Office of Legislative Affairs

Legislative Update

For the week of October 26, 2009 . . .

BUDGETS MOVE; BATTLES FLARE OVER VETOES - The log jam has been broken, but the net effect may be a deluge that extends the budget process into the foreseeable future.  As essentially promised by Senate Majority Leader Mike Bishop, the Senate withdrew the procedural motions that had sidetracked six of the annual spending plans since their final passage more than three weeks ago.  The action sent the spending plans to the Governor, who said she would sign the measures thereby averting a second shutdown of state government when the existing one-month continuation budget expires at Midnight October 31st.  But, even that process drew threats as Ms. Granholm again said she would sign the bills after exercising her veto authority on the spending plans-a move designed to force action on revenue enhancements she wants to augment spending-while Mr. Bishop-noting that every spending plan had experienced gubernatorial vetoes-stated that any gubernatorial vetoes imposed on the budget he and House Speaker Andy Dillon had worked out should be seriously contemplated by the author before being initiated as the legislature would not revisit the excised issues, viewing them instead as actions by the Governor to further reduce the size of government.

Ending the week, Governor Granholm issued a proration order calling for a further educational funding reduction of $127 per pupil.  Ms. Granholm said the action was predicated by constantly declining revenues and adamantly denied the order was an attempt to push legislators into enacting revenue increases.  She also argued it was prudent to issue the order now instead of waiting until January since the added time would give reeling school districts more time to absorb the additional cut.  In a subsequent press conference, the Governor said she both issued the proration order and vetoed monies in the School Aid budget to "defend public education from a serious threat" due to the legislature's failure to approve revenue increases.  She then went on to call on parents and teachers throughout Michigan to contact their legislator and urge their support of measures to enhance state revenue and help close the spending gap.  According to the Governor and Budget Director Bob Emerson, the revenue shortage facing the School Aid Fund is now $212 million, with the legislature having 30 days by law to act to offset the planned reduction.

A number of school groups quickly reacted to the order arguing their members could not absorb the additional reduction while noting the cuts were being magnified due to the fact they are coming when the schools have completed a third of the their school year and calling for the creation of more state revenue to fund education.  They further argued the new round of cuts would push several districts into the fiscal abyss forcing them to either engage in deficit spending or drain their reserve accounts, if they existed.  They renewed their call for the state to reform the funding mechanisms used to finance education saying the present system "is broken at this point."

Republicans, however, saw the effort differently as they called the order a "stunt," "irrational," "unnecessary," and, with regard to not using the May Revenue Estimating numbers as a basis, a "dangerous precedent."  They questioned the order's legality since it failed to use the May Revenue Estimate numbers as, they said, is required by law.  They wondered why the Governor didn't wait until January to consider a reduction order since future revenues are uncertain.  They questioned the rationale behind the order and said the budget was balanced when it was presented to the Governor and they would not pursue any revenue increases beyond the $100 million proposal currently before the House. 

GOV STANDS FIRM IN FACE OF PUSH TO REJECT E.O. - Despite resounding objections throughout the agricultural community to her plan to place the authority to select the Agriculture Department director within the Executive Office that have only intensified during the two weeks that the order has existed, Governor Granholm remains steadfast in her intent to back the order.  Arguing the state's Chief Executive should have appointment authority for both the Agriculture director and the director of the newly created Department of Natural Resources and Environment on the grounds residents expect the governor to run the Administration, a Granholm spokesperson said that "there are no changes contemplated in the Executive Order."

Meanwhile, the groundswell of opposition to the governor naming the Agriculture Director continued to grow.  Last week saw four Senate panels hold two joint meetings on the issue, with the Agriculture and Bioeconomy Committee meeting with the Senate Appropriations Agriculture Subcommittee while the Natural Resources and Environmental Affairs Committee joined with the Senate Appropriations Natural Resources Subcommittee.  Both panels heard testimony echoing the sentiments of earlier criticism, with many witnesses saying while they supported the planned merger of the Departments of Natural Resources and Environmental Affairs they wished the legislature had the ability to simply reject the language striking the Agriculture Commission's appointment authority.  While no formal action was taken on the two Senate resolutions seeking to reject the Executive Order, the Democrats on the panels charged opposition to the order was an effort to oppose the streamlining of government-something the Minority Party members noted Republicans have been urging for months.  In the House, the issue took an interesting turn.  There, Representative Jeff Mayes introduced House Concurrent Resolution 23 which-as do the Senate resolutions offered -seeks to reject the Governor's Executive Order.  While rejection language was not unexpected in the Lower Chamber, the fact the primary sponsor is a member of the Governor's own party was something of a surprise.

CREDIT CHANGES MULLED AS CAUTION URGED - Members of the House Tax Policy Committee began taking testimony on a number of the state's tax credits in anticipation some or all of the credits may be pared back or eliminated in an effort to find additional state revenues.  The Lower Chamber has already approved a vehicle bill that would clip 15 percent from some of the credits authorized under the Michigan Business Tax (MBT).  As the committee focused on MBT credits allowed for compensation, investment, research and development, personal property and brownfield projects, a Treasury official-saying the credits were not necessarily "bad"-told members the credits often had little to do "with the theory of the tax" and should be viewed as "shadow appropriations" since they control nearly $1 billion in potential state revenue.  Conversely, business community witnesses told members to remember the credits had been crafted in an effort to make Michigan's tax burden more competitive to those in other states.  They also argued it was important to have-and keep-a competitive tax program to encourage business investment in Michigan with other business witnesses saying the state should not adversely impact existing credits just to "maintain status quo spending policies" as others said the credits helped their firms' invest in research and development with the bulk of that activity occurring in the state.

NINE STATES REPORT DOUBLE-DIGIT UNEMPLOYMENT - According to data released by the U.S. Bureau of Labor Statistics, Michigan, the District of Columbia and eight other states have reported unemployment rates in excess of 10 percent for the month of September.  Michigan, at a 15.3 percent unemployment rate for the month, continued to lead the nation followed by Nevada at 13.3 percent.   In terms of jobs lost, New York led the nation reporting the loss of 81,700 jobs in September followed by Texas (44,700), California (39.300), Wisconsin (21,700) and Michigan (21,500).  For the year, California led the nation in jobs lost, reporting a total loss of 732,700 jobs, followed by Florida (360,400), Michigan (308,800), Illinois (306,900), Texas (303,700), Ohio (258,100), New York (256,100) and Georgia (245,400).

ODDS AND ENDS - Responding to a bureaucratic order telling a mother to obtain a day care license when watching her neighbor's children as they waited for the arrival of their school bus, the House Families and Children Services Committee has unanimously reported legislation that would exclude babysitting services from the state's definition of home child care operations.....Senate Minority Floor Leader "Buzz" Thomas has introduced a legislative package that would lift the existing cap on charter schools while providing for a degree of certainty regarding the quality of education being provided by the institutions..... according to the latest RealtyTrac.com report, through the third quarter of the year, Michigan ranks eight nationally in terms of foreclosures with one of every 122 properties involved in legal proceedings.....despite ranking the firm "A-" for both its financial strength and credit rating, a leading insurance company rating agency has downgraded its outlook on Blue Cross Blue Shield of Michigan from "stable" to "negative"..... although not a primary offense, the House Transportation Committee has reported legislation that would make it illegal to send or receive text messages while driving.....responding to questions posed by Time Magazine readers, Governor Granholm says Detroit and Michigan will recover due, in part, to the economic and personnel infrastructure currently in place, noting the state has more engineers than the rest of the nation and workers who could shape steel into vehicles can make the same bends to manufacture windmills.....arguing their organization had been formed by sportsmen fed-up with politics superceding science in the management of the state's natural resources, the Michigan United Conservation Club will oppose the Governor's Executive Order merging the Departments of Natural Resources and Environmental Affairs as long as the director of the new department is a gubernatorial appointee and not a leader selected by the Natural Resources Commission.