Office of Legislative Affairs
Legislative Update
For the week of October 19, 2009 . . .
BUDGET WOES AND BATTLES DRAG ON - When the Michigan Legislature approved the School Aid budget late last week, Senate Majority Leader Mike Bishop declared the budget process for the 2010 Fiscal Year done. He was right and wrong. From a technical standpoint, he is correct as the legislature had approved the several budgets that contain the state's overall spending plan for the current fiscal year. From a process standpoint he was incorrect as the Upper Chamber held six of the more controversial budgets-those dealing with the health, education, safety or welfare of Michigan residents-on procedural motions in an effort to determine what steps the Governor might take with her veto pen to rewrite the spending plans.
Early last week, after House Democrats moved some measures designed to enhance revenues to the Senate, Ms. Granholm called on Senator Bishop to release the budgets for her review and response. In doing so, she also suggested she might try to pull an end-run on the legislative process by striking monies from various budgets by veto and then reallocating those monies through actions taken by the State Administrative Board. That suggestion led Senator Bishop to amplify his call for a face-to-face meeting with the Governor to specifically discuss what budget issues she found most troubling and how she intended to treat them in the signing process.
That meeting was held, but the end result of the discussion indicated a slight procedural movement might be possible while underscoring the two parties remained miles apart philosophically on what the budget should include. While telling the media he had heard what he needed from the Governor-and that he thought the bills could now be released-he also said he would first have to discuss the situation with his caucus and, as of this writing, the budget bills remain sequestered in the Upper Chamber.
The overriding issues and disputes remain the same as they existed earlier this summer. Ms. Granholm-and many of her Democratic legislative colleagues-contend the spending plan created by the Senate Republicans cuts too deeply and argue additional state revenues should be authorized to minimize the impact of the spending reductions. As such, she is still expected to exercise her veto power on the remaining budgets, if and when they reach her desk. Conversely, Republicans have taken the tack that the state should live within its means and if income has declined the state should-as have its residents-make the necessary adjustments in spending to reflect the missing income. Moreover, Mr. Bishop has said the revenue enhancements proposed by the House are not necessary and they would not be considered by the Upper Chamber.
Adding to the budget mix was the determination that the revenue in the School Aid Fund will not be sufficient to support the School Aid budget the legislature adopted just last week. Thus, despite the presence of a $165-per-pupil cut in K-12 funding in place in the new budget, legislators will be asked to either find more monies to cover approved expenditures-and using the balance of the stimulus money is already being discussed in some quarters to meet the $264 million shortage-or embrace additional spending reductions to balance the budget. Thus, the primary budget issues remain with no resolution in sight, revenues continue to fall, significant portions of the budget have yet to wend their way completely through the political process and the month-long continuation budget has run half its course.
BUSINESSES ADVOCATE TAX ACTION - Buoyed by the Senate's plan to phase-out the nearly 22-percent surcharge currently levied on the Michigan Business Tax, a number of the state's largest businesses organizations urged the House to follow the Upper Chamber's lead and approve the proposed three-year phase-out plan. The approach was offered as a way to generate revenue to minimize the required reductions in School Aid spending. In so doing, spokespersons for the groups responded to criticism that the Senate action did so at the expense of working families-the plan is funded by freezing the Earned Income Tax Credit-by arguing the majority of the working poor want good jobs and that eliminating the MBT surcharge can go a long way in assisting the business community in providing them. The spokespersons also noted other actions can be taken to fund the program, such as further cuts to-or the complete repeal of-the Film Tax Credit or putting a one-year moratorium on economic incentive grants provided by the Michigan Economic Growth Authority. The spokespersons also stressed that Governor Granholm has said she would support the surcharge's elimination if the repeal was financed through other means, and, they argued, the Senate plan achieves that goal. The business representatives also said Senate Republicans had taken a major step by acting on tax changes which they had previously opposed.
CONSOLIDATION, TAX REVIEW PROPOSED BY COMMISSION - The Legislative Commission on Government Efficiency approved the format and basic content of its final report and the document-expected for release by year's end-suggests the state should develop programs designed to encourage local governments and school districts to consolidate their respective operations-two controversial suggestions panel members said they would not expect the Michigan Legislature to embrace. The report also said the state should work to reduce state employee benefits and restructure its tax programs to keep pace with costs and the economy. The Commission was charged with finding ways to reduce state spending, but members generally agreed that spending was but a portion of the state's existing budget problems.
Addressing the report's more controversial recommendations, panel members expressed individual beliefs that the state employed too many local units of government-there are some 1,800 such units in the state-and houses too many school districts. The members said, identifying problems and resolving them are two different issues, with most agreeing how to achieve mergers and consolidations would be the major stumbling block to such activity. The panel also suggested revenue sharing be made a constitutional mandate for all levels of government-it is currently a combination of constitutional and statutory mandates-but it should be linked to specific services instead of being considered general funding for the recipient entities. They endorsed allowing local governmental units to levy additional taxes to replace shortfalls in state support.
In terms of state government, the report recommends an examination of the workforce to ensure state jobs have the appropriate number of workers assigned to them and encourages the state to engage in more merit-based pay programs for state employees. The report also says worker benefits should be more aligned with private sector offerings and costs, suggesting lower benefit levels or higher employee contributions from new state workers.
Panel members also noted one of their report's suggestions has already been implemented by the Michigan Legislature-although the final outcome remains uncertain. That is the panel's recommendation to eliminate the Promise Grant Program While support for the recommendation was not unanimous, most panel members said the program, as developed, was unnecessary with most qualifying recipients coming "from schools where it's obvious that most of the parents will send their kids to college," while changing the program to a needs-based scholarship would simply duplicate existing state programs in that area.
Ultimately, the panel's key recommendation covered a topic not included in its original charge. The report will encourage the Michigan Legislature to consider the state's taxes to develop a program that more accurately reflects the state's economy. Panel members charged the state lacks a stable tax base with the deficit existing not due to a shrinking economy "but because the tax base doesn't reflect the economy we've got." The report will say the base is too small and that tax rates could be lowered if the base is broadened. The report will also suggest the state adopt a pay-as-you-go system for new programs-an approach that would require identified new revenue for proposed new programs and identified spending reductions when taxes are cut.
UNEMPLOYMENT RISES AGAIN - Michigan's September unemployment rate rose to 15.3 percent according to data released by the Department of Energy, Labor and Economic Growth (DELEG)-the highest level reported thus far this year and the highest monthly unemployment rate Michigan has experienced as a state in more than a quarter century. The September rate was 0.1 percentage points above the 15.2 percent level recorded for August, but it was 6.4 percentage points higher than the September 2008 unemployment rate. Nationally, the September unemployment rate stood at 9.8 percent. According to DELEG officials, the state's total labor force dropped by a total of 10,000 workers, shrinking to a total of 4.83 million workers while the total number employed declined by 14,000 to under 4.1 million.
CANVASSERS OKAY CASINO PETITIONS - Casting a unanimous vote, the State Board of Canvassers approved the form of petitions submitted by proponents seeking to create up to eight new casinos in Michigan. Supporters of the initiative intend to locate five of the casinos, if approved by voters, at horse racing tracks throughout the state with those facilities not required to construct a hotel on the site. The tracks eligible for the casinos would have to have offered pari-mutuel betting during 2009. Proponents of the question submitted two petition forms, one which included a reference to the voter approved gaming language added to the Michigan Constitution in 2004 and one which did not, with the Board opting to approve the petition that mentioned the existing constitutional language. The approved petition language will ask voters to agree that it "shall be lawful to conduct casino gaming and enact laws as provided in this section without further vote of the people." The plan would require the casinos to pay a tax equal to 30 percent of their gross receipts, with three-fourths of that money earmarked for the School Aid Fund. Of the remaining 25 percent of the levy, 20 percent would go to all the state's counties, 3 percent would go to the county in which the casino is located and 2 percent would go to the community in which the casino is housed. Having been approved as to form, the question's supporters now have to obtain 380,126 valid signatures within a 180-day period to secure a place on the ballot.
ODDS AND ENDS - Governor Granholm has signed the Department of Agriculture budget, but she vetoed $7.8 million from the budget for the Office of Racing Commissioner and related county fair prizes and $540,000 for the agricultural surplus program arguing the monies have been duplicated in the Human Services budget.....the House has approved legislation requiring the Michigan Economic Growth Authority (MEGA) to provide more information regarding job creation by companies which receive MEGA grants and other tax incentives...... with the budget still unresolved, Michigan Government Television has announced it will expand its non-stop coverage of the state government to cover activities 24/7 through 2 p.m. November 6th..... a new national agreement will, beginning sometime in 2010, allow Michigan's lottery players to purchase both Mega-Millions and Powerball ducats.....Governor Granholm announced that more than 1,200 of the world's leading stem cell researchers will visit Detroit's Renaissance Center next October to attend a major conference. | 
