The Michigan Legislature adjourned for summer vacation on June 14, but not before both houses quickly passed a small tax cut to start conveniently on October 1, just before the November 6 election and the House caused an international uproar over censoring two female members. The Legislature returns for one day on July 18 and again August 15, before returning for several weeks on September 11. The Governor has signed 603 bills in his first 18 months in office.
After abolishing the Michigan Business Tax last year that brought in $1.8 billion and increasing individual income taxes (including a new pension tax) and cutting state services to pay for it, Republican House members up for re-election had a sudden change of heart. Two bills sponsored by Republican first-termers that restore $102 million to taxpayers are now law. PA 223 of 2012 would amend the Income Tax Act to reduce the individual income tax rate from 4.35% to 4.25% on October 1, 2012, rather than January 1, 2013, when the rate is currently scheduled to decrease.
PA 224 of 2012, would amend the Act to allow a taxpayer to claim a personal exemption in the amount provided under current law or in the following amount, whichever was greater, for each personal or dependency exemption allowable on the taxpayer’s Federal income tax return:
Currently, the amount of the personal exemption is $3,700. For each tax year beginning on and after January 1, 2013, the exemption must be adjusted for inflation, and will be phased out for single taxpayers with household resources between $75,000 and $100,000, and for married couples filing joint returns with household resources between $150,000 and $200,000. The exemption will not be allowed for a single taxpayer or joint filers whose total household resources exceed $100,000 or $200,000, respectively.
Democrats squawked that the tax relief amounted to a nickel a day, but the House and Senate passed the measures with wide margins.
School Employee Retirement Reform Update
The Legislature adjourned in June before completing its goal of passing SB 1040, the reform of the school employees’ retirement system. The Senate version closes the hybrid defined benefit/defined contribution pension plan and creates a pure defined contribution plan for new employees along with other changes. Closing the system would mean some up-front costs that are not in the FY2013 appropriations bills. It does not address “stranded costs,” those associated with schools privatizing services so there is a decreasing base of employees on which to calculate the annual required contribution. The Mackinac Center and the Laura and John Arnold Foundation in Houston are backing the Senate plan. Senate leaders say it can be paid for by ignoring the General Accounting Standards Board guidelines.
The Governor, the House, and the school employee unions favor the House version. It addresses stranded costs but doesn’t force a move to defined contribution. Gary Olson, former Senate Fiscal Agency Director, current Senior Policy Fellow at Public Sector Consultants, and consultant to the Coalition for a Secure Retirement, warned that “Any deviation from GASB accounting standards will likely cost the State of Michigan more in the long run than might be gained in short-term cost savings.” Olson had earlier concluded there needs to be “a balance between the future funding needs of MPSERS and fairness to the existing and retired employees of the system.”
Those advocating for MPSERS reform say it is important to pay down the state’s unfunded liabilities and reduce future costs. In the end the Senate decided to study the matter for 6 weeks and action is expected at the July 18 Senate session.
Protect Our Jobs Ballot Proposal Update
The union-led coalition supporting the ballot proposal to guarantee collective bargaining rights in Michigan submitted nearly double the number of signatures needed to put the measure on the November 6 ballot. On June 21, a ballot question committee, Citizens Protecting Michigan’s Constitution (CPMC) that fought a union-backed ballot proposal in 2008, asked the Secretary of State to reject the petitions, to refuse to process it further or to refer it to the Board of State Canvassers for certification to the ballot. CPMC is composed of the Michigan Chamber of Commerce, Business Leaders for Michigan, the Small Business Association of Michigan, and other employer organizations. CPMC claims that the ballot proposal rewrites the Michigan Constitution and repeals dozens of unidentified laws not contained in the petition language. A few days later, the Secretary of State said she had no legal authority to reject the proposal. CPMC is now preparing a court challenge.
Michigan SERA Coordinating Council endorsed the campaign to put a constitutional amendment on the ballot guaranteeing collective bargaining rights for public and private sector employees. One provision in the proposed amendment would assure constitutionally-protected collective bargaining rights for state employee unions similar to that which the state police troopers achieved through a constitutional amendment in 1978.
News of the Day
If you are a SERA member, you are eligible to receive News of the Day, a periodic e-mail about breaking news and media stories of interest to state employees and retirees. Write to email@example.com giving your name and chapter.
Editor’s note: Mary Pollock is the newly appointed Lansing SERA Chapter and SERA Council’s Legislative Representative. She may be contacted at 1200 Prescott Drive, East Lansing, MI 48823-2446; Phone 517-351-7292; E-mail firstname.lastname@example.org.
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