Office of Legislative Affairs

Legislative Update

For the week of August 03, 2009 . . .

BUDGET IMPASSE CONTINUES - Despite nearly a month of closed door meetings on the issue, participants in the high-level budget discussions admit a final solution to close the projected deficit remains elusive. Sources agree the major stumbling block is how the new spending plan will treat anticipated reductions to the Michigan Promise Grant-the scholarship program for qualifying Michigan college students which the Senate Republicans eliminated in their version of the budget-and cuts in revenue sharing.  However, it also appears the two sides have differing views on the size of the gap facing them, which portends to become an even larger hurdle than the two identified obstacles.  Democratic sources contend the two sides have shrunk the General Fund spending gap to some $80 million based on the varied budget targets that have been set while Republicans-arguing all targets must be set first while charging they have not been shown how Democrats propose to fund the targets-claim the actual chasm could be as large as $600 million. 

Meanwhile, the spending targets weren't the only set of numbers in contention.  A new Senate Fiscal Agency (SFA) memo notes state revenues have continued their month-to-month decline and now contends the combined deficit for the General and School Aid Funds for the current fiscal year has grown to $1.4 billion with that number rising to a staggering $2.7 billion in the coming fiscal year-$1 billion more than the combined deficit forecast for the two funds at the May Revenue Estimating Conference.  The memo also notes the fiscal projections contained within the document are the numbers now being used by the Quadrant and Governor Granholm during the on-going budget debates.  The SFA analysis contends sufficient federal stimulus monies exist to fill the budget gap in the current fiscal year, but that their use in that application will seriously diminish their impact on the 2009-10 Fiscal Year deficit.  The memo also reiterates that policy makers must begin to prepare to address the anticipated deficit-more commonly known as "the cliff"-when federal stimulus monies totally evaporate in the 2010-11 Fiscal Year.  As lawmakers glumly absorbed the memo's content, sources indicated Republicans were now reportedly-and very reluctantly-considering some form of revenue enhancement to balance the coming budgets, but only when-and if-budget targets are set to ensure all other options have been considered and employed in balancing

the spending plan.

In terms of revenue enhancements, House Appropriations Committee Chair George Cushingberry, Jr. repeated his call for the state to eliminate those tax-loopholes which he has labeled "welfare for the rich."  Mr. Cushingberry charged that the judicious closure of the varied loopholes currently authorized by the state would erase half of the state's projected deficit.  Mr. Cushingberry said the issue was "certainly going to be on the table" as the budget meetings continue as he claimed his assessment of the programs indicates to him their elimination would generate an additional $660 million in revenue to the state.  He also argued the loopholes needed closure to ensure the state does not do anything that would, in any way, jeopardize current or future federal funding.

In terms of "loopholes" poised for closing, most observers placed the state's recently enacted-and most generous in the nation-Film Tax Credit at the top of the list.  The program has carried a bull's-eye among Senate Republicans since before its enactment and, although the Administration believes the program is working as intended, it may have to be sacrificed in exchange for some other tax programs changes Democrats are rumored to be seeking.  Another program that may also be on the chopping block-at least until such time as the economy

recovers-is the Earned Income Tax Credit.  While Senate Majority Leader Mike Bishop has purportedly quietly given his staff the go ahead to identify programs not creating jobs for the state, Senate Republicans still await the Governor's list of targeted tax loophole closures for their consideration.

SUPPORT AND OPPOSITION TO DILLON'S HEALTH PLAN GROWS - The universal health care plan for public employees recently proposed by House Speaker Andy Dillon gained additional support and opposition last week.  With Republican legislative leaders favorably disposed to at least considering the plan, last week saw twelve school groups throw their support behind the plan.  The group, consisting of such groups as the Michigan Association of School Administrators, Michigan School Business Officials, the Michigan Association of School Boards and the Michigan Association of Secondary School Principals among others, said their benefits mirror those provided to members of the Michigan Education Association and they understood major reforms are needed. Calling the Dillon Plan a "profile in courage," the officials also argued the plan would allow the state to negotiate a master plan for public employees while allowing school officials to focus on the task of educating Michigan's children.  Saying the plan would put more dollars into the classroom, a Department of Education spokesperson confirmed that Superintendent of Public Instruction Mike Flanagan also supports the concept of consolidating the health care programs of public employees.  The plan also earned the support of the bipartisan Center for Michigan, which issued an open letter to Michigan's governmental leaders urging adoption of the consolidated health plan as a cost saving measure while noting benefit costs for public employees in other states and the private sector run much less than those currently paid by Michigan's varied levels of government on behalf of Michigan's public employees.

As support grew, so did the announced opposition.  The Dillon Plan had been assailed from the outset by the Michigan Education Association-with leaders contending the organization was going to "war" with the Speaker over the proposal-and last week saw their ranks swollen by the stances taken by Lt. Governor John Cherry, Democratic gubernatorial candidate John Freeman and Republican gubernatorial hopeful Senator Tom George.  Defending his position on the proposal, Mr. Cherry-stressing he wanted to see the plan "in black and white"-said there was a "very real possibility" the plan would actually increase costs.  To that point, Mr. Cherry argued the plan-coming from the state-could run afoul of the provisions of the Headlee Amendment, the constitutional amendment that requires the state to pay for all state mandated programs whether implemented by state or local government.  That potential, the Lt. Governor argued, could lead to locals enrolling part-time public safety personnel to their employment and benefit rolls where the state would have to pay for them.  He also argued the only way to achieve the cost-savings being touted by the Speaker-a claim the Lt. Governor charged was a "shell game"-would be to drastically reduce program costs, an assessment that intimated major revisions in currently provided benefits would have to occur-despite their having been negotiated as part of employment contracts. 

HOUSE PANEL OKAYS MORE TRANSPARENCY FOR MEGA - While the Granholm Administration and Senate lawmakers continue their discussions on approving legislation that would allow the state to continue to offer economic development inducements, the House New Economy & Quality of Life Committee has sent a measure enhancing the transparency of those transactions to the House floor.  However, the committee, which reported Senate Bill 71 on a unanimous vote, also tie-barred the legislation to a proposal that would expand the credits issued by the Michigan Economic Growth Authority (MEGA), which the House passed in June on a 92-15 vote. Currently, the MEGA program has utilized all the credits it can issue under existing law, and Administration officials fear the inability to continue to offer the incentives to growing or relocating firms will put the state at a major marketing disadvantage.

The transparency issue arose when some Republican senators questioned the actual value of the varied tax incentives contending they had very little after-the-fact information on a recipient's performance in actually creating the promised jobs for Michigan citizens.  They questioned whether some firms, which had already obtained MEGA credits, were getting "double credit" for jobs when they moved from one Michigan community to another.  They also questioned the wisdom of providing incentives to companies coming into Michigan when, they argued, the incentives gave the new firm a competitive advantage over established Michigan firms that were paying their taxes and ineligible to obtain the MEGA credits.  Finally, they argued, if the state was going to pick winners and losers, the process should be sufficiently open to allow Michigan residents to easily determine how their tax dollars were being spent.

Although the reporting measure has been sent to the floor, it is also apparent some additional buffing will be needed to smooth out the differences between the two chambers.  For example, the House Tax Policy Committee must, in the opinion of Michigan Economic Development Corporation (MEDC) officials, also move Senate Bill 70, a measure that amends the Revenue Code to allow the reporting of certain tax information related to the recipient firms.  As part of that reporting process, the Senate version requires the MEDC to provide the actual tax certificates issued to each firm granted MEGA credits.  However, MEDC officials contend that act could disclose the involved firm's proprietary information, a result they argued could drastically diminish the effectiveness of the MEGA program.   A Senate spokesperson argued the information sought could be provided in a fashion that would protect any proprietary information while still giving lawmakers solid data on the program's performance.  The Senate spokesperson also noted the Upper Chamber's members were also concerned that the language changes approved by the panel before moving the bill would revise the reporting characteristics of the information by consolidating all the information into a single category.  Rather, the spokesperson said, the Senate wants retention capital investments separated from the balance of the MEGA credits.  He also noted the Senate expects the data to reflect the number of jobs in question in the current fiscal year, and not just for whatever year the MEDC has available data. 

IS BREWER ON HIS OWN? - With House Speaker Andy Dillon already ruffling the feathers of the Democratic faithful with his consolidated health care plan for public employees, it now appears Michigan Democratic Party Chair Mark Brewer may be sailing on his own over his announcement the party is contemplating bypassing the legislative process by submitting a number of ballot proposals to Michigan voters on a myriad of issues. One leading House Democrat stressed the suggested proposals-such as mandating a 20 percent reduction in utility bills, higher minimum wages or requiring all Michigan businesses to provide employee health care packages-were those solely of Mr. Brewer and not the House Democratic Caucus, while another stated he first heard of the idea when he read about it in the paper. The biggest blow was issued by a third House Democrat who called the concept "almost an insult" to Michigan voters while contending the ideas, presented at a time when the economic conditions preclude monies to pay for the proposals, "get to the point of silliness."

ODDS AND ENDS - Governor Jennifer Granholm issued a directive embracing varied program changes and initiatives all of which are designed to reduce greenhouse gas emissions by 20 percent by 2020 and by 80 percent by 2050.....with lawmakers contemplating the merger of the Departments of Natural Resources and Environmental Quality, rumors claimed Department of Environmental Quality Director Steven Chester is on the Environmental Protection Agency's short list of candidates to head the Agency's Region V office in Chicago.....although the samples showed Michigan beaches were cleaner than the national average, a recent study conducted by the Natural Resources Defense Council found the number of Michigan beaches which exceeded national health standards continued to increase.....again finding the language was too vague, the Ingham County Elections Board has-for the second time-rejected a proposed recall petition seeking the ouster of Governor Granholm for her decision to close prisons and parole inmates.....Secretary of State Terri Land announced her office would provide new car buyers with the vehicle history of their trade-in to demonstrate the older vehicle qualifies for the federal "Cash for Clunkers" rebate program.....nearly certain California will accept the invitation, the Department of Corrections has kept the Standish Maximum Correctional Facility-initially slated for closure-open in anticipation of the arrival of West Coast inmates.....joining with the Chief Executives of seven other Midwestern states, Governor Granholm signed an agreement pledging to develop high-speed rail service in the region.....the transfer of the Upper Peninsula State Fair grounds to Delta County-and the fair's ultimate independence from state control-moved closer to reality as the Administrative Board Building Committee agreed to the move.