With the Legislature expected to recess for the summer on June 12, much remains to be done.
Revenues Down from January Projections
The May 15 Revenue Estimating Conference resulted in a consensus agreement among the Executive Office and Legislature that overall General Fund revenues will be reduced by $473.7 million from the January 2014 estimate though there is still a sizable increase in projected revenues this year and no deficit anticipated. That and other changes means reductions of $616 million in the proposed FY 2015 budget and beyond.
Explanations for the reduced revenues included the effect on sales tax collections from the harsh winter, which kept consumers away from stores. Second, state coffers will be affected by political gridlock in Washington, D.C. Investors cashed in and paid taxes in 2013 out of fear of increased taxes as Congress and the President fought over ways to resolve the Fiscal Cliff. Annual collections for this fiscal year are expected to fall by more than 29 percent as a result. A third reason was a self-inflicted one: PA 4 of 2014 signed in January will lower personal liability for unpaid business taxes that are due. It is projected that the business break could cut revenues by nearly $68 million this year and by more than $100 million in the 2014-15 fiscal year. A fourth reason was that tax credits companies can continue to claim under the now-defunct Michigan Business Tax came in higher than expected.
Overall, the administration and the Republican leaders emphasized that the state is still growing economically. The Democrats put a different spin on it saying that all the business tax cuts the Republican majority have enacted aren’t working as well as promised.
Minimum Wage Increase Approved
In a dramatic turn of events, a bi-partisan legislature approved and the Governor signed a new law repealing the former Michigan Minimum Wage Act and substituting for it a new Workforce Opportunity Wage Act with identical language except for new provisions concerning minimum wages.
The new WOWA will increase the hourly minimum wage for most workers to $8.15 in September, $8.50 in 2016, $8.90 in 2017 and $9.25 by the beginning of 2018. Tipped employees would earn 38 percent of the minimum wage, or about $3.51 an hour in 2018. Beginning in 2019, the minimum wage will be adjusted to the rate of inflation or 3.5 percent, whichever is lower. Annual increases would only take effect if the state’s unemployment rate is below 8.5 percent. By all accounts, the new law is designed to undermine the petition drive seeking to raise the minimum wage to $10.10 an hour for all employees.
Meanwhile, the new law did not deter Raise Michigan’s petition drive for a ballot proposal to amend the former Michigan Minimum Wage Act. Signatures were turned in to the Bureau of Elections the day after the WOWA bill was signed. Should the proposal qualify for the ballot and voters pass it, then there likely would be a legal showdown if the state refuses to enforce it according to the attorney for Raise Michigan, Mark Brewer.
The Michigan Restaurant Association, a staunch opponent of the Raise Michigan campaign, has created a ballot committee called “People Protecting Michigan Jobs ”to oppose a potential ballot proposal. The MRA argues that raising the minimum wage for both regular and tipped workers to $10.10 per hour would cause many restaurants to close their doors or lay off workers.
Grand Bargain Passes
In another bi-partisan effort, the so-called Grand Bargain to help Detroit emerge from bankruptcy included a $194.8 million commitment from the state of Michigan that passed both the House and Senate handily. More than $800 million was pledged by the state, foundations, the Detroit Institute of Arts and others to reduce cuts to Detroit city worker pensions and protect the DIA art collection from a forced bankruptcy sale.
Detroit retirees have received their ballots and must vote to approve or disapprove the overall bankruptcy plan affecting them by July 11. To qualify as accepting the plan, more than two-thirds the amount of claims and one-half of retirees have to say yes. The plan stipulates that if retirees vote for the plan, they will see only a 4 percent cut in their pensions and “may” be waiving the right to sue the state to recover the full amount of the pension. If the plan isn’t approved, the state’s contribution will be nullified. The Governor and others have said that it is in Detroit retirees’ best interest to vote in support of the plan or risk much deeper cuts in their monthly checks. Hearings before U.S. Bankruptcy Judge Steven Rhodes on the legality of the whole plan start July 24.
The Change Agent Consortium, a national coalition of faith, labor, civil rights organizations and citizens is urging a “no ”vote on the Grand Bargain on the basis that paintings from the DIA should be sold before pensioners should take cuts to their earned retirement income. A spokesperson for the Consortium said that the Grand Bargain puts Picasso before people.
At this writing, there is yet no “Grand Bargain” to fund road and infrastructure improvements in Michigan. The Michigan House passed bills designating $450 million annually for the state’s crumbling roads and bridges from a variety of General Fund sources. But this is far short of the $1.2 to $2 billion Governor Rick Snyder and others say is necessary. Senate Majority Leader Randy Richardville favors shifting the transportation tax from one based on cents per gallon to a system that would eventually charge 15.5 percent on the wholesale price of fuels. It would net the amount of revenue the state needs to tackle the transportation issue but would increase gas prices by 25 cents a gallon.
Also in the mix is a proposal to increase the sales tax from six to seven percent and dedicate the increase to road and bridge funding. It would capture revenue from out-of-state travelers using our roads. But Michigan Senate Democrats object to a solution that again raises taxes on the middle and low-income residents without some offsetting tax relief for them.
Senate Democratic Leader Gretchen Whitmer commented that the fact that Republicans can’t get a transportation package with their votes alone shows how tough the vote will be. She said this might be the largest tax increase on which legislators will ever vote. A spokesperson for the Michigan Building and Construction Trades Council cautioned that we’ve already lost this season and if we wait much longer, we’ll lose next season for infrastructure improvements.
Update on the Fiscal Year 2015 State Budget
With all the hoopla, attention, and effort expended on the Detroit bankruptcy deal and a roads package during May and early June, the rest of the budget has been moving quietly through the process to conference committees. At this writing, budget targets need to be set by the Governor and Senate and House leadership before conference committees can move their bills. Reportedly at issue are the dedication of “rainy day” funds to help offset the statewide impact of the Detroit’s bankruptcy, whether the General Fund money being used for road funding in FY 2015 is built into future budgets or is designated as “one-time ”funding, film incentive funding level (Senate Majority Leader Richardville is seeking $60 million for the program, up from $50 million in the current year. Governor Rick Snyder has proposed reducing the program to $25 million), language on the new bridge to Canada to assure that no state money is spent on the project, and the need to grapple with revenues that are down significantly below estimates made in January.
Snyder Calls For An ‘Age-Friendly’ State
In his first Special Message to the Legislature of the year, Governor Rick Snyder chose Senior Appreciation Day on June 2 to call for improved aging services in Michigan. He said almost 2 million residents in the state are 60 and older, which is a 20 percent increase over the past 10 years. He also said the fastest-growing population in the state is those aged 85 and older. The Governor urged the Legislature to make Michigan a “no-wait state ”for meals on wheels and other programs that benefit seniors. He noted that in his February budget recommendation that he proposed $20 million in increased program support.
He also used the occasion to defend the changes in tax law eliminating the special senior exemption, modifications of the Homestead Property Tax Credit, and taxing the pensions of those born after 1945. His view is that the tax overhaul produced a fairer tax structure for all generations. More information about the Governor’s Special Message is at www.michigan.gov/snyder.
PENSION TAX AND COURT TRANSFER LAWSUITS
Don’t forget to attend the oral argument in school retiree Tom Okrie’s challenge to the pension tax and transfer of the Court of Claims from the Ingham County Circuit Court to the Court of Appeals. It is scheduled for 9 a.m. on Tuesday, July 8, 2014 in the Michigan Court of Appeals’ courtroom on the 14th Floor of the Cadillac Place, 3020 West Grand Boulevard, Detroit. Each side will be allowed one-half hour to address the Court of Appeals in a special session.
See Attorney Gary Supanich’s Web site at www.michigan-appeal-attorney.com for updates on the cases.
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Editor’s note: Mary Pollock is the 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 email@example.com.
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