April 9, 2017
Budget, Appropriations, Income Tax Cut
Before they broke for spring break on March 31, a majority of the House and Senate appropriations subcommittees had reported out their budgets to each chamber’s overall Appropriations Committee. Apparent is a concerted Republican effort to pare down the Governor’s proposed Fiscal Year 2017-18 budget to show a savings that could support re-introduction of the income tax cut that failed on February 23.
The Revenue Estimating Conference in January projected $10.5 billion in state revenues. This represents a 2.3% increase from the FY 2016-17 General Fund/General Purpose consensus revenue estimate. The FY 2017-18 School Aid Fund consensus revenue estimate is $12.8 billion, a 2.6% increase from the FY 2016-17 consensus revenue estimate. The Governor had proposed using this increased revenue on increasing some state programs and putting some more money into the state’s Rainy Day Fund. It appears that the legislative majority wants to return some of that economic growth money to taxpayers. The Revenue Estimating Conference in May will be relevant to whether the Governor’s budget proposals to enhance some state programs and a legislative-driven income tax cut are adopted.
State Salary Publication
Apparently the public is dying to know what state employees get paid for their work. The House Oversight Committee voted 4-2 to report out for full House consideration HB 4301 to require the Department of Technology, Management, and Budget (DTMB) to post on the state Website the name, title, civil service classification, salary and benefit information of all state employees.
Michigan SERA opposed the bill in Committee on privacy and safety grounds as did many state employee unions. The information is already obtainable through the Freedom of Information Act through a request about an individual employee or employees.
Sponsors argued that salaries are taxpayer dollars and publishing the salaries would promote transparency and discourage fraud and abuse. The suggestion to publish state contractors’ employee salaries was rejected however. There are more state contractors and their employees than state civil servants these days.
Meanwhile the Mackinac Center for Public Policy, the Michigan Coalition for Open Government, and the Michigan Press Association published a new online salary database of more than 300,000 Michigan public employees. The database is searchable by name within three broad categories of Education, State, and Judges. This database includes the names and three years’ worth of salary information for some school and community college employee, state employees, and judges. The list can be accessed at www.MichiganGovernmentSalaries.com. After using it a few times, it asks for your own email address which is likely for the purpose of further communications from the three sponsors of the database.
Subsequently it was discovered that DTMB provided erroneous data such as some $400,000 salaries, inclusion of public safety personnel, and other anomalies. A corrected database was provided. The sponsor of the bill has for now put his bill on hold because of the private sector efforts to disclose the salary information.
Some Other Bill Activity
Funeral Representative — Under Michigan’s new funeral representative law, a person may designate anyone to be their funeral representative, but if not designated in a written document, the rules of intestate succession apply and the surviving spouse has the authority. However, some couples separate without legal annulment or divorce and some people die without wills or designation of a funeral representative (intestate).
Signed into law by the Governor on March 31, SB 39, now PA 20 of 2017, is a technical fix to the funeral representative provision in the Estates and Protected Individuals Code (EPIC) that relieves funeral directors from the responsibility to ask if the surviving legal spouse of a decedent had been estranged or had abandoned decedent before giving the surviving spouse authority for funeral arrangements where no funeral representative is designated in a written document.
Public Employee Felonies — Passed in the full House is HB 4131 that would require (rather than permit) forfeiture of employer contributions to a defined contribution plan if a public employee or retirant is convicted of or enters into a nolo contendere plea that is accepted by the court for a felony arising out of service as a public employee such as misuse of public funds and accepting bribes. The measure is awaiting action in the Senate Judiciary Committee.
Death With Dignity — Rep. Tom Cochran (D-Mason) is sponsoring HB 4461 a “death with dignity” bill that would allow physicians to prescribe medication to mentally capable terminally ill patients for the purpose of ending the patient’s life. The bill would require the patient to make the request for a life-ending drug in writing, with at least two witnesses, including one who is either a medical professional or a relative. The patient’s regular physician and a consulting physician would have to confirm they have a terminal illness and that the person is medically capable of asking for a drug leading to death. There would be a required 15 day waiting period for the drug. The physician would be required to give the patient a variety of information and advise the patient not to take the drug alone or in public. Under the bill, the physician would not have to administer the drug, but could. Also under the bill, their terminal illness would be listed as the cause of death so life insurance money could be paid. The bill has been referred to the House Health Policy Committee.
In 1998 Michigan voters rejected 2-1 an initiated law that would have legalized and regulated assisted suicide after a decade of activity by Dr. Jack Kevorkian, the legislature, and many court battles over the issue. Since that era, California, Colorado, the District of Columbia, Oregon, Vermont, and Washington have passed laws permitting physician-assisted suicide; Montana has assisted suicide by a court ruling; 44 states consider assisted suicide illegal by law, common law or absence of law permitting it.
Graduated Income Tax — Several measures to change Michigan’s income tax from a flat 4.25 percent to a graduated income tax were introduced in March. HJR K and SJR I would amend the Michigan Constitution to permit a graduated income tax though prohibiting it by municipalities. HB 4109, HB 4436, HB 4437 and SB 295 address the issue by establishing income bands and assigning tax rates from 3 percent to 10 percent starting at $20,000. The House measures have been referred to House Tax Policy Committee; the Senate measures are in Senate Finance Committee.
Right now, everyone, no matter what they receive in income, pays the same income tax rate if born before 1946. When you combine the income tax with other taxes, such as property taxes and sales tax, people who have less income end up paying a significantly larger portion of their income in taxes than people whose income is substantially more. For instance, according to the bill sponsors, families with incomes of $17,000 to $88,000 a year pay about 9.5 percent of their total income in state and local taxes, while a family with income of $392,000 or more has a state and local tax rate of 5.9 percent. With a graduated income tax, there is a tax savings for 94 percent of taxpayers. A family with income of $80,000 a year would save $600 in state income taxes; a family earning $50,000 a year would see a $525 tax savings.
Homestead Exemption — Senate Finance Committee has reported out to the full Senate for consideration SB 78 which would continue for two years the homestead property tax exemption upon the death of a homeowner who willed their principal residence property to a first degree relative as long as it was for sale and not used as a residence, leased, or used for any business purpose.
Municipal Pension Task Force Update
The Governor’s 20-member Task Force on Responsible Retirement Reform for Local Government has met four times since it was formed in early February. The Task Force has decided to separate the pension issue from the retiree health care issue. Only one meeting has been devoted to post-employments benefits such as health care insurance. SERA’s concern is that ideas for paring back municipal pensions and post-retirement benefits will spread to other public pensions. The Task Force is supposed to report to the Governor by mid-April.
On March 28, U.S. District Court Judge David Lawson approved a settlement agreement between Flint water activist group Concerned Pastors for Social Justice and the state that will require the state to spend $87 million (no more than $20 million from the recent federal money) through January 1, 2020 to pay for replacement of water lines and to assure that every residence has a properly working filter to remove lead or else supply water to the resident. The settlement requires the state to continue several programs to respond to the crisis, most notably the expansion of Medicaid in Flint to those up to 21 and pregnant women with incomes up to 400 percent of the federal poverty level. The agreement is historic in that no city has ever forced a state via the courts to remove lead pipes from the ground under the federal Safe Drinking Water Act.
The state has already invested about $247 million with another $49 million proposed for Fiscal Year 2017-18 to address fixing the pipes, funding for nutrition services, early education programs and water sampling costs with a $25 million reserve for additional needs.
Standard and Pour credit rating agency recently estimated that the crisis could cost between $1 billion and $1.5 billion, mostly from state and federal sources due to the local tax base limitations.
For the past year the state fought the lawsuit vigorously but agreed to mediation at the end of last year. The Detroit Free Press recently reported the state has paid $12 million to outside attorneys for work related to the Flint drinking water crisis, with nearly 30% of that amount going to criminal and civil defense attorneys hired by Gov. Rick Snyder.
The Michigan Department of Environmental Quality has spent $3.65 million, while the Department of Health and Human Services has spent $956,000 and the Treasury Department has spent $35,555. The other big outside attorney costs are for Royal Oak attorney Todd Flood, the special counsel Attorney General Bill Schuette hired to lead the Flint criminal investigation, and retired Michigan Court of Appeals Judge William Whitbeck, who is serving as Attorney General Bill Schuette’s top legal adviser on the investigation. Their contracts are capped at $4.9 million and $284,000 respectively. So far, they’ve together spent about $3.7 million. Not included in the $12-million total are an additional $1.3 million in Flint legal costs that have not yet been reimbursed by the state.
American Health Care Act Fails
The American Health Care Act to repeal the budget aspects of the 2010 federal Affordable Care Act (Obamacare) was introduced in the U.S. House on March 6, passed through Committees in a week on party-line votes without a Congressional Budget Office analysis, and was withdrawn on March 24, the seven-year anniversary of the ACA’s signing into law. House Republicans failed to acquire sufficient Republican votes to pass the bill due to objections from both the conservative Freedom Caucus and the moderate Tuesday Group. Governor Snyder opposed the Medicaid cuts in the bill that would have potentially reduced federal funding for the health care of over a million of Michigan’s indigent and disabled population.
As to effects on Medicare, the Kaiser Family Foundation in its analysis said that the ACHA would have repealed the payroll tax on high earners, repealed the annual fee paid by branded prescription drug manufacturers, and reinstated a tax deduction for employers who provide drug coverage to Medicare beneficiaries as well as permitted a 5-tier age-banding that would have significantly increased premiums for the 50 to 64 year-olds in the private health care insurance market. In effect, the ACHA was a tax cut bill, not just a health care bill. These Medicare-related tax increases in the ACA helped to extend the financial viability of Medicare.
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 email@example.com.
Return to top of page