Office of Legislative Affairs

Legislative Update

For the week of September 21, 2009 . . .

LEADERS SAY BUDGET AGREEMENT IS IN HAND-MAYBE - On Wednesday of last week, Senate Majority Leader Mike Bishop and House Speaker Andy Dillon announced they had reached a tentative agreement on the budget for the coming fiscal year which begins October 1st-bringing to fruition the fear many Democrats had begun to verbalize that they would be forced to vote on a budget based on spending cuts. In his statement, Mr. Bishop said, "This signed agreement between legislative leaders allows the budget chairmen to move forward with making specific budget reductions to bring our fiscal house in order. I appreciate the legislative leader's cooperation in taking this next step in delivering a balanced budget to the Governor that does not require any new tax increases." Likewise, Mr. Dillon stated his caucus is prepared to move budgets with "deep cuts," but also will protect vital programs including police and fire, the Promise Grant, K-12 education and health care for children and vulnerable adults while defending the agreement as a necessary first step in moving the process forward before the onset of the new fiscal year.

However, the agreement-which embraces most of the Senate Republican's plan to balance state spending by implementing cuts and avoiding tax increases-may not be able to withstand the political winds that quickly whirled around the plan. Details of the agreement, including spending targets, were not released initially pending individual caucus briefings on the contents of the plan although the two legislative leaders instructed their Appropriations Committee negotiators to complete their conference committee work by this week. Once those often tumultuous meetings were held the agreement was revealed to contain $1.279 billion in program reductions using General and restricted funds with another $412.7 million in cuts coming from the School Aid Fund. Among the more disconcerting reductions to lawmakers are a $200 million reduction in General Fund monies beyond the adjustment proposed last week by Governor Granholm for the Department of Community Health, the elimination of the Promise Grant college scholarship program, a cut of $163.4 million in revenue sharing payments and a nearly $80 million cut to the Department of Corrections that department officials said could force the closure of three more prisons.

With the details public, the intensity of the storm clouds that had initially surrounded the announcement of an agreement based on the Senate budget only increased. When Wednesday's agreement was first announced, a spokesperson for Governor Granholm said the Administration did not "support the Senate cuts and we don't support the targets" and urged the legislature "to put a budget on the Governor's desk that does not make harmful cuts." The Governor-who personally questioned the probability the legislature would return after the start of the new fiscal year to embrace revenue enhancements as envisioned by Speaker Dillon-also met behind closed doors with Senate Democrats and then emerged to harshly criticize the agreement as others in the Administration intimated, in ever increasing tones, that she would exercise her "constitutional authority" to adjust-or reject outright-any spending plans she felt were too onerous.

Likewise, Democratic lawmakers-at least beyond the House negotiating team-expressed major concerns as the targets-and what they meant in terms of state programs-emerged. Senate Minority Leader Mike Prusi said the agreement was, in his opinion, so bad that he could not encourage his grandchildren to remain in Michigan if it is actually enacted. Other Democratic legislators on both sides of the Dome argued the depth of some cuts-such as those envisioned for Community Health-would literally put the residents of nursing homes "on the street." They also argued the solution to others-such as the planned cut in Department of Corrections spending-could be addressed by revising the "Truth in Sentencing" statute thereby reducing the number of prison inmates, but, they also quickly noted, their Republican counterparts would never agree to such a revision.

Response to the plan varied among the several interest groups. Those organizations dependent upon state funding expressed shock such a deal had been made as they quickly marshaled their respective forces to prevent the movement of a budget based on the Senate Republican's plan. Calling the reductions "horrific" while labeling the action as "sending the wrong message," spokespersons for educational and local governmental interest groups said they were not about to quietly accept a budget implementing some of the largest reductions in a decade on the "wink and a promise" the legislature would subsequently return to restore funding through tax increases once the spending plan was in place. They also urged the Governor, individually and collectively, to veto the plan if it should ever reach her desk. Conversely, the agreement was generally welcomed by organizations representing the state's business sectors. One such spokesperson noted the spending reductions were in keeping with the actions being forced on businesses by the economy and that they were pleased the plan did not impose additional taxes.

Thus, we have a budget agreement based solely on legislative negotiations that is on the ropes. Conference committees will meet this week with adoption of conference reports on Tuesday and voting on the House and Senate floor on Wednesday. The prospects for passage of the Bishop/Dillon agreement are somewhat shaky as an Immediate Effect vote is needed in the Senate and Senate Democrats are threatening to withhold their votes. The Senate will vote on a continuation budget on Tuesday as a backup plan.

SENATE PUSHES FOR JUNE 1ST BUDGET INSIGHT - On a bipartisan 28-6 vote, the Senate adopted a proposed amendment to the Joint Legislative Rules that would require both chambers to provide the general outline of their respective budget proposals by June 1st of each year. The intent of Senate Concurrent Resolution 21, sponsored by Senator Tom George, is to prevent the recently recurring trend of delaying legislative action on the budget until much nearer the onset of the new fiscal year. In prior years, both chambers approved the budgets originating in their respective chamber before the spring recess and then gave second house approval to the balance of the budget during the month of June-with legislative leaders using the Fourth of July recess as the target for setting final spending targets, completing conference committee work and finalizing the budget. Arguing the process has slipped, Mr. George defended his resolution by saying the current process "makes it more likely that a deal would be struck late at night and it probably increases the chances of a government shutdown." Despite the Upper Chamber's overall support for the resolution, Senate Minority Leader Mike Prusi objected to the proposal's immediate consideration instead of having it first deliberated in committee while House Speaker Andy Dillon thanked Senator George for his "advice on changing House rules" and said the House would consider his suggestion "after the current fiscal crisis is completely resolved."

AUGUST REVENUES OFFER MIXED RESULTS - The revenue report for August is in and the numbers provided state officials with a "good" and "bad" news situation. The bad news was, as expected, that the August 2009 revenue was less than the state realized in August 2008. The good news, which was not expected, was the fact that the August monies actually exceeded income projections. In the year-to-year comparison, total revenue for August was $1.56 billion-a 2-percent drop from monies collected in August of the prior year. However, the total was $70 million more than state officials had projected going into the month. The monthly analysis of state revenues, performed by the Senate Fiscal Agency, found the "Cash for Clunkers" program had helped state income for the month by driving up vehicle sales by more than 40 percent over August 2008 volumes. The review also found income gains from the Michigan Business Tax, insurance and state education taxes, while the vast majority of state tax programs reported declines. Thus far through the 2009 Fiscal Year the state has collected revenues totaling $14.888 billion which the SFA analysis notes is some 12 percent below the monies the state collected at this point in the last fiscal year.

ODDS AND ENDS - Ending rampant speculation that has existed since she removed herself from the contest while endorsing another, Secretary of State Terri Land has been tapped by Oakland County Sheriff Mike Bouchard, one of five announced Republican gubernatorial candidates, to be his running mate if he wins the party's nomination.....on a 2-1 vote which the Administration intends to appeal, the Ingham County Elections Commission has approved recall petition language targeting Governor Jennifer Granholm, meaning recall supporter now have 180 days to collect the necessary 950,314 valid signatures required to force the recall election.....although nothing is definite and efforts to find available state funding for next year continue, the general manager of the State Fair in Detroit says several private groups are exploring ways to cover the costs of running the fair with a few of those interested having already being sent to the Granholm Administration for further discussions.....with the Michigan Tax Tribunal reportedly facing a 20,000 case backlog, the House Judiciary Committee has reported a measure that would allow property taxpayers to request an informal conference with their tax assessor to resolve existing disputes.....with both the House and Senate versions of the budget envisioning the consolidation of the Departments of Natural Resources and Environmental Quality, Senate Republicans have begun the introduction of a multi-bill package of proposals needed to achieve that goal..... having sponsored just introduced legislation that would consolidate the Departments of Environmental Quality and Natural Resources, Senator Michelle McManus, arguing that agriculture is one of the state's economic lynchpins, has urged Governor Granholm not to embrace a "short-sighted" solution that would wrap the Department of Agriculture into that consolidation.