News Story

Michigan Roads Benefit From Decline In ‘Fix Now Pay Later’

Engler and Granholm used state credit card for road repairs, kicking costs into future

State government borrowing for road and bridge projects, which spiked upward during the economic downturn, is at its lowest level in two decades, according to transportation officials and an analysis by the Mackinac Center for Public Policy.

Outstanding transportation debt declined from more than $2.5 billion in 2008-09 to under $1.5 billion today (adjusted for inflation). This means that more taxpayer dollars are available for construction work rather than loan payments, said James Hohman, director of fiscal policy at the Mackinac Center.

“Instead of using current revenues to pay for projects that were completed 20 years ago — and may be already falling apart — that money can be used for today’s priorities,” Hohman said.

The debt reduction translates into an additional $38.5 million available for road funding in 2019 versus 2010, he said.

Hohman said some of the credit for controlling the state’s transportation-related debt load should go to former Gov. Rick Snyder, who made addressing long-term state debt of every kind a priority.

Jeff Cranson, a spokesman for the Michigan Department of Transportation, said a number of factors contributed to the decline. These included deliberate efforts to put as much current revenue as possible into current projects and refinancing old debt at more favorable interest rates.

Michigan’s borrowing for transportation projects climbed sharply early in the 21st century, beginning in 2001, as state policymakers under then-Gov. John Engler sought to accelerate construction funding even as tax revenues began a decline of nearly a decade.

Both trends continued under Gov. Jennifer Granholm, including substantial borrowing to cover state costs incurred for projects that were part of the so-called Obama economic stimulus package.

Some of the debt made possible specific projects, like the construction of a second span at the Blue Water Bridge in Port Huron. But it also included additional funding for public transportation, local road and bridge repairs and airport security improvements.

In recent years, however, concerns have arisen that paying off old debt was making it harder to address current critical needs at a time when the public was demanding action on deteriorating road conditions.

Newly elected Gov. Gretchen Whitmer famously made “fix(ing) the damn roads” a key component of her campaign for office.

Whitmer has not yet spelled out the specifics of a plan to raise additional funding for road repairs.

MDOT’s Cranson said it would be “premature and only speculation” to comment on what, if any, role new borrowing would play in the administration’s strategy.

Hohman said he believes it would be a mistake to relinquish the gains made in recent years to bring the state’s transportation debt under control.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.