The official session of the Michigan Legislature in July consisted of less than three total hours over three days for the House; the Senate scheduled five session days but met during those days for less than an hour of official business. But there was a lot of news coming out of Lansing.
Roads Fix Plan Update
With both the House and then the Senate passing roads fix plans with all Republican votes, the House Republicans met off-site all day on July 14 to discuss the Senate proposal. Both plans divert $700 million from the General Fund to transportation funding without specifying all the current state programs that would need to be cut; the Senate plan does not cut the Michigan Economic Development Corporation nor abolish the Earned Income Tax Credit like the House plan does. The Senate plan proposes new revenue from a 15 cent increase in the motor fuel tax and increased electric vehicle registration fees; the House plan gets a little new revenue from a four cent increase in the diesel fuel tax but most of the funds come from projected future revenue growth — something the Democrats labeled a fantasy plan.
House Dem Plan — House Democrats announced a plan on July 14 that would raise $1.2 billion to fix Michigan’s roads and bridges mostly by raising the Corporate Income Tax from 6 percent to 9 percent, increasing truck registration fees, reducing the truck weight limit and renegotiating Michigan Economic Growth Authority tax credits. The Dems pointed out that due to the 2011 tax overhaul the Republicans passed, Michigan collected over 50 times more from individual income taxes than from business income taxes in 2014, shifting the burden of funding roads, schools and other essential programs from business to individuals.
Ballot Proposal — A fourth actor (fifth if you count the Governor) entered the scene when three unions unveiled a ballot proposal that would increase the Corporate Income Tax from 6 percent to 11 percent and put the $900 million in new revenue toward roads. The group behind the proposal, Citizens for Fair Taxes, consists of the Michigan Laborers, Michigan Regional Council of Carpenters and Millwrights and the International Union of Operating Engineers. The proposal is structured to prevent a legislative end run by repealing the current Income Tax Act and replacing it, rather than amending provisions that could be amended or repealed by the Legislature, rendering the initiative moot. That’s what happened with a minimum wage proposal in 2014.
On July 30, the Board of State Canvassers approved as to form the proposed voter-initiated law called the Corporate Fair Share of Taxes Act. Supporters will need to gather signatures from at least 252,523 registered voters to put the proposal before the Legislature. If the Legislature takes no action on it, it would go on the November 2016 ballot for voters to decide. A poll conducted by the proposal’s supporters showed 69 percent of 600 likely Michigan voters support hiking the business tax as a stable road-funding source. If approved by the voters, the tax increase would take effect January 1, 2017.
Business oriented organizations have roundly criticized the ballot proposal as a job-killing tax increase that would create the country’s second-highest corporate income tax. However, a looming voter-initiated law may spur the Governor to work with both Republicans and Democrats to craft a better transportation funding package.
Michigan Supreme Court Decisions
On July 29, the Michigan Supreme Court rendered two important decisions affecting state employees and retirees.
Pension Fund Change Upheld — In a 4 – 3 decision, the high court held in Michigan Coalition of State Employee Unions v Michigan (Supreme Court Docket No. 147758) that active state employees in the defined benefit plan hired before April 1, 1997 can be required to contribute 4 percent of their pay to the pension fund or be forced into the defined contribution 401(k) program. $134 million has accumulated in escrow from 19,000 state employees during the pendency of the legal challenge of Public Act 264 of 2011. Fewer than 600 employees opted to leave the defined benefit plan and go into the 401(k) plan. When the law passed in 2011, the House Fiscal Agency estimated it would save the state about $300 to $350 million over the next 15 to 20 years.
The Coalition argued that only the Michigan Civil Service Commission is authorized by the Michigan Constitution to establish rates of compensation or determine conditions of employment. The Court of Claims and the Court of Appeals had upheld the Coalition’s argument.
The court majority of Chief Justice Robert Young Jr., Justice Stephen Markman, Justice Brian Zahra and Justice David Viviano reversed, saying that compensation as referenced in the Constitution does not include fringe benefits such as pensions. That is clear from the constitution convention debates and the message that was submitted to Michigan voters explaining the proposed Constitution, the majority held. It pointed out that the Civil Service Commission acquiesced in the alleged infringement of its right to establish pensions when it did not object to the initial State Employee Retirement Act of 1943 which required state employees to make a contribution from their compensation to the pension plan. Justice Mary Beth Kelly and Justice Bridget McCormack filed separate opinions concurring in part and dissenting in part with the majority opinion. Justice Richard Bernstein filed a dissenting opinion, saying he would have affirmed the lower court’s decision in favor of the unions.
Right To Work — In UAW, Local 6000 v Green (Supreme Court Docket No. 147700), the same group of four justices upheld the application of the state’s 2012 law barring mandated union fees in labor contracts to the state classified workforce. The UAW argued the law was unconstitutional as applied to state civil service workers because it infringed on the powers of the Civil Service Commission to regulate state employment.
The majority ruled the drafters of the Constitution didn’t give the Commission the power to “compel civil servants to make involuntary financial contributions to subsidize the Commission’s exercise of its constitutional duties and responsibilities.” It reasoned that the Commission had not been given authority to tax or appropriate, which generally the Constitution delegates to the Legislature. The dissent sought to explain that the Commission never receives the union fees, that they go straight from paychecks to the unions, but this logic was lost on the majority.
Of the four justices participating in the majority rulings on both cases, only Justice Viviano nominated by the Republican Party is up for re-election in 2016.
On August 6 in response to the Supreme Court decision, the Civil Service Commission issued draft changes to CSC Rule 6-7, Dues and Fees. The notice explained that most state union contracts approved by the commission in 2013 implemented a voluntary system of union support, where employees could opt to pay full union dues, a service fee, or nothing. The proposed amendments to CSC Rule 6-7 would allow union contracts to establish voluntary service fees instead of mandatory service fees. Because the service fees would be voluntary, the Commission proposed removing the requirement of providing a formal appeal process to challenge the amount of fees and ending related notice and accounting requirements.
Bargaining Begins — The Supreme Court decisions were issued just before bargaining began between the Office of the State Employer and state unions. Union contracts (except for State Police Troopers and Sergeants) expire at the end of 2015. The unions want to bargain together with the state but at this writing there is no decision whether OSE will agree to coalition bargaining.
2013 bargaining went to impasse over the OSE’s desire to switch all employees to a health care plan that had been implemented for new hires requiring higher premiums, co-pays, and co-insurance. The CSC eventually supported the change with the effect of increasing both active employee and retiree out-of-pocket health care costs.
Earned Paid Sick Leave — In addition to the proposed voter-initiated law to raise the Corporate Income Tax from 6 to 11 percent, the Board of State Canvassers recently approved two more petition drives. One is a voter-initiated law to require employers to provide earned paid sick leave for personal or family health needs, as well as purposes related to domestic violence, sexual assault and a child’s school meetings. A business with more than 10 employees would have to allow their workers to bank one hour of sick time for every 30 hours of work. Over 40 percent of employees in Michigan do not have paid sick leave.
Voting By Mail — The other is a proposal to amend the state constitution of 1963 to establish voting by mail for all Michigan registered voters. Voters could drop their ballots off at city and township designated official drop boxes on or before 6 p.m. on election day. City and township election offices would collect ballots from post offices at their closing time and from drop boxes at 8 p.m. on election day. The proposal is based on Oregon’s mail-in ballot process. A constitutional amendment petition requires 315,654 valid signatures, which are due by July 11 of next year and collected during a 180-day window period.
Other Ballot Proposals — Petitions already approved and circulating include proposals to repeal the prevailing wage, to ban fracking, and two petitions to legalize marijuana. A petition to prohibit differential medical pricing has been approved but the sponsors are waiting to see if the legislature takes action before circulating petitions. Other rumored ballot proposals are a third marijuana legalization initiated law, civil rights protections for sexual orientation and gender identity, an independent redistricting commission, and a graduated income tax. Michigan Senators have introduced 11 and House members have introduced 25 joint resolutions to amend the Michigan Constitution. The latest provides for a unicameral, nonpartisan Legislature.
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 email@example.com, 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 firstname.lastname@example.org.
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