LANSING, MI – Gov. Gretchen Whitmer unveiled her first budget proposal on Tuesday, urging lawmakers to adopt a significant education funding increase and up the gas tax to, as she put it, “fix the damn roads.”

The centerpiece of Whitmer’s plan is focused on her campaign promise to improve Michigan’s roads. It would raise the fuel tax by 45 cents per gallon by Oct. 1, 2020 in three, 15-cent increments. The budget also increases money for schools, gives the tax structure a second look and puts money toward clean drinking water.

All of that, Whitmer told lawmakers, amounts to one historic vote for this budget.

“It will not be easy. It will not happen overnight. But this budget represents our best opportunity to forge a new path here in Michigan,” Whitmer said.

The move would come after the 2015 road plan passed by lawmakers, which is expected to generate $1.2 billion by 2021. But it would also alter that plan, taking $500 million of it slated to come from the general fund this year and sending that to the higher education budget instead.

Even with that existing cash infusion in place, Michigan roads are getting worse and were recently rated worst in the nation.

Experts, including those on former Gov. Rick Snyder’s 21st Century Infrastructure Commission, have pegged Michigan’s additional road funding needs at over $2 billion per year, and the governor’s proposal will generate $2.5 billion per year.

The total budget Whitmer proposed for Fiscal Year 2020 clocks in at 60.2 billion, significantly more than $56.8 billion budget the state is currently operating under. Part of the increase comes from the proposed gas tax increase.

Whitmer addressed that head-on, citing budgeting gimmicks from former political leadership, and asked lawmakers not to kick the can down the road.

“No more shell games and half-measures. Here’s a real plan,” Whitmer said.

Gas tax increase

The 45-cent gas tax increase would bring roads up to 90 percent of roads in good or fair condition by 2029, said Kolb.

The new money would go into a new formula directing dollars at the most heavily traveled and most economically important roads, he said. The Michigan Department of Transportation and local road agencies would come up with five-year plans, and a board would review their actions.

“The public will be able to find out which roads are being fixed and track the progress of each project on an accessible website,” Kolb said.

According to The Tax Foundation, a Washington, D.C.-based nonprofit focused on tax policy, Michigan has the sixth highest gasoline tax nationally at 44.13 cents per gallon. The governor’s proposed 45-cent increase would push Michigan into the top spot, overtaking Pennsylvania’s current high of 58.7 cents per gallon.

Former senator Ken Sikkema, a Republican, co-chairs the bipartisan Michigan Consensus Policy Project, made up of political leaders. The first project the group tackled was road funding, and they, too, proposed raising the gas tax by 40-plus cents.

Their proposal put a 45-cent tax in place to raise $2.47 billion per year for roads when fully implemented and tacked on an extra 2-cent tax to create a matching fund to address other local streets and roads.

Of Whitmer’s road funding proposal, Sikkema said, “It’s big, it’s bold, and it would solve the problem.”

A former Republican lawmaker, he said lawmakers who don’t like Whitmer’s plan need to offer a different one.

Kolb offered a glance at other tax increases that would raise $2.5 billion per year, including one that would increase the Corporate Income Tax from 6 to 19.5 percent.

“If you don’t like this solution, then you can bring another one to us. But we need $2.5 billion, and there’s only so many ways to raise that,” Kolb said.

The mechanics of the road tax increase have somewhat of a domino effect in the budget Whitmer is proposing.

Tax effects

Two tax pieces of Whitmer’s budget are meant to help mitigate the effects of the new gas tax by reducing tax burdens on low-income and fixed-income Michiganders.

The piece meant to help low-income people is doubling the state’s Earned Income Tax Credit, which currently gives 6 percent back to people on their state tax returns when they meet certain federal requirements. A married taxpayer with two kids, for example, qualifies if their household income is less than $51,492.

Whitmer said she planned to use the increase in that tax credit to offset the cost for those families – fully implemented, she projected the average driver would spend $23 per month on the higher gas tax and save $30 per month through the increase in the Earned Income Tax Credit.

And to help retirees on a fixed income, she said, “We’re going to repeal the retirement tax, which will save 400,000 households and average of $65 a month.”

She plans to fill the budget hole with a tax hike on s-corporation and limited liability company businesses, which would be partially offset by a decrease in the federal taxes they pay.

And for average families who won’t get tax relief from either of these two changes, Whitmer pointed to what she calls a road tax people are already paying, for car repairs.

“This is the worst kind of road tax you can pay, because it doesn’t actually fix the roads,” Whitmer said. “Crumbling infrastructure affects every single one of us.”

Education increase

In the governor’s education budget, she proposes increasing the per-pupil funding, which funds public schools based on the number of students who attend, by $120-180 per pupil.

“The biggest threat to our state’s future and our security is failing the next generation,” Whitmer said.

“We have a moral obligation to them, and a practical one in our own interests.”

The increase comes on top of a series of increases lawmakers have put in the state budget in recent years, including one of between $120 and $240 per pupil for the current fiscal year.

The governor is also proposing funding some types of students, like special education, lower-income and career and technical education students at higher rates. Some students cost more to educate, Whitmer said, and these increases recognize that.

The weighted foundation allowances represent a $507 million increase.

Overall, Kolb said, the budget was a 3.6 percent increase over last year’s education spending.

The budget also puts $24.5 million toward literacy coaches in schools, which would triple the number of state-funded literacy coaches.

Whitmer’s budget also follows through on a campaign trail talking point to move away from using School Aid Fund money to fund higher education. Instead, she will use $500 million in general fund the lawmakers pledged to contribute to road funding for higher education. That lets her take $500 million of School Aid Fund out of the Higher education budget and put it back toward K-12.

Next Steps

The governor kicked off the budget process with her presentation before the House and Senate appropriations committees. Now it’s up to the legislature, through those committees, to put forth specific proposals.

The House and Senate typically each come up with a budget proposal of their own and then hammer out their differences and send the final product to the governor for signature.

The budget year starts over on Oct. 1, but Whitmer has expressed a desire to keep with the tradition of previous Gov. Rick Snyder in finishing it early, before lawmakers go on a summer break, typically in June.

More changes

Other changes in the governor’s proposal included:

Doubling the Earned Income Tax Credit from 6 to 12 percent over two years

Eliminating the tax on pension benefits

$13.9 million to enhance monitoring and response to public health threats like drinking water contamination

Local revenue sharing increases of 3 percent

$52.9 million to 14 information technology projects like tax systems, permitting and inspection systems.

View Whitmer’s presentation here.

Note: This story has been updated with additional information.