February 7, 2021
January, in odd-numbered years, is very busy at the Capitol. New legislators are inducted, the Governor’s State of the State address is given, and the Consensus Revenue Estimating Conference all happen in January.
Pension Tax Elimination Bills Introduced — Three bills that would eliminate the tax on pensions were introduced on the first day of the 101st Legislature. They are House Bill (HB) 4002 sponsored by Rep. Joe Bellino (R-Monroe) and referred to the House Tax Policy Committee; Senate Bill (SB) 3 sponsored by Sen. Paul Wojno (D-Warren) and referred to Senate Finance Committee; and SB 24 sponsored by Sen. Tom Barrett (R-Potterville) and also referred to the Senate Finance Committee.
The most current analysis is that State revenues would decline by $330 million if a pension tax repeal was adopted. Governor Whitmer proposed eliminating the pension tax last year but suggested financing the revenue loss by an increase in the corporate income tax, a non-starter with the GOP-led Legislature.
Revenue Estimating Conference — At the January 15 Consensus Revenue Estimating Conference, State Treasurer Rachael Eubanks, State Budget Director Dave Massaron, Senate Fiscal Agency Director Christopher Harkins, and House Fiscal Agency Director Mary Ann Cleary, after hearing testimony from economists and other experts on the national and state economic outlook, reached consensus on revised economic and revenue figures for the remainder of Fiscal Year (FY) 2021 and for the upcoming 2022 and 2023 fiscal years. They agreed that State revenue projections should be raised upwards from August 2020 and that federal stimulus funds are helping the State. However, revenue will be down $1.24 billion for FY 2020-2021 and down $84 million for FY 2021-2022 from January 2020 estimates, an estimate made well before the pandemic declaration in Michigan on March 10, 2020. “While the pandemic has had a dramatic impact on our economy, the state of Michigan has outperformed national averages in a number of areas,” State Treasurer Rachael Eubanks stated at the Conference.
Supplemental Budget Bill — On January 20, Governor Gretchen Whitmer proposed a $5.6 billion COVID relief plan. All but $575 million of the $5.6 billion plan comes from federal COVID-19 recovery funding that was directed to the State by Congress. Five million dollars in State spending proposed by the Governor would fund the purchase and installation of metal-detecting security equipment at the Michigan Capitol building to fund screening visitors for weapons. Whitmer also proposed renewing the Good Jobs for Michigan tax incentive program and enacting a permanent extension of unemployment benefits from the current 20 weeks to 26 weeks.
In contrast, the Michigan House on a mostly party-line vote approved on February 4 a $3.5 billion plan to spend about a quarter of federal COVID-19 relief money on vaccinations, support for schools to return to in-person learning, grants for restaurants and small businesses, and provide some rental and food assistance. The bill would tie-bar $2.1 billion in K-12 funding to HB 4049 that would give local health departments the authority to make decisions on reopening schools and restarting sports programs in an emergency situation, supplanting the Governor’s and the Michigan Department of Health and Human Services’ (MDHHS) authority. The Michigan Association for Local Public Health opposed the bill. The Michigan Senate has not yet weighed in on the proposals to spend the federal money.
State of the State Address — Governor Whitmer gave her State of the State address virtually, a big change from the usual pomp associated with the joint session of the Legislature in the House Chamber with receptions galore before and afterwards. Her main message this year was unity and bi-partisanship. She pledged to eventually vaccinate 50,000 people a day against the coronavirus, to get K-12 schools open to in-person learning again, and to help businesses recover from the effects of the pandemic. She vowed to “fix the damn road ahead,” a twist on her “fix the damn roads” campaign slogan. She said, “The state of our state is resilient.”
Appointment Rejections — The Michigan Senate Republicans have now rejected 18 appointments proposed by Governor Whitmer, not due to their qualifications but because the Republicans want to apply pressure on the Governor to relinquish authority over COVID-19 responses and likely other policy issues they favor. The Governor has asked the Legislature to pass some laws related to the coronavirus, like a mask mandate, which the GOP-led Legislature has so far resisted. The MDHHS has some authority to regulate public health matters under epidemic conditions, which it has used without a legal challenge from Republicans.
Sen. Curtis Hertel Jr. (D-East Lansing) criticized the Republicans for the use of appointment disapproval when they have not put forward a pandemic response plan other than to delegate authority to counties.
Lame Duck Change Proposals — Speaker of the House Rep. Jason Wentworth (R-Clare) sponsored the first bill for the 101st Legislature — House Joint Resolution (HJR) A — which would require bills adopted during lame-duck sessions in even-numbered years to have a 2/3 majority to pass. That would put quite a damper on controversial bills being considered during lame-duck session. The bill was referred to the House Elections and Ethics Committee. HJR B, sponsored by Rep. Gary Howell (R-North Branch), would establish the end of a legislative session as the Friday before the first Monday in November in an even-numbered year. In other words, no legislative session would be permitted after the election in even-numbered years. The bill was sent to the Government Operations Committee.
Guns in the Capitol — An April 2020 rally inside the Capitol Building saw many demonstrators openly carrying long weapons including assault-style weapons. Some of the demonstrators loomed over the Senate in that chamber’s gallery with rifles slung over their shoulders. Later, some of those men were charged with plotting to kidnap Governor Gretchen Whitmer. For months the Michigan State Capitol Commission deliberated on whether it had the authority to change the firearms policy for the Capitol Building which has had no restrictions unlike any other state capitol.
The January 6, 2021, storming of the U.S. Capitol Building along with a bomb threat called in to the Michigan Capitol on January 7 apparently motivated the Michigan State Capitol Commission to call a special meeting on January 11, 2021, to finally approve a ban on open carry of weapons in the Capitol Building, effective immediately. The ban does not cover the concealed carry of firearms, nor does it prevent guns outside on the Capitol grounds. Those who enter the Capitol with a concealed pistol will need to have a valid concealed pistol license.
Gun Bills Introduced — So far 12 bills regulating guns have been introduced. They range from reiterating in statute the Capitol Commission’s minimalist policy to banning both concealed and open carry of firearms in the Capitol Building, on the Capitol grounds, in the House and Senate office buildings, or in leased or owned State properties.
Other Bills — This last month also saw re-introduction of some bills from previous sessions. SB 21 would prohibit former members of the Legislature from engaging in certain lobbying activities for a period of time. HB 4022 would require monthly internet posting on the State’s website to include a list of employees, position title, classified or non-classified civil service status, and salary. HB 4064 would create an ombudsman for public employees. SB 33 would allow under certain circumstances electronic monitoring devices in nursing homes.
INDIVIDUAL INCOME TAX RETURN PROCESSING
The Michigan Department of Treasury announced that it will begin processing individual income tax returns on Friday, February 12, the same date as the federal Internal Revenue Service (IRS). IRS pushed back the processing date due to software updating and testing.
W-2s and 1099s were due to be sent to individuals by January 31. The Office of Retirement Services sent out corrected 1099-Rs; it is also available in your MiAccount. Log in and click on Pension Payments to access your statement. All State income tax returns and payment of any taxes owed must be postmarked by Thursday, April 15, 2021. To learn more about Michigan’s individual income tax, go to www.michigan.gov/incometax.
VALUE OF MICHIGAN PENSIONS
A recent report from the National Institute on Retirement Security found the economic impact of defined benefit pensions support a significant amount of economic activity in the state of Michigan. Pension benefits received by retirees are spent in the local community. This spending ripples through the economy, as one person’s spending becomes another person’s income, creating a multiplier effect. In 2018, expenditures stemming from State and local pensions in Michigan supported:
Each dollar paid out in pension benefits supported $1.48 in total economic activity in Michigan. Each dollar “invested” by Michigan taxpayers in these pension plans supported $5.62 in total economic activity in the State.
The average pension benefit received was $1,924 per month or $23,090 per year. These modest benefits provide retired teachers, public safety personnel, State employees, and others who served the public during their working careers income to meet basic needs in retirement. Between 1993 and 2018, 26.35 percent of Michigan’s pension fund receipts came from employer contributions, 7.16 percent from employee contributions, and 66.49 percent from investment earnings. Earnings on investments and employee contributions — not taxpayer based contributions — have historically made up the bulk of pension fund receipts.
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