Snyder, GOP leaders strike deal to forgive Driver Responsibility Fees

Gov. Rick Snyder and Republican legislative leaders struck a deal Wednesday to forgive $637 million in unpaid Driver Responsibility Fees owed by more than 300,000 motorists that workforce officials have blamed for crimping the state’s labor pool.

State Budget Director John Walsh confirmed to Crain’s that the governor and Legislature will move forward with granting motorists complete amnesty of fees that stem from a state-level tax on municipal traffic violations.

The Senate and House swiftly took action Wednesday afternoon to pass bills that forgive all unpaid Driver Responsibility Fees, pairing the deal with legislation that delivers modest election-year income tax relief for individuals and small businesses.

The sheer volume of the lingering driver debts and wide-ranging impact on drivers across the state was first reported by Crain’s in August. For years, the unpaid debts have increased as the state has suspended the licenses of drivers who didn’t pay the fines.

Snyder and legislative leaders had been at odds about simply forgiving all of the unpaid debt because the drivers fees are still a source of revenue for the state’s $10 billion general fund.

“This is the CPA governor who likes to run numbers and I’m just happy we’re going to be able get 300,000 people their drivers’ license back,” House Speaker Tom Leonard told Crain’s. “We will see full forgiveness and amnesty.”

The House Fiscal Agency has estimated an amnesty program would cost the state’s budget about $23 million this fiscal year.

“The public policy outweighs the financial implications because I think we’re in a position to absorb it now,” Walsh told Crain’s.

Under the deal, lawmakers also plan to waive a $125 fee drivers have had to pay to get their driver’s license reinstated.

“Detroit drivers will no longer have to fork over thousands of dollars to an administration looking to make a quick buck,” state Sen. Coleman Young II, D-Detroit, said Wednesday in a statement. “In the automobile capital of the world — where mobility should be both affordable and accessible — it is humbling to see that we were finally able to get people out of debt, on the road, and back to work.”

More than 70,000 of the 348,000 Michigan motorists who owe the past fines are residents of Detroit, said Mayor Mike Duggan, whose administration and workforce development board had been lobbying lawmakers to forgive some or all of the fees.

“Eliminating these fees will remove a barrier to work for over 70,000 Detroiters,” Duggan said in a statement.

Leonard, R-DeWitt, began pushing for amnesty for drivers who owed the fees in late September but faced push-back from Snyder over the fee revenue that will be lost.

Some of the outstanding driver fees date back a decade or more under a revenue-generating program that was instituted in 2003 by the Legislature and then-Gov. Jennifer Granholm under the guise of improving driver habits.

“It’s taken us a while to get this done,” Leonard said.

Snyder, Leonard and Senate Majority Leader Arlan Meekhof also reached an agreement Wednesday on tax relief — clearing two big issues facing the Legislature as lawmakers begin their winter and spring work on the next state budget.

The governor and legislative leaders agreed to raise the personal exemption from the first $4,000 of income to $4,900 of income that will be exempt from the state’s 4.25 percent individual income tax.

“This is a fiscally responsible plan that benefits hardworking taxpayers all across the state,” Snyder said in a statement. “I have been working with the Legislature to eradicate Driver Responsibility Fees since taking office and am pleased we found a solution that gets rid of them completely while not creating new state debt.”

Lawmakers face big spending decisions in the coming months on funding for K-12 schools, public universities, mental health programs and road repairs.

“I don’t think this was something we wanted hanging over our heads as we head into the budget cycle,” Leonard said of the driver fee forgiveness and tax relief.

The increased personal exemption will be phased in by 2021, starting with a $50 increase this calendar year, followed by a $4,400 personal exemption in 2019, $4,750 in 2020 and the $4,900 exemption in the 2021 tax year, said Amber McCann, spokeswoman for Meekhof.

The tax break applies to business owners whose companies are formed as limited liability corporations, sole proprietorships or s-corps.

There also will be an inflationary trigger built into the personal exemption, allowing the break on taxable income to increase with inflation, McCann said.

Snyder had proposed increasing the personal exemption to $4,500 as part of a legislative fix to restore the tax break after its use was rendered incompatible with the recent federal tax overhaul.

“We’re able to afford both,” Walsh said of the higher tax exemption and forgoing attempts to collect the unpaid driver fees.

The deal does not include new $100 tax credits legislators in both chambers had proposed in recent weeks and keeps the income tax rate at 4.25 percent.

Snyder has been pushing legislators in recent weeks to be focused on “fiscal responsibility” as the cost of a 2015 deal on road funding starts to absorb money from the state’s general fund.

“Our citizens are screaming for better roads, better schools, any number of things — mental health is becoming a bigger issue,” Walsh said. “We’ve struck a really good a balance here.”

Chad Livengood: (313) 446-1654

Twitter: @ChadLivengood