The State’s fiscal crisis and how to resolve it remains the primary topic of discussion in the corridors of state government. The Republicans and Democrats appear to be deeply entrenched in their positions on the issue with no real resolution in sight. The Governor is preparing to take those measures she must do balance the budget under these unprecedented circumstances. Employees have been warned that they may face layoffs if agreements on the budget are not reached. Drastic cost reduction measures are already in effect.
The problem is that the Republicans believe that more cost reduction measures can and must be taken before tax measures are implemented while the Democrats believe that any additional significant cuts would curtail vital services. It was within this philosophical framework that a solution was crafted for resolving the current year deficit of some $800 million. After the two sides announced an agreement, it appears that they had put a band aid on a major wound and not performed the treatment necessary to heal the wound on a permanent basis.
The “solution” to the current fiscal year problem consists of one time measures such as borrowing from various funds, selling at a discounted rate, some of the tobacco settlement money due the state in the future and deferring payments to colleges and universities until next fiscal year. While these measures will provide funds to allow the current fiscal year to end in the black, it is merely putting off the problem for resolution in the future. The Detroit Free Press editorialized the so called solution this way: “Michigan is crossing into new and repugnant budget territory with the compromise plan to help cover this year’s expenses by borrowing against future year’s tobacco settlement money.” …“It’s like pledging your future Social Security checks to pay the electric bill today.” The Free press editorial concluded, “Their solution’ — mostly borrowing and raiding dedicated accounts — not only boots the stalemate down the road, it recklessly adds to the cost of solving it.”
And so it goes. There are so many various measures to resolve the fiscal problems being floated around that is would be unwise to attempt to analyze them here. Needless to say, at some point in time, both sides are going to have to put aside their philosophical differences and demonstrate some statesmanship by once and for all reaching a permanent solution to a very complex issue.
The following are bills which might be of interest to senior/ retirees:
HB 4530 is a bill that provides some temporary relief for the fiscal crisis for the current fiscal year. This bill implements the interest-only payment on the unfunded actuarially accrued liability for 2006-07 to the State Employees’ Retirement Fund, deferring the payment on the principle for this year. The state will realize a savings of $82.9 million gross and $44.8 million General Fund. The bill has passed both houses and gone to the Governor for signature.
HB 4215 is a bill intended to provide relief for home owners from school operating taxes by amending the General Property Tax Act to allow a homeowner to claim an additional principal residence exemption under certain circumstances. The bill would allow a home owner to claim in addition to his principal residence, an exemption for property which is not occupied and is for sale. Such an additional exemption could be claimed for up to three years. The bill has been reported out of the House Committee on Commerce and is on the floor for consideration.
HB 4674 is a bill which would amend the Insurance Code to prohibit insurance companies from increasing the premium for an automobile or home insurance policy during the term of the policy. The only exception to this would be if the premium had been based on materially incorrect information provided by the applicant or insured. Under the bill, the premium could not be increased once it is billed and paid in whole or in part by the insurance customer. The bill has been reported out of the Committee on Insurance and is on the House floor for consideration.
HB 4800 would amend the State Employees’ Retirement Act to suspend the retirement allowance payments of a retiree if the individual is reemployed by the State of Michigan directly or indirectly (through third party contracts). The retirement payment would remain suspended during the period of reemployment. The pension suspension would begin on the effective date of the bill. The bill has passed the House and gone to the Senate where it has been assigned to the Committee on Local, Urban and State Affairs.
HB 4801 is a bill which is of direct interest to some retirees. This bill would amend applicable laws to allow the pensions of state retirees to be treated the same as private sector retirees who currently pay state taxes on pension amounts in excess of an indexed amount, currently approximately $41,000. Currently state retirees do not pay state taxes on any of their pensions. Under this bill, those retirees receiving larger pensions would have to pay on a portion of their retirement allowance. Ironically, Federal employee pensions and those of armed service personnel would not be affected by this bill. The bill was reported out of Committee several weeks ago but there has been no floor action on it.
SBs 342, 343 and 356 are bills intended to prohibit the practice of some mortgage lenders or individuals attempting to influence or coerce a real estate appraiser to render an appraisal at a predetermined value. An appraiser could not develop or communicate such an appraisal. Violation of the provision contained in these bills could result in criminal penalties and/or civil fines. The bills have passed the House and gone to the Senate Committee on Banking and Finance.
HB 4859 is a bill intended to revise the jury pool selection process in order to assure a diverse geographical composition of a jury pool. The bill provides for a process to “ensure that the names of persons residing in each postal Zip Code within the county will be represented in jury pools selected in that county in proportion to that postal Zip Code’s percentage of the county’s total population, as reflected in the most recent federal decennial census.” If the results of this process do not render a geographical diverse list, further procedural steps are to be taken to assure this diversity. The bill has been introduced and assigned to the Committee on Judiciary.
Abolition of the Department of Civil Service — Governor Granholm issued Executive Order 2007-30 which abolishes the Department of Civil Service and consolidates the human resource operations of state government. The E.O. transfers the Commission from the Department of Civil Services to the Department of Management and Budget with the Commission continuing as an autonomous entity exercising its constitutional powers and duties as an independent of the Department of Management and Budget. The E.O. also centralizes human resources (personnel) activities at the Civil Service Commission. The Civil Service Commission has to cooperate with and provide data to the Department of Management and Budget relating to human resources activities and the Office of the State Employer relating to employee benefits. Personnel related activities including employee benefits are transferred from the Department of Civil Service to the Civil Service Commission and other residual activities formerly done by the Department of Civil Service are transferred to the Department of Management and Budget. Unless overturned by the legislature (which is unlikely), the abolishment of the Department of Civil Service becomes effective August 26. It appears no one knows what this means in terms of job losses or budgetary savings. Another Executive Order (2007-31) consolidates the internal audit function of state government to the Department of Management and Budget.
Part-Time Legislature — There have been some formal discussions within legislative circles regarding changing the Michigan legislature from a full-time one to a part-time one. In exchange for this move, the supporters of a part-time legislature are advocating removal of term limits. This issue is in the early stages of exploration and may not get very far. It appears it may be a “trial balloon” to see how the citizenry of the state feel about it. Under any circumstance, such a proposal would have to be put to a vote of the people.
DNR Fee Increase — The Natural Resources Commission has approved certain fee increases for campsites. The fee structure is as follows: (1) designated camp ground site fees increase from $10 to $15 per night per campsite. (2) equestrian, off-road vehicles and semi-modern campground fees increase from $10 to $20 per site per night. (3) rates increase from $3 to $6 per person per night with special discounts for seniors at campgrounds and weekly rates for cabins being eliminated.
Non-Unionized Employee Layoffs possible — At the request of the Granholm administration, the Civil Service Commission has approved the temporary layoffs of non-exclusively represented employees, if it becomes necessary. Union contracts have such a provision in them requiring the unions to be notified if such is being contemplated. For non-unionized employees, it was necessary to get comparable authorization from the Civil Service Commission to achieve layoffs of this group should it become necessary.
Michigan’s Credit Rating Downgraded — The last of the three major national credit rating services (Standard and Poors) has downgraded Michigan’s credit rating due to its perilous fiscal situation. Moody’s and Fitch had already taken downgrading measures. This merely means that bond rates and short term loan rates will cost more if it becomes necessary for Michigan to borrow money. This does speak volumes about how the inability of Michigan’s leaders to resolve the long standing fiscal crisis is interpreted on Wall Street!
People in the News
Laura Chappelle, a six year member of the Public Service Commission, has resigned from the Commission. Ms. Chappelle served as chairperson of the Commission from 2001-03. She appeared to be well respected by her colleagues on the Commission and spoke highly of them in her departing remarks. She will teach utility Law at MSU College of Law. Governor Granholm will appoint her replacement.
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