Capitol News

July 2015

Although the Michigan House recessed for its summer break on June 18, the Michigan Senate remained to work on finding revenue for roads and bridges. House and Senate members are scheduled to return to Lansing for a 3-day session on July 14.

Senate Moves Its Roads Fix Plan

After several weeks of closed-door meetings, the Michigan Senate Republican Caucus rolled out its transportation package consisting of modified HB 4610, HB 4611, HB 4612, HB 4613, HB 4614, HB 4615, HB 4616 and its own SB 414 in a Senate Government Operations Committee hearing on Tuesday, June 30. It was reported out on a party-line vote.

The next day, the Senate used Lieutenant Governor Brian Calley’s tie-breaking vote on two bills in the 9-bill package to approve a road funding package that includes a significant gas tax increase and diversion of $700 million from the General Fund. The plan would raise $1.4 billion in road funding when fully implemented with about half of the money coming from the higher gas tax and half of the money coming from unspecified General Fund budget cuts. HB 4609, which would eliminate the Earned Income Tax Credit, was not taken up by the whole Senate.

Gas Tax Increase — The gas tax increase would raise the motor fuel tax from 19 cents to 23 cents starting October 1, 2015, 27 cents on January 1, 2016, and 34 cents on January 1, 2017. The bill creates parity between how the state taxes gasoline and diesel fuel. The increases would generate about $800 million per year. Beginning in fiscal year 2018-19, when motor fuel taxes reached 34 cents per gallon, they would thereafter be adjusted based on inflation going forward with a sunset of 2034.

Sturdier Roads — By October 1, 2015, the Michigan Department of Transportation would have to establish an internal task force called the “50-Year Roads Task Force” to create a comprehensive public report for the Legislature evaluating the cost of construction and the use of certain materials, among other things. A 50-Year Roads Lock Box Fund would be created within the Department of Treasury where 7 cents of the 15-cent increase in motor fuel tax would be deposited and could only be released with legislative approval for higher quality, longer-lasting roads.

Income Tax Rollback — As a sweetener for taxpayers who will have to pay higher prices at the pump and to gain anti-tax Senators’ support, a potential income tax reduction was included in the package of bills. The income tax rollback, SB 414, would first divert $350 million in FY 2016-17 and $700 million in each subsequent year through FY 2032-33 from the General and School Aid funds to a Michigan Transportation Fund. The revenue in the MTF would be distributed according to the formula in Public Act 51 of 1951 (the MTF law).

The bill would also reduce the individual income tax rate for a tax year beginning on and after January 1, 2018, if the percentage increase in General Fund/General Purpose revenue from the prior fiscal year exceeded a positive inflation rate for the same period. The complicated formula works out to be a reduction of .1 percent from the state’s 4.25 percent income tax for every $230 million the state’s General Fund is earning over the rate of inflation.

Electric Vehicle Registration Fee — House Bill 4612 (S-2) would amend the Michigan Vehicle Code to levy additional vehicle registration fees of $30, $100, or $200 for hybrid electric vehicles, depending on number of tires and weight.

The Split — One-third of the Senate Republicans and all the Democrats except Sen. Virgil Smith made up the 19 votes in opposition to two of the bills in the Senate plan the increase in the gas tax and the income tax rollback. Smith is under indictment for three felonies and in danger of being expelled from the Senate so is motivated to vote with the Republicans. Lt. Governor Calley was called in to break the 19-19 tie and move the process forward to the House.

Response — Organizations representing local governments, schools, and universities were concerned about the redirection of $700 million from general revenues. That amounts to about 16 percent of discretionary state revenue and would require severe budget cuts. The Michigan Chamber of Commerce was quoted with favorable comments about the Senate plan.

Whether there are 56 votes in the 63-member House Republican Caucus to pass a gas tax hike is an open question. The Senate plan didn’t include House-supported abolishment of the Earned Income Tax Credit and shifting funds out of the Michigan Economic Development Corporation. The Senate plan comes in the form of altered House bills so the bills likely won’t be vetted in a traditional committee process and are more likely to be referred to a small conference committee with eventual compromise between lawmakers and Gov. Rick Snyder. Likely it will take House Democratic votes to pass a roads plan.

Governor Inks FY 2016 Budget

Gov. Rick Snyder signed the $54.5 state budget on June 22. It grows state government spending by about $1.4 billion next fiscal year, but did not contain the budget changes necessary for whatever roads plan is adopted. It did include $113 million the state already spends to match federal funding for highways.

Most public schools in Michigan will see their base state funding increase $70 to $140 per student next school year. The $13.89 billion School Aid budget sets a new state record for spending on K-12 schools and higher education. Snyder’s request for a special fund to help debt-ridden Detroit Public Schools and other financially distressed schools was not included though $50 million was left unappropriated that could be used to pay down the Detroit school district’s $438 million debt or give all Michigan schools an extra $33 per student later in the fiscal year.

The budget plan contains a modest 2 percent spending increase for four-year public universities if the schools cap tuition increases at 3.2 percent. Almost immediately Eastern Michigan University’s Board of Regents rejected the $1 million increase in state aid in favor of a 7.8 percent tuition increase that will generate an estimated $10 million in added revenue.

Snyder’s signature on the budget bills is the fifth consecutive year he and the Republican-controlled Legislature have agreed to a budget in June, nearly four months before the new fiscal year begins on October 1 and a month before most school districts start their budget year.

Effect on State Workers — State workers will be affected by the budget in various ways. W.J. Maxey Boys Training School will be closed by October 15 and 70 workers displaced. Fifteen Department of Health and Human Services offices will be closed or consolidated to save $2.4 million and workers reassigned. Film incentive money will be decreased to $25 million, $19 million of that going to repay state pension funds that were tapped to help build a Pontiac film studio in 2009. There will be new recruit schools to hire 88 new troopers and 10 motor carrier officers. The new budget continues a requirement that the Department of Corrections employ no more than one supervisor for every eight front-line employees at central office and northern and southern regional administration offices. State unions have been promised tracking and input on the Department of Community Health and Department of Human Services merger. The budget also maintains language that forbids state agencies from disciplining employees for communicating with lawmakers.Gov. Rick Snyder wanted the language dropped.

Updates

Petition Drives — The Board of State Canvassers approved language at its June 11 meeting for two petition drives legalizing the use of marijuana for persons older than 21. There are major differences in the two proposals regarding cultivation, sales, taxes and other issues. A third marijuana legalization committee will soon be approaching the Board of State Canvassers to approve its petition language. When there are competing ballot proposals about the same issue, the one receiving the largest number of votes will prevail. Language for initiated laws on medical pricing, fracking and prevailing wage are already approved.

To be eligible for the November 2016 ballot, petitions need to collect a minimum of 252,523 signatures by registered voters within 180 days. If sufficient numbers of signatures are gathered, the measure goes to the Legislature for enactment. If the Legislature fails to act, the proposed law goes on the ballot for voter decision. The Legislature may also propose its own language and both proposals go on the ballot. The Governor has no veto power in the initiated law process.

Local Law Preemption — The Governor signed HB 4052 (now Public Act 105 of 2015 with immediate effect) on June 30. It prohibits local units of government from establishing mandatory wage, benefit and leave time requirements. An amendment in the Senate grandparented in local laws adopted prior to January 1, 2015, thus limiting somewhat the impact on local communities.

Child Placing Agency Protections — In anticipation of the U.S. Supreme Court’s approval of marriage equality for same-sex partners, religiously affiliated child placement agencies sought a law to protect them from lawsuits alleging unlawful discrimination when they refuse to place children with same-sex couples for fostering or adoption. The state contracts out all adoptions and most foster care placements. The agencies are affiliated with religions that do not approve of same-sex marriages or same-gender sexual conduct. After contentious hearings, HB 4188, 4189, and 4190 were passed and signed by the Governor on June 11 (now Public Act 53 of 2015, effective September 9, 2015).

Transitions — Superintendent of Public Instruction Mike Flanagan officially retired June 30, with new Superintendent of Public Instruction Brian Whiston taking the post on July 1. Former Lansing Community College president and current Capitol National Bank President Paula Cunningham has been named state director of AARP Michigan effective July 6.

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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