LANSING – Gov. Gretchen Whitmer will propose in her Tuesday budget a 45-cent-per-gallon increase in the fuel tax — phased in over a one-year period — to raise more than $2 billion to fix the state's crumbling roads, a spokeswoman said Monday.

Tiffany Brown, a spokeswoman for Whitmer, said the first 15-cent increase would take effect Oct. 1, with another 15-cent hike on April 1, 2020, and the third increase on Oct. 1, 2020.

When fully implemented, the proposed tax hike would increase the cost of a 15-gallon fillup by about $6.75.

Michigan's fuel tax is currently 26.3 cents per gallon for both regular and diesel fuel.

The Senate Fiscal Agency estimates each one cent increase in the fuel tax would raise about $46 million annually to fix roads, so a 45-cent hike would raise close to $2.1 billion for roads.

Whitmer campaigned on a pledge to "fix the damn roads" and promised her budget would include a realistic plan to do so. But her proposal is expected to be a tough sell in a Republican-controlled Legislature that barely passed a much more modest hike in the fuel tax — 7.3 cents for regular fuel — in 2015.

Michigan taxes on fuel are already fifth-highest in the nation, and about 18 cents per gallon above the national average, largely because Michigan is one of a few states that applies its sales tax to fuel, according to a recent study by the Citizens Research Council of Michigan.

While Whitmer's proposal would appear to vault Michigan into first place in the nation in terms of fuel taxes, Brown said the governor would also propose unspecified measures to lessen the impact of the proposed increase on the pocketbooks of Michiganders.

Laura Cox, chairwoman of the Michigan Republican Party and former chair of the House Appropriations Committee, slammed the proposal as "a $2-billion tax increase that will break many Michiganders' budgets."

Cox said Michigan deserves "real solutions on this critical issue, not a tax and spend solution which places the burden on the state's overtaxed families.”

In seeking more than $2 billion for needed road repairs, Whitmer has three primary options — higher fuel taxes, higher vehicle registration fees and state borrowing.

Kurt Weiss, a spokesman for the Department of Technology, Management and Budget, confirmed Monday that borrowing is not part of Whitmer's plan. He would not comment on whether a hike in registration fees will also be proposed.

Whitmer is to present her road funding plan to a joint meeting of the House and Senate appropriations committees at 11 a.m. Tuesday.

A bipartisan group of former state lawmakers recently proposed a 47-cent-per-gallon hike in the fuel tax, but that was over nine years.

Both House Speaker Lee Chatfield, R-Levering, and Senate Majority Leader Mike Shirkey, R-Clarklake, have acknowledged Michigan needs more revenue for roads, without citing specifics.

Chatfield will wait until the budget is presented to comment, a spokesman said.

Shirkey "would first like the governor to work with the Legislature to save families money by reforming car insurance," spokeswoman Amber McCann said.

Transportation Director Paul Ajegba recently told state lawmakers that while it may be worthwhile to look at more innovative funding mechanisms in the future — such as charging vehicles for each mile driven — the traditional funding sources such as fuel taxes and registration fees are the ones on the front burner today.

A recent report from the Citizens Research Council of Michigan gave a similar message.

"Additional road funding can come from three main sources: new taxes, diverting existing state revenues and/or borrowing," said the February report. "Each track presents its own set of advantages and obstacles."

Fuel taxes

The fuel tax was last increased by 7.3 cents per gallon for regular fueland 11.3 cents per gallon for diesel fuel in 2015.

Whitmer could propose an option that would minimize the impact of such an increase, and help make a large fuel tax increase more feasible, by removing the sales tax from fuel sales, but Weiss said that is not part of the current plan.

Michigan is one of only a handful of states that charge sales tax on fuel sales. Unlike money raised from fuel taxes, money raised from sales tax does not go to pay for road repairs.

At a $3 per gallon pump price — which is a little higher than current prices — the sales tax makes up more than 15 cents of what motorists pay. That means that if fuel sales were exempted from the sales tax, the first 15 cents of any fuel tax increase — raising about $690 million for road repairs — would not noticeably impact the pump price of fuel.

But Weiss said Monday the 45-cent hike is proposed on top of the taxes that are there today, meaning there is no current plan to take the sales tax off fuel sales.

Taking the sales tax off of fuel would reduce sales tax revenue by close to $900 million. That would financially impact schools and local governments, which receive most of the sales tax revenue.

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Ohio Gov. Mike DeWine, a Republican, recently proposed an 18-cent-per-gallon increase in the fuel tax there. In Wisconsin, another neighboring state, Democratic Gov. Tony Evers has proposed an 8-cent-per-gallon increase.

Registration fees

Michigan's vehicle registration fees were hiked 20 percent under the 2015 road funding package, and many motorists now pay about $150 per vehicle.

Michigan's registration fees — which raise close to $1.4 billion annually for road repairs — are already on the high side in national rankings, so there is likely less room for Whitmer to propose the type of significant increases being proposed for fuel taxes.

Michigan charges additional fees for hybrid and electric vehicles, based on the rationale that owners of those vehicles pay little or nothing in fuel taxes. Hybrid vehicles pay a $47 surcharge, and electric vehicles pay a $135 surcharge, according to the Citizens Research Council report.

The borrowing option

Weiss said Monday that borrowing is not part of the budget plan and Whitmer is not considering the options outlined below.

Whitmer could issue bonds for up to about $1 billion through the State Trunkline Fund — without requiring approval of the Legislature or Michigan voters — and pay the money back over 30 years, according to the Citzens Research Council analysis.

Hiking fuel taxes and/or registration fees could allow for a higher amount of bonding, since the state would then be borrowing against higher anticipated revenues.

Whitmer could also propose issuing general obligation bonds to pay for road repairs. Those would require voter approval.

The problem with either type of borrowing is that required interest and principal payments would annually reduce the amounts that could otherwise be spent on roads.

Spending more on roads and infrastructure would make Michigan a more attractive place for businesses to invest, and also stimulate the economy, Business Leaders for Michigan said in a report released Monday.

"Investing an additional $1.6 billion in state highway and bridge infrastructure annually would create or sustain 18,000 jobs, increase the state GDP (gross domestic product) by $1.5 billion annually and increase real personal income by $1.1 billion annually," the business group said.

Contact Paul Egan: 517-372-8660 or pegan@freepress.com. Follow him on Twitter @paulegan4.