Office of Legislative Affairs

Legislative Update

For the week of September 7, 2009 . . .

BUDGET TALKS REMAIN UNPRODUCTIVE - Facing less than a month to resolve an apparent myriad of budget issues and obtain legislative approval of them, the Governor and Quadrant members entered last week with high hopes but were apparently unsuccessful in moving the issue forward in any appreciable manner.

The latest week of budget discussions started on an ominous note as Governor Granholm, complying with employment contract provisions but also underscoring the seriousness of the situation, gave the unions representing state employees the required 30-day notice that lay-offs would occur if an approved budget is not in place at the start of the new fiscal year.  That was followed by the announcement the participants had agreed to a more intense meeting schedule, with House Speaker Andy Dillon saying Thursday's session-following a House Democratic Caucus meeting on the budget-would be a 9 a.m. to 9 p.m. marathon meeting at the Governor's request while Senate Majority Leader Mike Bishop again urged the Administration to provide a concrete counterproposal to the Senate's austere budget plan.

Wednesday saw the House Democrats engage in a lengthy off-site caucus to discuss budget options, but despite hopes the meeting would place some finality on various issues the caucus wanted as part of any budget deal, early reports indicated the members had been unable to develop a consensus on how to approach any of the major issues.  In fact, unconfirmed reports suggested the five-hour meeting had focused primarily on what revenue enhancement options were possible with caucus leadership apparently not indicating support or opposition to any of them.  The process also led to chiding from Republican lawmakers who noted the Senate had already adopted a balanced budget-albeit full of painful decisions-while House Republicans reminded listeners they had proposed a balanced budget of their own some 42 days ago.  And, adding to the intrigue, it was announced the Thursday meeting would involve input from participant from outside government-although two of the four invitees had been major players in prior administrations-a decision that led Mr. Bishop to say that while he was eager to hear what the individuals might have to say he expected them to remove themselves from the meeting when actual negotiations began.

Going into Thursday's meeting optimism was high but the final outcome was disappointing.  The Governor and the Quadrant members first spent some four hours with their non-governmental guests as the invitees outlined some 30 governmental reforms they suggested to resolve the state's underlying fiscal problems.  But, while being sympathetic to many of the ideas-several of which he pointed out had already been offered in varying forms over the years-Mr. Bishop said the suggestions had little, if anything, to do with resolving the current budget.  And, the subsequent marathon session-which was much shorter than initially anticipated as participants left the meeting shortly after their guests left-failed to produce any significant results with both Mr. Bishop and House Minority Leader Ken Elsenheimer emerging from the meeting to again call on the Democrats to offer, and make public, a concrete proposal to which their caucuses could react.

But, the day's activities were not yet done.  Following the morning session, Mr. Dillon apparently returned to his office, met with key members of the Granholm Administration and crafted a draft budget proposal for Republican consideration.  In keeping with the agreement to keep the discussions private until a final pact is reached, Mr. Dillon refused to divulge any specifics of his proposal, but said his plan-delivered to Mr. Bishop shortly before 5 p.m.-focused on reforms more than revenue enhancements.  But, that event also underscored another problem festering just under the surface in these talks as Mr. Bishop said whatever plan to balance the budget Democrats put forth, the House would still have to obtain the votes needed for passage-again intimating none of the available options likely to garner Senate support would enjoy the same traction in the Lower Chamber.

COALITION CALLS FOR EXPANDED TAXES - Arguing Michigan needs to overhaul its tax structure so it can provide critical services, a coalition consisting of unions, schools, nurses and social welfare advocates called for the elimination of the state's flat tax rate-as mandated by the Michigan Constitution-and its replacement with a graduated system topping out at a 6.9 percent tax rate for the state's wealthiest individuals and dropping down to 3.9 percent for the state's poorest citizens.  The coalition claimed the Income Tax revision would add some $600 million in new revenue to the state's coffers.  The group also called for the levy of the state's Sales Tax on "luxury and nonessential services" which they said would include everything from spas to entertainment and sporting tickets to landscaping, but did not place a value on the additional revenue the state might receive from such a revision.  Coalition spokespersons also said their plan did not include any cuts to the state's budget given the fact their programs of interest had experienced spending reductions almost annually over the past decade, but they said they would review any proposed cuts offered by the Governor or legislative leaders.  But, it is likely the proposal will fall on deaf ears as Senate Republicans have said they are opposed to any tax increase while Governor Granholm and several leading Democrats have said they would not support any "general" tax increase-a stance usually thought to include boosts in either the Income or Sales Tax.

DILLON PLAN GETS FIRST HEARING - It was a busy week for House Speaker Andy Dillon.  He not only participated in budget discussions and created a Democratic response to the Republican's budget plans, but he also began a spirited defense of his proposal to consolidate the health care benefits for all of Michigan's public employees under one comprehensive umbrella.

Arguing the approach would leverage better pricing options, impose healthier living standards and reduce spending on wasteful procedures, Mr. Dillon told the House panel he helped create to review his plan that consolidation was the way for the state to improve its efficiency in providing benefits to its employees.  Speaking to the 13-member committee, Mr. Dillon said Michigan is "actually an affordable state" when comparing health care costs in the private sector but that advantage is lost when a similar comparison is made to public sector health care benefit costs.  That, he said, tells him the state is not purchasing those programs correctly.  Stressing his plan would treat all employees equally, he said the massive size of the employee pool enrolled in the program would generate significant savings to all levels of government-his initial savings projection was in the $1 billion range.  The Dillon Health Care Plan had been released in draft form earlier in the week, with most participants indicating a willingness to consider the plan although few-except union representatives who said they expected to find nothing in the draft that would modify their strong opposition-indicating a stance on the proposal.

Under his proposal, a 13-member Michigan Health Benefits Program Board, consisting of the State Employer and the State Budget Director and 11 other members-most of whom would be gubernatorial appointees-representing varied interests and expertise, would be created.  The panel would then develop four to six health care plans that would then be made available to public sector employees.  Unlike his announced intentions, the draft only requires the Board to make cost and benefit comparisons to benefit packages offered to public employees in other states although the language would not preclude the Board from considering private sector costs and benefit levels within Michigan's private sector.  Governmental units could opt out of the state program, but only if they can demonstrate to the Board's satisfaction that their selected alternative costs 5 percent less than the state's program.  Benefits in place on January 1, 2010, would remain in effect until the governing contract expires at which time the local governmental unit would have to adopt the state plan.  The plan would be paid for by the state using monies collected from all the participating entities with the monies contained in the fund prohibited from lapsing to the General Fund.  Finally, local governmental units and the unions representing their employees would retain collective bargaining rights to determine which plan will be offered within their unit, how much the local unit and its employees will contribute to the plan's cost and which employees will be eligible for coverage.  The proposal, if adopted, also repeals the Public Employee Health Benefit Act and certain sections of the school code.

Since it was announced, the Dillon Plan has been both hailed and vilified-with most of the negative comments coming from fellow Democrats or representatives of the party's traditional bases of support.  When Mr. Dillon first suggested the plan, union representatives charged the concept totally undermined the collective bargaining process and that the anticipated cost savings could only be realized by forcing further concessions on public employees.  As a result, Democrats, from the Governor on down, have been very cautious in their comments, generally expressing skepticism on the plan's workability but saying they would be willing to review actual language when it emerged.  Furthermore, many Democrats-again including the Governor-privately expressed more than slight irritation with Mr. Dillon for the fact he announced his program without their prior knowledge, thus catching many of them off-guard when subsequently contacted by the media for their reaction.

Reaction of the committee's members was polite with most of the panel's Democratic members still indicating they were still open to the concept but unwilling, at this point, to endorse the idea outright.  On the other hand, Republicans-citing the problems facing North Carolina over a similar health care program-generally questioned the extent the state would be exposed to additional costs if the operating fund fails to adequately cover costs. 

BILLS OFFER FREE COLLEGE TUITION - Two House Democrats are sponsoring legislation that would provide free college tuition to Michigan residents in exchange for a 1.15 percent increase in the state's Income Tax rate.  The measures were introduced by Representatives Alma Wheeler Smith-a Democratic gubernatorial candidate-and Rebekah Warren, although the two legislators had initially previewed the measures last March.  The two legislators said their measures, coming at a time when returning college students don't know the status of the Michigan Promise Grant monies, underscore the need to provide a degree of certainty in financial assistance programs for higher education.

As introduced, eligible students, based on the grades completed in a qualifying high school setting or its equivalent, would receive a credit of up to 100 percent of any tuition paid to a qualifying institution of higher education, with the credit being off-set by the receipt of other scholarship monies, such as Pell grants or educational payments made under the G.I. Bill.  Another interesting feature of the measures requires the recipient of the credit to remain a Michigan citizen for at least 4 years following his or her attainment of a Bachelor's degree.

ODDS AND ENDS - With supporters saying "one curriculum, one size, does not fit all," the House used a 97-10 vote to remove the criteria that high school students must take Algebra II to graduate.....on a 90-17 vote, the House approved a measure designed to provide tax credits of up to $100 million to firms willing to locate in the advanced battery and solar energy complex to be housed on the Ford Motor Company property located in Wixom.....answering his own call for fiscal transparency, Attorney General Mike Cox released his personal financial data showing his and his wife's net worth stands at less than $500,000.....saying it fears the required costs will add to the state's economic malaise and Michigan's ability to aid the poor, the Michigan Catholic Conference has announced it is opposed to holding a constitutional convention as voters will be asked by the 2010 ballot.....Pfizer, the world's largest pharmaceutical firm, has agreed to a pay a staggering $2.3 billion settlement with the United States government and the states over charges of health care fraud, with Michigan slated to realize almost $15 million from the agreement before it has to give nearly half of the monies to the federal government.....although still 12 points below its 2008 average, an economist with Comerica Bank says the Michigan Economic Activity Index increased by two points between June and July, rising to 75 on the index's scale.....contending less that 18,000 of the promised 61,000 jobs have been created and saying it has failed to achieve its goals while actually costing the state jobs, the conservative think-tank Mackinac Center has called for the elimination of the Michigan Economic Development Corporation.