Office of Legislative Affairs

Legislative Update

For the week of September 14, 2009 . . .

GOV'S BUDGET DRAWS CRITICISM - Governor Granholm publicly released her revised budget proposal last week with most participants and observers expressing disappointment over the plan.  In fact, the public release ultimately resulted in a peace-making meeting between Ms. Granholm and House Speaker Andy Dillon, and Republicans essentially saying much of the plan was a non-starter but appreciative for finally having something concrete to react to.

Key elements of the Governor's two-year budget plan include a 1-cent per bottle tax on bottled water; extending the Sales Tax to tickets for live entertainment, vending machines and service contracts; a delay in the implementation of the scheduled increase in the Earned Income Tax Credit; a 25-cent per pack boost in the state's Cigarette Tax; the closing of tax loopholes; a $74 million cut in revenue sharing payments; the reduction of some specific tax credits-including a 7-percnt cut in the Film Tax Credit-and the phasing-out of the 22-percent surcharge on the Michigan Business Tax over a three-year period.  Overall, the plan envisions a balanced budget by generating $684 million in new revenue, absorbing $862 million in cuts and using $973 million in federal stimulus funds, with the Governor contending her plan-when combined with February's Executive Budget proposal-cuts state spending and enhances state revenues by equal 12-percent figures.  It was quickly noted the Governor's plan did not specify which programs within state government were facing the knife with the proposal only listing total spending reductions by department.

In releasing her plan, Ms. Granholm also said she hoped the House would immediately begin working on the passage of its budget bills in order to bring the last missing budget proposal to the negotiation table.  That plea fell on deaf ears as Speaker Dillon issued a statement saying Ms. Granholm "should know that showboating a proposal that has no chance of passing is not a way to solve the state's fiscal crisis," while encouraging all parties to put "theatrics and demands aside" and do the hard work of "negotiating a budget solution."  He also noted, through a spokesperson, that the bills contained on the Governor's agenda would not be placed before House members for immediate consideration.  To that response, senior members of the Granholm Administration suggested the House approve their own plan if they found so much to dispute in the proposal put forth by the Governor.

In fact, Republicans were kinder in their reaction to the Granholm budget plan.  While a spokesperson for Senate Majority Leader Mike Bishop called the Governor's proposal a general tax increase-and thus fated to be rejected by the caucus which still stands by its already approved plan-the spokesperson did call the plan's release a major step toward finalizing the state's budget while indicating the caucus remained willing to consider some changes to the various tax exemptions offered by the state.  Welcoming the public release, the spokesperson said the debate can now include public input over paying more in taxes or living with reductions in services.  Likewise, House Republicans also praised the Governor for finally releasing her plan so the public could readily see and review her proposal and "kick the tires" to see if it was acceptable.

Interested parties also expressed muted optimism in the face of adversity.  Representatives of organizations involved with the state's social safety net said they were pleased the Governor had finally put a face on rumored revenue enhancements though they said they were still concerned the spending plan would fall short of the growing need.  Likewise, local governmental officials said they were encouraged by the fact the Governor's proposed reductions in revenue sharing payments suggested a middle-ground number between the Senate plan-which would pull nearly $100 million from the payments-and the House proposal that would only reduce payments by some $5 million.

Meanwhile, as promised, Representative Cushingberry unveiled his budget proposal for public consumption.  Saying he hoped the plan "will trigger some of my friends into action," Mr. Cushingberry said his plan-which is his alone at this point-would generate some $967 million by, among other things, taxing bottled water, delaying the Earned Income Tax Credit, implementing a 3-percent physician quality assessment program, freezing revenue sharing payments, creating a 50-cent cell phone fee, taxing fast food at 2 percent, taxing satellite television and enacting a 1.8 percent surcharge on private health insurance claims.  The Cushingberry Plan was immediately assailed by Republicans with a Minority Caucus member of the House Appropriations Committee saying a plan to raise taxes and cut educational funding is "beyond me" while GOP leadership again pointed out they had already offered a balanced-budget plan that protected educational funding while not raising taxes while lamenting the Appropriations Committee Chair "clearly does not share those priorities."

COX OFFERS BUDGET PLAN - Attorney General and Republican gubernatorial candidate Mike Cox issued a 92-point plan outlining how he would address Michigan's fiscal crisis should he be elected governor at the 2010 election.  Calling the plan suggestions based on a "pro-growth, freedom idea," Mr. Cox said he would cut the Income Tax rate to its former level of 3.9 percent and halve the burden of the Michigan Business Tax.  Mr. Cox also said he would reduce state spending by increasing the amount state employees pay towards their health care benefits, revising teacher pension programs and obtaining other benefit concessions from government employees.  He also said higher education and State Police spending would be among his administration's top priorities-including a call to eliminate the cap on the number of charter schools a university can create.  The entire list of proposals-which Mr. Cox noted makes him the only gubernatorial candidate to release a recovery plan-can be found on his campaign website.

CEOs CALL FOR REFORMS - Essentially telling Michigan's political leaders they have failed and we have a plan to repair the damage, a newly formed group consisting of the state's top 70 CEOs told state officials that you should embrace our plan or we will expend the time and money necessary to elect officials that will.  The new group of CEOs is called Business Leaders for Michigan.

Outlined by Domino's Pizza CEO David Brandon, who said the state could continue on the same unproductive path it has followed to date or all involved could "roll up their sleeves" and tackle the problems, the Business Leaders for Michigan plan calls for the complete overhaul of the state's tax system and its operation.  It would expand the Sales Tax to services-exempting medical and business-to-business services, education, housing and some other already-exempt services-while reducing the Sales Tax rate to an undisclosed lower level.  It would also reduce Michigan Business Tax revenue by some 60 percent, eliminate the Personal Property Tax, implement two-year budgeting, cut the state's workforce by up to 10 percent while reducing the pay of state employees to the average of public employees in other states or those paid to workers in Michigan's private sector and requiring state employees to assume a greater portion of their health care benefit costs.

The proposal was immediately attacked by Democrats and union representatives.  Democratic Party Chair Mark Brewer noted that while calling for an "enormous sacrifice" by Michigan workers any call for the reduction in pay and perks paid to CEOs was "conspicuously absent" from the "so-called 'turnaround plan.'"  Likewise, union officials said the plan's call for wage and benefit cuts was misguided while charging state employees were "easy targets."  Legislative leaders on both sides of the aisle bristled over the suggestion they had failed to perform their assigned duties, many of whom called the charge "unproductive".

ODDS AND ENDS - Despite their initial contention that having all five announced Republican gubernatorial candidates participate in a scheduled 60-minute radio debate would be cumbersome-and that the four selected have generated more support within the party-officials with the Michigan Taxpayers Alliance have succumbed to pressure and included Senator Tom George in their September 26th Mackinac Island gubernatorial debate.....the State Board of Education has adopted a new policy that would close college or university teacher education programs if the program is not meeting state performance standards only if the Board fails to see sufficient improvement in the deficient program......defending the performance of their programs, officials with the Department of Corrections told members of the House Appropriations Subcommittee on Corrections that the number of people being sent to prison has hit a 10-year low and the number of parolees being reincarcerated has also dropped dramatically.....Lt. Governor John Cherry has gone on record in support of Governor Granholm's proposed $74 million reduction in revenue sharing payments while saying he would not support any greater reduction.....with doses of the H1N1 (swine) flu vaccine expected to be in state next month and others flu vaccines already in place, state health and education officials have again urged Michigan residents to take the steps necessary to protect themselves against the traditional flu outbreaks expected again this year and to stay home from work or school if they contract the virulent disease.....a recent survey conducted by a Lansing-based polling firm found voters oppose extending the current term limit restrictions by a margin of more than two-to-one.