Lansing— A Senate committee last week dramatically ramped up proposed spending to catch up on $730 million worth of improvements at Michigan airports, but its plan is drawing significant opposition.
The proposal would add $32 million to $42 million a year to the pot of money available for airport improvements through an adjusted aviation fuel tax. But a provision to offset the hike by eliminating Michigan’s 6 percent sales tax on aviation fuel sales has upset city and school officials.
“It causes us great concern,” said Jennifer Smith, the Michigan Association of School Boards’ assistant government relations director. “We’re losing guaranteed revenue.”
Up to $57 million a year in aviation sales tax revenue, which automatically flows to schools, would be lost. The Senate plan would replace the lost revenue with $57 million a year from the General Fund — the main state checkbook — but it is less certain because it would be subject to annual legislative approval.
Another $7 million in General Fund revenue would be shifted to local governments to offset their lost aviation sales tax revenue. The Michigan Municipal League also has qualms about the uncertainty in this strategy.
Without an inflationary factor in the legislation, “that $7 million at some point would be worth considerably less than $7 million,” said Municipal League specialist John LaMacchia.
The airport funding proposal, approved in the Senate Finance Committee last Wednesday, revamps a House-passed plan that would boost annual airport funding by a smaller amount — $17 million.
Lawmakers are trying to meet requests from state transportation officials and airport executives to step up funding for runway repairs and other upkeep. The 3-cent-a-gallon aviation fuel tax, unchanged in 85 years, no longer yields enough revenue to keep up with the needs, they say.
Legislators have estimated the state must bolster its annual airport allotment by an amount within the range provided under the Senate committee’s plan. Currently, state and local governments put up about $10 million a year to draw down $100 million in yearly federal funds for airports.
The House approved a bill package shifting the flat aviation fuel tax to a 2-percent rate and at least partly offsetting the impact on airlines by knocking 2 percent off the 6 percent sales tax on aviation fuel.
It drew opposition from Delta Air Lines, Michigan’s largest commercial carrier, which says the state’s combined fuel-sales taxes result in the highest rates it pays at any of its state hubs. The combined rate also is third highest in the nation, Delta says.
Under the Senate committee’s revised version, which goes to the full Senate for consideration, the 3-cent-a-gallon fuel tax becomes 4 percent but the entire 6 percent sales tax goes away.
A Delta official told the committee the revision is an improvement, but corporate spokesman Trebor Banstetter was less committal on Friday.
“We don’t really have anything new to say,” Banstetter said. “I would like to reiterate our position that we’re working with state leaders toward a solution that addresses the competition problem and creates a permanent, stable funding source for Michigan’s airports.”
Kevin Klein, who heads the Michigan Association of Airport Executives, endorsed the Senate plan. It meets airport funding needs, makes Michigan’s aviation fuel levy more competitive and follows Federal Aviation Administration fuel tax policies, he said.
“(The association) believes an aviation funding solution must be part of any legislation that is signed into law to address the road funding crisis in Michigan,” added Klein, director of Traverse City’s Cherry Capital Airport. “This legislation is a great step in making sure that happens.”
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