Capitol News

September 2014

Although the Legislature was in session for only one day in August, there was plenty of political activity in the state.

November Ballot

Statewide Candidates — With both the August primary and the summer party conventions completed, the statewide ballot is set for the big event, Tuesday, November 4. The tea party Republicans mounted an effort to put one of their own as Rick Snyder’s running mate, but incumbent Lt. Governor Brian Calley was the ultimate winner.

In the Democratic convention, the top of the ticket — Mark Schauer and Lisa Brown - was set months ago though there was a mild kerfuffle over the nomination for the Michigan Supreme Court of a candidate who was once endorsed by Michigan Right to Life.

Spending on the governor’s race could top $40 million, with much of that coming in the form of attack ads from third parties according to the Michigan Campaign Finance Network. That’s comparable to total spending in the governor’s races of 2002 and 2010, Robinson said. Those earlier races featured competitive primaries that accounted for a good share of the total spending. There were no primaries in the Michigan governor’s race this year, so all the spending is either in support of Snyder or Schauer.

See www.michigan.gov/elections for a complete listing of candidates, ballot issues, and voter information.

Ballot Issues — Both the Michigan Senate and House have approved Initiated Law 2014-2, the ôScientific Fish and Wildlife Conservation Act" sponsored by Citizens for Professional Wildlife Management. It amends the Natural Resources and Environmental Protection Act, 1994 PA 451, to give the legislature and the Natural Resources Commission the authority to designate species protected from hunting, to provide for free hunting, fishing and trapping licenses for active members of the military, and to provide appropriations for fisheries management activities necessary for rapid response, prevention, control and/or elimination of aquatic invasive species, including Asian carp.

The new law effectively blocks two referendums that will appear on the November ballot to halt wolf hunts authorized by the legislature. The inclusion of an appropriation will make the new law referendum proof under the Michigan Constitution. Keep Michigan Wolves Protected, sponsor of the two ballot proposals, is considering a legal challenge.

OKRIE UPDATE

On August 20 we received the disappointing news that the Michigan Court of Appeals unanimously ruled against teacher retiree Thomas Okrie in his lawsuit challenging the constitutionality of the transfer of the Court of Claims from the elected Democratic-leaning Ingham County Circuit Court judges to an appointed panel of Court of Appeals judges. It is part of Okrie’s larger challenge to the tax overhaul that removed an income tax exemption from pensioners born after 1945.

The Court of Appeals said it was unusual to place a trial court in the midst of an appellate bench, but it was not an unconstitutional violation of the separation of powers, reasoning that the Court of Claims was a legislatively created court. The Appeals Court held that the Constitution stipulates clearly that the Legislature can create courts inferior to the Supreme Court and with limited jurisdiction.

The Appeals judges said the new Court of Claims within the Court of Appeals had shown in the months before the decision that it could handle and resolve cases. In response to Okrie’s concern that the transfer endangered his right to a neutral judge as Appeals Court judges would rule on decisions other Appeals Court judges sitting as Court of Claims judges, the Appeals panel said he failed to show that they were not impartial.

Okrie is planning an appeal to the Michigan Supreme Court. SERA may participate in a group friend-of-the-court brief supporting Okrie’s appeal.

SERS Board News

Gov. Rick Snyder has appointed Vernon Johnson of Lansing to the State Employees’ Retirement System Board. The nine-member board, housed within the Office of Retirement Services, oversees the State Employees’ Retirement System defined benefit plan. In addition to the governor's four appointed members representing employees and retirees, the State Insurance Commissioner, Attorney General, State Treasurer, Deputy Legislative Auditor General, and the State Personnel Director also serve on the board.

Johnson retired from the Department of Treasury at the end of 2010 where he was an administrator in the Trust Accounting Division for more than 30 years. He represented the State Treasurer on the Board from 2009 and 2010. He serves on the board of trustees for the Capital Area District Libraries, the Old Newsboy Association, American Youth Soccer Association, Diocese of Lansing Finance Council, and the Lansing Catholic Central High School Finance Committee. Johnson earned a bachelor’s degree and a master’s degree from Michigan State University and is a great Spartan fan. He will serve the remainder of a three-year term expiring July 31, 2016 filled by the resignation of retiree Ronald Jones.

The Governor also reappointed Ruth Schwartz as an employee-member of the Board. She is director of payroll and tax reporting for the Michigan Department of Technology, Management and Budget. She serves as Project Director for Project SIGMA, the new initiative focused on the replacement of the State of Michigan’s enterprise-wide financial system.

Updates

Aramark — The administration’s investigation of the private food contractor Aramark resulted in finding errors on the part of Aramark and the Department of Corrections, Governor Rick Snyder announced. In recent months more than 70 Aramark employees were essentially terminated from employment for overfamiliarity with inmates, sexual misconduct, and failure to show up for work. Food shortages and menu changes caused prisoner unrest. Sanitation issues and maggots in the food were also found though the investigation determined that these were departmental and not Aramark errors. The company has been fined $200,000 and an independent overseer has been put in place within the Governor’s office. Aramark will be required to improve its training program and supervision of its employees. The Michigan Corrections Organization, the union representing Corrections Officers, as well as some legislators, have called for ending the contract to ensure safety and security of the prisons. Union representatives say that housing the oversight of Aramark in the Governor’s office is a way to avoid transparency since the Governor’s Office is not subject to the Freedom of Information Act.

Detroit Bankruptcy — The Detroit bankruptcy trial by U.S. Bankruptcy Judge Stephen Rhoades began September 2 and may continue into mid-October unless a settlement is reached earlier. Each side gets 85 hours to present their case. The trial will examine Detroit emergency manager Kevyn Orr’s plan to slash more than $7 billion in liabilities and reinvest $1.4 billion over 10 years to improve city services.

An essential element of the plan is the so-called Grand Bargain, which would allow the city to accept the equivalent of $816 million over 20 years from the state of Michigan, nonprofit foundations and Detroit Institute of Arts donors to reduce pension cuts and transfer the DIA to an independent charitable trust. Pensioners and unions have approved the Grand Bargain, but bond insurers Syncora Guarantee Inc. and Financial Guaranty Insurance Co., the backers of $1.4 billion in troubled pension debt the city wants to expunge from its books, have waged a vigorous battle against the plan. Both bond insurers face the prospect of losses of up to 94 percent on the investments they insured, while most city retirees would have to endure modest single-digit reductions in their monthly pension checks, an end to their cost of living increases and reduced health care insurance coverage.

There are several hundred exhibits involving thousands of pages of depositions, reports, studies, and articles; over 80 witnesses may testify. Rhodes will decide whether the plan is fair to all claimants.

Road Fix — Last winter’s severe winter left our roads and bridges in severe disrepair. Yet the Governor and legislative leadership were not able to hammer out a road fix deal before the summer recess. Raising the gas tax and vehicle registration fees is a hard pull for legislators in an election year.

On August 11 the southeastern Michigan area received a once-in-a-century rainstorm of about six inches of rain in under an hour. With 58 percent of the pump houses designed to deal with the run-off collecting in below-grade highways and roads in poor or non-functioning condition, massive flooding occurred on major roadways. An estimated one billion dollars in damages occurred. The Federal Emergency Management Agency has begun preliminary assessments in advance of any presidential disaster declaration and federal assistance.

The Michigan Association of Counties says that since 92 percent of the local millage issues put on the ballot in the August primary were approved by voters, it shows that voters are willing to pay more taxes for public services. The MAC has backed an increase in the state's sales tax by 1 percentage point to 7 percent per dollar that would raise $1.5 billion. It has encouraged the state to distribute the funds via the formula currently used as established in PA 51 of 1951.

Increasing taxes on fuel seems a long-term losing proposition since drivers are trying to use less fuel according to the MAC. An increase in the sales tax requires approval by a two-thirds majority of both houses of the Legislature and an affirmative vote of the public. Some action on the issue during the lame-duck session could put the issue on the ballot in March 2015.

MISCELLANEOUS

DCH Director — Department of Community Health Director Jim Haveman will be retiring in mid-September after a recent mild stroke. He will be replaced by DCH Deputy Director Nick Lyon who has been with the DCH since 2003.

State Budget Director — The Governor has appointed John Roberts to be the new State Budget Director. His father is former State Treasurer Doug Roberts who served under former Governor John Engler.

IBM v Treasury — The state has asked the Michigan Supreme Court for a rehearing of its July decision in favor of IBM. The company wanted to use a formula in the 1969 Multistate Tax Compact to apportion its business income tax base and modified gross receipts tax base for its 2008 Michigan taxes rather than a formula laid out in the Michigan Business Tax Act. The Office of Revenue and Tax Analysis calculates that the total revenue impact could be over $1 billion dollars if the court decision were applied to other companies. Most of that impact would be felt in the FY15 budget, already appropriated, causing severe cuts to many state programs.

Fireworks — Michigan’s ban on sale of aerial fireworks has resulted in sleepless nights during the July 4 week, traumatized pets, fire damage, and veterans suffering Post-Traumatic Stress Disorder according to Senate and House sponsors of bills to reinstate the ban. Let your state legislators know how you feel about aerial fireworks in your neighborhood and municipality.

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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