May 7, 2017
2017-18 BUDGET UPDATE
A sharply divided Michigan House pushed through Fiscal Year 2018 spending plans in a late session on May 2 by a 60-47 margin. The House budget bills total $55.8 billion but provide $272 million less than what Gov. Rick Snyder recommended.
On May 3 and 4, Michigan Senate Republicans passed budget bills which reserve $542.4 million less than what Governor Snyder recommended — $275.9 million less General Fund and $266.5 million more to the Budget Stabilization Fund.
It appears that the Michigan House and Senate leadership want to use the savings for an income tax reduction, more funds into the Budget Stabilization (Rainy Day) Fund, or closing the school employees’ hybrid pension plan to new hires and put them in a 401k plan similar to what state employees hired since 1997 have. The Senate Fiscal Agency projected last year’s legislation to close the hybrid MPSERS plan would have cost roughly $600 million in first-year costs, $3.8 billion over five years and $28 billion over 30 years if the state chose to wind down the system through accelerated payments, which it recommended as a best practice.
The budgets now move to conference committees to work out a compromise among the three versions of the budget. The May 17 revenue estimating conference will provide projections on the amount of tax revenues the state can expect to receive in the coming year and will heavily influence whatever compromise results.
Education Budget — An increase of $100 per student across the board from the House and between $88 and $175 per student from the Senate are in the bills. Controversial are more than $2 million that will be sent to private schools despite the Michigan Constitution’s prohibition of public funding of private schools, and equal funding allowances for both brick and mortar and cyber schools.
Michigan's 15 public universities overall would see 1.9 percent more in a $1.6 billion House higher education budget, with increases varying by schools, as long as tuition and fee hikes are capped at 3.8 percent.
PENSION TAX REPEAL STALLED
Now that the House members who passed the pension tax in 2011 are termed-out and gone, SERA hoped that a pension tax repeal or modification would move this session. This is especially true since there appears to be money available for tax relief (see story above), so why not direct it toward those retirees who were shocked when their promised state income tax-free pensions were suddenly diminished if they were born after 1945?
There are eight bills in the Michigan House and 2 in the Michigan Senate repealing or modifying the pension tax, but none have gotten hearings. Grassroots contact from SERA members and others are needed to get a hearing for one or more of these bills. The House bills (4052, 4055, 4083, 4092, 4132, 4159, 4180, and 4282) have been referred to the Michigan House Tax Policy Committee chaired by Rep. Jim Tedder (R-Clarkston, phone 517-373-0615). The Senate bills (41 and 266) have been referred to the Senate Finance Committee chaired by Sen. Jack Brandenburg (R-Harrison Township, phone 517-373-7670). Please call them and urge that they schedule a hearing for pension tax repeal.
BALLOT ISSUES EMERGING
Redistricting — The Michigan SERA Coordinating Committee Executive Board at its April 7 meeting endorsed efforts to put on the ballot in 2018 a proposal to amend the State Constitution to change the system for deciding political district boundaries for Congressional and state legislative districts in Michigan.
Voters Not Politicians is the nonpartisan ballot question committee advancing an amendment to Michigan’s Constitution that would take the Congressional and state legislative district boundary drawing out of the hands of whatever majority party is in control after each decennial census in Michigan and instead use an independent commission to develop the district lines.
Currently, the political party in power in the state legislature draws the lines. Using voter data and sophisticated computer programs, politicians are able to select their voters with precision, effectively determining the outcome of an election long before election day.
In 37 of the 50 states including Michigan, state legislatures are primarily responsible for drawing Congressional and state legislative districts as of January 2017. Independent commissions drew state legislative district lines in six states (Arizona, California, Idaho, Washington, Montana and Alaska). In seven states, politician-led commissions were responsible for state legislative redistricting.
Although the exact language of the ballot proposal has not yet been decided upon at this writing, the groups involved in the issue agree that we need to remove the legislature from the process and make it more independent of partisan political maneuvering. Voters Not Politicians will make a presentation to the statewide SERA Coordinating Council delegate meeting on June 2.
Pipeline 5 — The Board of State Canvassers has approved the wording for an initiated law ballot proposal to revoke the easement allowing Enbridge Energy’s Line 5 pipeline that runs under the Straits of Mackinac. If passed, the proposed Great Lakes Pipeline Safety Act would provide that if the pipeline is restarted, the owner would have to provide the state with a $4 billion liability policy or bond and a $400 million surety bond. The proposed law would also allow anyone to file a claim for damages based on the operation of Line 5 or any other pipeline under the Great Lakes. It is sponsored by the ballot committee Keep Our Great Lakes Great, a coalition of environmental groups. Supporters have to collect 252,523 valid signatures from registered voters in a 180-day period to put the issue on the ballot.
The Line 5 pipeline that runs under the Straits of Mackinac has seen 29 spills of various sizes along its span between Wisconsin and Sarnia, Ontario, including two at the straits, the National Wildlife Federation said in a report released April 24. The spills at the straits happened inland, near where the two pipes that run under the straits combine back to a single line. One in 2013, resulting from a connection failure, released about 20 gallons, and the other, in 2007, resulting from a pump failure, released about 30 gallons, the report said. Among the largest spills was an equipment failure in 1968 about midway between Marenisco and Watersmeet that released about 285,600 gallons. A bit to the southeast, another leak the same year released 96,600 gallons. A weld failure just north of Iron Mountain in 1972 released 252,000 gallons. A 1999 leak north of Crystal Falls released 222,600 gallons of liquid natural gas. The resulting gas plume was ignited to clear it, burning a nearby power line and causing an outage for six neighboring properties. A 1972 leak, also between Marenisco and Watersmeet, released 210,000 gallons and caused a fire. The most recent leak was a pinhole near Manistique in 2014 that released an unquantified amount of natural gas escaping.
Enbridge Energy officials told the Pipeline Safety Advisory Board at its meeting March 17 that the coatings and processes to protect the Line 5 pipeline under the Straits of Mackinac from corrosion are intact and there has been no deterioration of the pipeline. Enbridge Energy is the company owning the pipeline causing more than 800,000 gallons of oil to spill into the Kalamazoo River system with resulting $1 billion+ clean-up costs in 2010.
Pot Legalization — Having failed last year to get recreational marijuana legalization on the ballot, pot legalization advocates under the banner of Coalition to Regulate Marijuana Like Alcohol submitted for approval on May 5 an initiated law petition language to get the issue on the November 2018 ballot. Campaign spokesperson Josh Hovey of Truscott Rossman stated that legalizing personal possession and use of marijuana would reduce law enforcement costs and provide new revenue from a 10 percent excise tax and 6 percent sales tax on retail sale of the drug. That money would be split 35 percent to K-12 education, 35 percent to the transportation fund, 15 percent to the local government allowing the shops and 15 percent to the county. Advocates estimate that $100 - $200 million in revenues will be generated.
Hovey said legalization could save the state as much $300 million a year in law enforcement and court costs for small possession cases. If approved by voters, the new law would allow those age 21 or older to possess up to 2.5 ounces and have up to 12 plants in their home. Where local governments approve, the drug could be purchased at shops that would be allowed to grow a smaller number of plants or could purchase product from larger growers. The proposal would also legalize industrial hemp growth and use.
Former state Rep. Jeff Irwin, D-Ann Arbor is the political director for the Coalition. The national Marijuana Policy Project, which has gotten involved in several other states where marijuana legalization has succeeded, will be involved in Michigan’s ballot drive. Between $8 million and $10 million is needed for the petition drive and ballot campaign. In addition to volunteers, paid petition circulators will be used to gather signatures from valid Michigan voters in a 180-day time frame.
VETERAN’S HOMES EXPANSION
After several years of scandals about insufficient care at the two state-run veteran’s facilities that serve over 530 Michigan veterans, the state has announced plans to replace the large, institutional veterans’ homes in Grand Rapids and Marquette with smaller-scale housing. The plan would increase statewide bed space to 840 beds or more and build homes in other parts of the state as well. The Michigan Veterans Affairs Agency has applied for roughly $66 million in federal funding to help build a new home in the Detroit area and to replace and downsize the one in Grand Rapids. A third of the state’s 640,000 veterans live in Wayne, Oakland and Macomb counties. A $42 million state match for the two projects has been approved by the Governor and the Legislature.
The federal application also outlines a plan to build five more facilities in phases — first in the Flint/Saginaw/Bay City area, next the Jackson/Battle Creek region, then a replacement of the Marquette home, followed by one in the northern Lower Peninsula and finally another in metro Detroit. The design would be smaller houses with 10-14 residents with individual bedroom and bathroom, surrounding a common living and dining area with a kitchen.
Michigan’s veteran population is projected to drop by 57 percent to 277,000 by 2043, but the percentage of those aged 70 and older — those most likely to need long-term nursing care — will increase from a third to nearly half. If selected for funding, construction of new facilities would begin in 2018.
VOTERS SPLIT ON SCHOOL BOND PROPOSALS
Local millages are often a barometer of the way voters feel about Michigan’s economy, their own prosperity, and the direction of their local government. Of 24 school bond proposals on the ballot May 2, 13 were approved by voters, 10 failed and one had unknown results at this writing. The two largest proposals, $120 million for the West Bloomfield School District in Oakland County and $93.77 million in East Lansing, passed. But the third-largest proposal, $89.95 million for the Chippewa Valley Schools in Macomb County, failed as did the fifth-largest proposal, $57.85 million for the Center Line Public Schools, also in Macomb County. Voters in the Byron Center Public Schools in Kent County passed the fourth-largest proposal, $68.24 million, but two separate proposals in the Wayland Union School District in Allegan, Barry and Kent counties totaling $55 million failed.
Proposals for new sinking fund millages, property taxes to provide a steady source of revenue for school maintenance needs, fared better with only 6 of 19 failing.
Local government requests for tax increases did a little better than schools, with 24 passing and eight failing. Both parks and recreation millage proposals passed, as did all three library millages. Six of the eight proposed millage increases for police, fire protection or emergency medical services passed. Two of the three new road millage proposals passed.
FEDERAL HEALTHCARE UPDATE
In Michigan, there are 1.75 million children, seniors, pregnant women and disabled people served by either traditional Medicaid or through the Medicaid expansion called Healthy Michigan (600,000+) authorized through the Affordable Care Act (Obamacare). Others buy health insurance on the individual market exchange under the ACA. Almost everyone with health insurance is affected by the health insurance plan design and financing provisions of the current ACA so any changes will have broad impact across the country.
Without any hearings or costing out by the Congressional Budget Office, the U.S. House of Representatives passed by one vote on May 4 the American Health Care Act which substantially changes the ACA. The Michigan Congressional delegation voted along party lines: 9 Republicans in favor and 5 Democrats opposed. Gone would be the individual mandate that required people to either join a health insurance plan or pay a penalty. Medicaid would be pared back in 2020. The House AHCA bill would let states opt out of some requirements of the ACA, such as the “essential health benefits” provision that requires minimum coverage for things such as maternity care, prescription drugs, prevention care, and mental health services, among other areas.
Although those with pre-existing conditions could not be barred from purchasing health insurance under the House AHCA, the price of premiums may effectively mean higher and potentially unaffordable costs for sicker patients if the proposed high-risk pool system is not well funded. It is estimated that 30% of Michigan residents have pre-existing conditions.
In an analysis of the House bill, the Center for American Progress, a left-leaning Washington think tank, calculated that it would cost $861 million a year to provide coverage for high-risk individuals in Michigan. The House bill is estimated to provide about $342 million a year to Michigan. That could mean the state would have to make up the difference to maintain the same level of coverage today.The bill also allows insurers to charge older people up to five times greater premiums than younger people, up from three times under the ACA.
By allowing states to have differing plan designs, large employers may seek out insurance from companies in states with diminished coverage requirements to accomplish cost containment goals. Maximum yearly and lifetime health care caps may return in various states. Medicare is threatened by the tax cut given to wealthy individuals in the AHCA, funding that was dedicated to shoring up Medicare under the ACA.
The bill now moves to the U.S. Senate where changes to the bill are expected.
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 links to media stories of interest to state employees and retirees. Write to email@example.com, giving your name, email address, and chapter name.
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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