohman, a fiscal policy analyst for the Mackinac Center in Midland, said the consensus estimates always come with an "absent a national downturn" caveat, which applies not just for roads but every other part of the budget. But he said the current revenue growth projections show more than enough to cover the Senate's proposed income tax earmark.


See also:

MLive Gets Senate Roads Plan Wrong

House and Senate Pass Competing Road Funding Plans