Capitol News
July 2014
The Legislature adjourned on June 12 after several late nights attempting to pass priority legislation, including a transportation funding bill. The August 5 primary looms, which means most of the media attention is now focused on political races, not policy.
Okrie v State of Michigan Update
The Michigan Court of Appeals panel (Judges Jane Beckering, Joel Hoeskstra, and Karen M. Fort Hood) heard oral arguments from the parties on Tuesday, July 8 at its courtroom on the 14th floor of Cadillac Place in Detroit. Each side had 30 minutes to argue whether 2013 PA 164 transferring the Court of Claims from the 30th Judicial Court (Ingham County Circuit Court) to the Court of Appeals is unconstitutional under the separation of powers doctrine under the state constitution and the due process clauses under the federal and state constitutions. The judges asked questions that indicated some sympathy for our view that the transfer was unlawful. A decision is expected in the next few months. See Attorney Gary Supanich’s Website at www.michigan-appeal-attorney.com for detailed information about both the class action challenge to the pension tax and the related constitutional challenge of the Court of Claims transfer.
Personal Property Tax Replacement on August 5 Ballot
The PPT is a tax on certain business and industrial equipment. A survey commissioned by state government showed that the tax had a greater impact on inhibiting business expansion plans than any other factor. The PPT was therefore partially phased out by a package of bills approved in 2012, contingent on voter approval or the revenue replacement scheme in the ballot proposal. It asks voters to designate a portion of the state’s Use Tax assessed against telephone services, select Internet sales and hotel room rentals, among other things, to help reimburse local governments for loss of personal property taxes. The bills created a Local Community Stabilization Authority to collect a portion of the use tax and redistribute it to local governments without state interference. To offset the state’s loss of revenue, large manufacturers would pay a new, though smaller, essential services assessment and undesignated state programs will suffer reductions in support.
There are 30 local governments for which PPT taxes exceeds 30 percent of their revenues. For 13 local governments, PPT taxes are more than half of their taxable value. It will cost the state’s General Fund $107 million in 2015-16 and increase to $502.2 million in 2027-28. Under the Headlee Amendment, all new local taxes have to be approved by voters so that is why this is on the ballot.
FY 2015 Budget Bills Adopted
The Legislature has passed and the Governor has signed state budget bills amounting to $52.3 billion for FY 2015, including state and federal sources. That is a 6 percent increase, mostly attributable to Medicaid expansion.
A $37 billion omnibus general budget bill for FY 2015 to provide funding for state operations that fall outside of K-12 schools, higher education and community colleges passed the Senate 24-12 and the House 100-10. It was signed into law on June 30 by the Governor with two line-item vetoes on small transportation studies.
Some of the features of the FY2015 general omnibus budget bill:
- Restoration of some funding for municipalities, elimination of the Governor’s Economic Vitality Incentive Program that made local governments jump through hoops to get their statutory money; 8 million for financially distressed cities, villages and townships.. Local government got a total 7.4 percent increase over last year.
- 2.8 percent more on transportation funding.
- Medicaid cost increases including the first full year of Medicaid expansion.
- $50 million for film incentives. The Governor wanted only $25 million.
- The Department of Corrections (DOC) budget includes $4.3 million and 20 new employees the Governor wanted for prisoner education. The total DOC budget is $2.04 billion, an increase of 0.4 percent over the previous year.
- $94 million for the Budget Stabilization Fund.
- 100 new state troopers, 31 motor carrier operators and 25 conservation officers.
- $7 million additional for cyber security.
- $5 million to fight invasive species and $1 million is going to a recycling program.
- Another $14 million for mental health programs.
The Michigan Department of Human Services will see a 4.4 percent spending reduction in 2015. The cut is the result of steep caseload reductions for temporary cash and food assistance programs funded by the state and federal government.
School Budget
In 60-50 vote, 13 House Democrats went along with 47 Republicans to support the “School Bus” bill, the omnibus education bill. The bill passed the Senate 21-17. It features $175 per-pupil increases for schools with lower funding levels and $50 increases for those with higher funding levels, which is designed to increase equity among K-12 schools. The goal, according to supporters of the plan, was to close the gap between schools that receive the highest foundation allowance, which will now be $8,099, and those that receive the lowest, which will now be $7,251. However, many of the No votes came from legislators in districts getting the $50 increases.
The plan sets aside $13.87 billion for K-12 schools, slightly more than the $13.797 billion Governor Snyder originally proposed. The Governor pointed out this is $1.1 billion more than when he took office in 2011, a statement that is highly disputed among his Democratic opposition.
Also included in the School Bus was a 5.9 percent operations funding increase for universities and a 3 percent increase for community colleges.
Road Funding Eludes Resolution
Senate Majority Leader Randy Richardville (R-Monroe) had some support in his 26-member caucus to raise the wholesale tax on gasoline to fund road and bridge improvements; there was also support for asking voters to raise the sales tax one percentage point; yet another popular concept was finding the money in the current budget. But no proposal garnered the necessary 20 votes in the Senate Republican caucus, so Democratic votes were needed. Richardville floated the idea of passing the increase in the gas tax and putting the sales tax increase to voters. If the voters approved the sales tax increase, the gas tax increase scheme would be nullified. However, that idea didn’t fly.
The Senate stuck around until 1 a.m. Thursday morning June 12, the last day before the Legislature’s summer break, to consider a flat 7 percent wholesale tax on gasoline and diesel, which would have generated a little more than the amount collected from the current 19-cent gas tax collected at the pump, with an inflation escalator maximum of 5 percent to increase the funding over time. But that did not garner the necessary 20 votes either. A deal with some Senate Dems to link an increased gas tax to a partial restoration of the homestead property tax exemption was defeated as well.
When the Senate returned at 10 a.m., they considered indexing the state’s 19-cent gas tax to the rate of inflation, but that failed also. Democrats were incensed about a Republican idea to repeal the prevailing wage if the Dems did not support Richardville’s plan and voted No on other compromise ideas. One bill that will streamline the state’s vehicle registration system did pass; it will raise $100 million.
Apparently a work group will be meeting over the summer to come up with a solution. To get their votes, Dems want tax relief, the corporate income tax raised from 6 to 8 percent to generate some road money, overweight truck permit increases, and more truck weight enforcement.
Snyder Signs Detroit Grand Bargain
On June 30, surrounded by a host of city and state officials along with the Detroit bankruptcy judge, the Governor signed the “Grand Bargain,” the 10-bill package that gives Detroit $195 million from the state’s rainy day fund toward an $800 million bankruptcy deal that will soften the hit on Detroit retirees’ pensions and save the Detroit Institute of Arts. The state contribution will be repaid over time by annual payments from the state’s tobacco settlement fund. If retirees do not approve the bankruptcy plan, the $800 million will go away. The ballots were due back to the court July 11.
Aramark inTrouble
The Department of Corrections announced recently that it has given Aramark, the new prison food service contractor that displaced 370 state employees last December, warnings that it needs to improve its performance or risk losing its contract.
The Department of Corrections (DOC) has already fined the company once. In a letter dated June 6 from DOC to Aramark, it indicated the state on July 1 will "strictly enforce" the penalties for food substitutions and shortages listed in the contract. The penalties include written warnings and fines for some offenses, and even termination of the contract if the contractor staff doesn’t adhere to the DOC’s rules and regulations. For meal substitutions and meal quantity violations, the first strike is a written warning and subsequent offenses are fines, according to the contract.
There’s been dozens of Aramark employees banned from prisons for discipline problems, and the contractor hasn’t kept up with required staffing levels according to reports. Over 150 prisoners were in health quarantine because of illness allegedly caused by the food. Maggots were spotted in food near serving lines in two facilities.
Capitol Improvements
The State Capitol would see $9.7 million in maintenance and restoration projects over three years it was announced recently. Included are a $1.4 million chiller and cooler replacement; dome restoration and painting totaling $1 million; security system improvements; replacement of the parking lot guard house; parking lot patches; work on the House elevator; a camera project, drapes for the Governor’s parlor, roof work and exterior grounds maintenance and assessment. Already started is maintenance of the exterior stairs on the east side of the building and the installation of a heating loop in the stairs to melt the snow and ice. The 1994 red chairs used by legislators are scheduled to be replaced and all the desks on the House floor are being refurbished.
Consumers Energy Bills Will Decrease
The Michigan Public Service Commission (MPSC) recently approved a revised renewable energy plan for Consumers Energy, including a 52-cent reduction for customer bills starting in July. The new plan does away with the 52-cent surcharge, as the cost of wind-generated energy has decreased.
SERA Recent News — If you are a SERA member, you are eligible to receive SERA Recent News, a periodic e-mail about breaking news and media stories of interest to state employees and retirees. Write to michigansera@comcast.net, giving your name and chapter.
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 michigansera@comcast.net.
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