Capitol News
November 2015
This month two nightmares have ended — the roads fix negotiations and the Courser-Gamrat scandal.
Road Funding Plan
From its first mention in Governor Snyder’s first State of the State address in 2011, the road funding plan has had a long and tortuous path. Four years ago the Governor asked for $1.2 billion to fix Michigan’s crumbling transportation infrastructure. What he got was $1.2 billion in 2021, long after most of the legislators who voted for the deal are gone due to term limits. The goal was achieved through a combination in equal parts of tax increases and redirection of current general fund revenues from yet-unnamed program cuts and/or growth in revenue. The plan also includes two tax reductions.
Fuel tax increases — Michigan’s 15 cent per gallon diesel tax and 19 cent per gallon gasoline tax would each increase to 26.3 cents on January 1, 2017. Combined, the increases are projected to generate about $400 million a year in new revenue for roads from the people who actually use them. Beginning in 2022, fuel tax rates could rise or fall with inflation, a new feature.
Vehicle registration fee increase — Michigan’s vehicle registration fees would increase by 20 percent for passenger vehicles and trucks, beginning January 1, 2017. The increase is projected to generate $200 million a year in new revenue dedicated to roads.
GF funding — Beginning October 1, 2018, $150 million will be taken from the General Fund and shifted to roads funding. That will go up to $325 million on October 1, 2019, and $600 million on October 1, 2020 and beyond. Redirection of General Fund revenue will mean less money for other budget priorities like education, corrections, local government, human services, and public safety. But supporters of the plan hope that future growth in Michigan’s economy will bring in more revenue and that cuts in programs can be kept to a minimum. Snyder initially opposed taking $600 million from the General Fund, but apparently saw no other route to a deal.
Tax relief — While $1.2 billion is eventually raised for roads, the legislature tinkered with two tax laws to give some of it back to taxpayers. The largest, expansion of the Homestead Property Tax Credit for middle and low income homeowners and renters, is worth $200 million. Beginning in tax year 2018, the state would increase the maximum HPTC from $1,200 to $1,500 and raise the household resources income cap from $50,000 to $60,000, meaning more people would qualify for a larger credit. Beginning in tax year 2021, the state would index the maximum credit and home value cap to inflation. The maximum home taxable value cap is presently $135,000.
The other tax relief measure is an automatic cut of income taxes in 2023 from the current flat income tax rate of 4.25 percent after any year that the General Fund revenue growth exceeds inflation by a factor of 1.425. Of course in the next 8 years any future legislature could decide to undo the provision.
Other features — The Michigan Department of Transportation will have to form a roads innovation task force and report to the legislature by March 2016 indicating how it will design and build longer lasting roads with reduced maintenance costs. The first $100 million a year in new fuel tax revenue would be set aside and only released when the Legislature thinks the state is ready to build longer-lasting roads. Once fully phased in, the plan calls for $54.5 million a year for public transportation, $433.6 million a year for state highways, $426.6 million a year for county road agencies and $238 million a year for cities and villages, according to the Senate Fiscal Agency.
Taxpayer cost — Governor Snyder projects that higher fuel taxes and vehicle registration fees will cost the average motorist about $60 a year. A family with an income between $20,000 and $30,00 a year could save between $100 and $200 a year from the HPTC expansion, offsetting the higher fuel taxes and vehicle registration fees.
Overview — The main fuel tax and vehicle registration fee bills passed the House and Senate with just one Democratic vote in each chamber. House Minority Leader Tim Greimel (D-Auburn Hills) said in a statement. “The Republican proposal raises taxes on middle-class families, does nothing to lower truck weights, and drains funding from education and public safety. Even worse, it doesn’t even start fixing our roads until 2021.” The Governor has indicated he intends to sign the bills and there is even talk of bonding in anticipation of the new tax revenues to speed up the revenue stream.
Election Developments
Three primaries — In the primaries for three open House seats, Mary Whiteford and Gary Howell easily defeated former Reps. Cindy Gamrat and Todd Courser in special election primaries on November 3 in the 80th House and 82nd House District primaries, respectively. Gamrat of Plainwell came in with just over 9 percent of the vote in her race. Courser received under 3 percent of the vote among 11 candidates. Both primary winners will likely win in their traditionally Republican seats in the March 8 special general elections.
Democrat David LaGrand of Grand Rapids easily defeated his primary opponent in the special election for the 75th House District vacated by Rep. Brandon Dillon when he took on the Michigan Democratic Party Director position. The 75th is a traditionally Democratic stronghold.
Recall Snyder — In other election related news, a recall petition was filed on November 2 against Governor Rick Snyder by Angelo Scott Brown, a former Detroit mayoral primary candidate. The Board of State Canvassers will meet November 13 to consider whether the petition states factually and clearly the reasons for recall. Only after meeting that threshold could Brown proceed with the difficult task of collecting the necessary 300,00+ signatures to put a recall election on the ballot.
Prevailing wage repeal — Proponents of repealing the prevailing wage law, Protecting Michigan Taxpayers, experienced a huge set back when their 388,310 petition signatures failed to meet the requirements. The Bureau of Elections staff found fewer than half of the 503 sample signatures were valid. A group opposing repeal of the prevailing wage law found some of the errors. The petition had the lowest rate of valid signatures in any petition submitted since the state started using the sampling process.
The petition circulators could face misdemeanor charges for lying on the circulator certificates on the petitions. Silver Bullet, the company contracted to hire circulators, may face a criminal investigation as well. Protecting Michigan Taxpayers is starting over again to collect signatures with a new signature collecting and validating company.
Governor Consolidates State Retirement System Boards
On October 27 the Governor issued Executive Order 2015-13 creating a new State of Michigan Retirement Board. It consolidates the three retirement boards for state employees, military (National Guard) and Michigan judges administered by the Office of Retirement Services. State police and education retiree boards administered by the Office of Retirement Services were not affected by the consolidation. The order takes effect January 1, 2016.
Nine members — The board will consist of nine members, and include the Attorney General, the State Treasurer, the State Personnel Director, the Legislative Auditor General or their designees. It will also consist of members of the three retirement systems and one person from the general public.
Named to the board was Molly Jason as Attorney General Bill Schuette’s designee, Robert Brackenburry as Treasurer Nick Khouri’s designee, Craig Murray as Auditor General Doug Ringler’s designee, and John Gnodtke as State Personnel Director Jan Winters’ designee.
Also appointed were Court of Appeals Judge Mark Boonstra (current Chair of the Judges Retirement System Board) representing the general public, Oakland District Judge Diane D’Agostini (current Vice Chair of the Judges Retirement System Board) representing judges, Civil Service Deputy Director Matt Fedorchuk representing state employees, former Office of Retirement Services deputy director retiree Laurie Hill representing state employee retirees, and John Wojcik, general counsel for the Michigan National Guard, representing the Military Retirement Provisions board.
Fedorchuk will serve until December 31, 2016. D’Agostini will serve until December 31, 2017. Wojcik will serve until December 31, 2018. Boonstra and Hill will serve until December 31, 2020. All terms are four-years in length following the phase-in period. Senate advice and consent is not required for the appointments.
The UAW Local 6000 complained that the Governor should have appointed a labor union member to represent state employees since over 70 percent of the state workforce is unionized but instead he appointed a high-level management official from a department (Civil Service) that already has a statutory representative on the Board.
State Employee Labor Contracts
Tentative agreements have been reached between the Office of the State Employer and state employee bargaining units on pay and benefits. A one-year contract for wages and health care starting October 1, 2016 will provide a 1 percent base wage increase and a 1.5 percent lump sum payment. Other provisions will last three years.
The Office of State Employer sought a one-year deal on the wages and health care components because of concern about a potential federal excise tax on health care plans exceeding certain thresholds, the so-called Cadillac tax in the Patient Protection and Affordable Care Act. Starting with the 2018 tax year, the Cadillac tax levies a 40 percent excise tax on the portion of total health insurance premiums that exceed $27,500 for a family and $10,200 for an individual. By way of comparison, in 2015 average premiums in employer-sponsored insurance for a family are $17,545 and for an individual, $6,251.
Apparently there will be a few enhancements to the active state employee health plan under the tentative agreements. These include inclusion of telemedicine coverage, bite splints available every 5 years instead of once in a lifetime, moving the VDT/safety glasses benefit to the vision plan, and improvements in dependent life insurance. The TruHearing hearing aid benefit made available to retirees recently will also be made available to active employees.
After ratification by union members, the agreements will go before the Civil Service Commission at its meeting on December 16 for approval.
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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