February began with good news which was accompanied by controversy. The good news was that the State closed its books for the 2006-7 fiscal year with a surplus of $353.1 million. This September 30 fiscal year end closing balance was considerably higher than anticipated. The Governor and the Democrats attributed the unexpected savings to prudent fiscal controls she implemented throughout the various departments to help ease the anticipated fiscal crisis. The Republicans countered that argument by claiming that the larger balances were intentionally kept secret by the administration until after the tax increase measures were passed late last calendar year.
The inevitable argument of what to do with the unexpected windfall began. There were those who said that it provided a safety net for the current fiscal year and could be used to avoid a fiscal crisis within the next eight months. Others argued that the surplus should be put into the Budget Stabilization (Rainy Day) Fund. Still others suggested the surplus should go for road repairs. The Republicans pushed for the money to be returned to the people in the form of a rebate because the recently passed tax increases did not anticipate such a large balance. The discussion continues, but don’t look for a check in the mail any time soon.
The economic picture for the state remains bleak with most economic indicators not showing an upswing in Michigan’s economic picture this year. Revenue estimates are down from the May, 2007 estimates by some $369.9 million. So it is not surprising that in her State of the State message, Governor Granholm emphasized economic stimulus measures she is proposing which will be funded, without raising taxes, through innovative funding proposals. One of the economic stimulus proposals is labeled Michigan Invest! Fund which will be funded using $300 million of the state pension funds, approximately one percent of the total investment portfolio, to invest in Michigan businesses. It is anticipated that these funds will be invested prudently using the same investment guidelines as used in any other pension fund investment.
Apparently, the Governor and legislative leadership heard the public dissatisfaction with their past year performance, especially the partisan bickering, and agreed to be more civil and cordial with each other. This agreement to “play nice” came out of a recent dinner meeting held at the Governor’s mansion in which House Speaker Andy Dillon and Senate Majority Michael Bishop participated.
While awaiting the new session to get in full swing, there were a number of legislative committee meetings held to take up legislation some of which had been in committees for a number of months. The following is some of the legislative actions which took place during February which may be of interest to retirees/seniors:
HB 4064 would create a new Home Heating Fund to fund home heating credits under the state Income Tax Act to the extent that those credits are not fully funded by federal low income home energy assistance program block grant funds. The Fund would be established within the Michigan Department of Treasury and receive income through income tax check-offs, investment earnings, appropriations, or any other sources of money received. HB 4280 is the bill which would authorize the income tax check-off. The fund would be used exclusively to supplement, but not replace, the federal low income home energy assistance funds. Both of these bills (4064 and 4280) have passed the House and gone to the Senate Committee on Finance.
SBs 826-33 and HBs 5287-5291 are some thirteen bills intended to better regulate the mortgage industry as the result of massive foreclosure problems that the country has witnessed over the last year. In general, the bills would better define loan officers’ duties and regulate their conduct, build in some professional standards addressing education and ethics, bar individuals convicted of certain crimes from becoming loan officers, establish pre-exam skills requirements before licensure of loan officers by the Office of Financial and Insurance Services (OFIS), and provide strong regulatory controls including accessing civil fines and other forms of censure by OFIS. The bills were reported out of the House Committee on Banking and Financial Services and are now on the House Floor.
SBs 846 – 847 are bills addressing the investment of state funds in nations that sponsor terror. SB 846 creates the Divestment from Terror Act which spells out how Treasury Department officials are to identify companies which have holdings that did business with or were located in a “State sponsor of terror.” The Department of Treasury is to maintain a list of such businesses. The state must divest all of its holdings in such companies on the list within 15 months from identifying such companies. All new investments in such companies would be prohibited, of course. Fiduciary agents would be bound by the Divestment from Terror Act and would be immune from liability for action taken to comply with the Act. There are a series of bills which identifies specific investment funding sources applicable to the Act. SB 847 applies to state pension funds. “Sponsor of terror” countries would be identified by the U.S. Department of State. If any of the following countries were identified by the Department of State, the provisions of the Act would apply on the dates indicated: Syria (January 1, 2010), North Korea (January 1, 2011), and Cuba (January 1, 2012). The bills have passed the Senate and moved to the House Committee on Government Operations.
HB 4645 is a bill which would regulate the issuance of tax refund anticipation loans (RALs) and require disclosure of certain information to the consumer prior to receiving the loan. Consumer advocates have believed these loans target low income individuals who can ill-afford the exorbitant interest rates charged by the tax preparers. In fact, it is believed that some individuals are not aware that a RAL is actually a loan. This bill would apply the provisions of the Regulatory Loan Act to refund anticipation loans which requires lenders to be licensed under the Act. The bill would separate the fee charged for the loan from the charge for the preparation of the income tax return. Before the taxpayer prepares a loan application, the facilitator of the loan would have to inform him/her in writing that (1) that a RAL is a loan and not an instant tax refund (2) the actual loan fees and annual percentage rates charged for at least three examples of loan amounts (3) that electronic filing is available without applying for a loan (4) the average time for a refund if a RAL is not taken (5) that the RAL may not be the same as the actual amount refunded by the IRS (6) the estimated time for a loan to be approved and the proceed paid to the taxpayer. Requiring a person to apply for a RAL could not be a condition of the facilitator to prepare an income tax return. Under this bill, a taxpayer would have to the end of business on the day after making the loan to change his/her mind and rescind the loan. The bill has been reported out of the Banking and Financial Services Committee and is on the House floor.
HBs 5186-88 are bills to provide additional measures to protect certain assets of wards and protected individuals from misuse or fraud by guardians and conservators. The bills would amend parts of the Estates and Protected Individuals Code to require a guardian ad litem to inquire about liquid assets of an individual and include an estimate of these assets in the report to the court; grant a court discretion to order the guardian to petition for the appointment of a conservator; prohibit a conservator from selling, mortgaging, or disposing of the individual’s property without court approval; and require, with certain exceptions, a conservator to furnish a bond. All of the bills are tie-barred to each other which means none can become law unless all become law. The bills were reported out of the House Judiciary Committee and are on the House floor.
HB 5636 is a bill intended to clarify a recent law (PA 95 of 2007) requiring retirees to forfeit their pension during the time they return to work for the state by being “employed directly by the state as an employee or indirectly by this state through a contractual arrangement with other parties.” This bill would change the definition of “employed by the state” to mean: 1) employed by the state as an employee, 2) hired by this state directly as an independent contractor and 3) employed indirectly by this state through a contractual arrangement between this state and an employment agency. This bill was recently introduced and has been referred to the Committee on Oversight and Investigations.
Retiree Health Care Reforms Committee — Bob Kopasz, Chair of the statewide SERA Council, presented testimony in opposition to HB 5545, the bill which would move responsibility for the development and authorization and subsequent administration of state retiree health care plans from the Civil Service commission to the Office of Retirement Systems. This bill was introduced on December 6 and reported out of Committee on December 13. SERA opposes the bill because it does not appear to resolve any known problem and is unclear as to what organizational entity will ultimately be responsible for approving retiree health plans. The bill conflicts with the ultimate goal which has verbally been stated as the reason for the move. We were told at a “Town Hall” meeting hosted by UAW Local 6000 by Committee Chairman Mark Meadows that the eventual goal was to have one health plan for all systems under the Office of Retirement Systems, including the School Employees System. The reason for making this move is to save money, but no one has quantified how much would be saved. Representative Meadows acknowledged that other legislation would have to be introduced to complete the package of bills needed to make the goal a reality. We firmly believe that we must see the entire package of bills to fully understand the impact on state retirees before we can support such legislation. Handling the legislation on a piece meal basis does not accomplish this understanding. Further meetings regarding this bill are anticipated.
Hospital Cost Comparison Website — The Michigan Health and Hospital Association has announced a new website which provides cost and quality information on the fifty most common inpatient and outpatient procedures. The website discloses the average charge, average Medicare payment, average length of stay and the number of patients treated in a year for the 146 hospitals in the state. It also provides quality measures based on outcomes for hearth attacks, heart failure, and surgical infection procedures. The website address is www.mihospitalinform.org and carries data base on 2006 statistics. It will be updated annually as the data becomes available.
Consumer Protection Measures — In her State of the State message, Governor Granholm announced her intention to create a position of Insurance Advocate to be the voice of consumers in seeking “fair and affordable” insurance and to intervene on behalf of consumers in legal matters regarding insurance costs and to seek prosecution in egregious cases. She also announced that she will seek stronger authority for the Attorney General and local prosecutors to investigate price-fixing by gasoline companies by amending existing anti-trust and consumer protection laws.
Mailing Absentee Ballots — Despite a Court of Appeals decision preventing the Detroit City Clerk from mailing absentee ballots to senior citizens without their being requested, Municipal and County clerks appear to have found a way around that decision based on a Macomb County Circuit Court ruling. The Macomb County clerk has began mailing out ballots to senior citizens based on a resolution passed by the Macomb County Commission allowing her to do so as long as the municipality to which they are mailed has also passed a resolution opting in for seniors to receive non-requested absentee ballots. So far, two Macomb county municipalities have opted in. It appears that other counties will follow the lead of Macomb County inasmuch as it is considerably less costly to do bulk mailings as opposed to responding to individual requests.
People in the News
William Fitzgerald, a former Democrat legislator who at the age of 32 became the youngest Senate Majority Leader in the 1980s, recently died at the age of 65. Mr. Fitzgerald was a Grosse Pointe attorney at the time of his death.
John “Joe” Collins, who in the early sixties at the age of 25, became the youngest state Democratic Chairman, recently died at the age of 72. Mr. Collins was also the co-founder of Jackson National Life Insurance Company.
Mark Siljander, a former U.S Congressman from the St. Joseph area, was indicted on federal charges of money laundering, conspiracy, and obstruction of justice for allegedly funneling money to a foreign terrorist organization. Mr. Siljander was elected to Congress in 1981 and served three terms.
Kwame Kilpatrick, Mayor of the City of Detroit is being investigated for possible perjury. He testified that he did not have a sexual relationship with his Chief of Staff in a lawsuit against him and the City of Detroit but text messages between him and the Chief of Staff later proved to be untrue. The text messages also indicate he and his Chief of Staff may have committed perjury when both testified that they did not fire a high ranking police official for investigating their relationship among other matters. The City lost the lawsuit and later settled for $9 million. A secret side agreement to the settlement may get the Mayor in further legal trouble. The Chief of Staff has resigned. So far, the Mayor has refused to resign his position.
M. Scott Bowen, an attorney who has served the last two years as Director of the Office of the State Employer, has been appointed as state Lottery Commissioner by Governor Granholm. He succeeds Gary Peters who resigned several months ago. Prior to being appointed Director of the Office of the State Employer, he had served as a Grand Rapids district judge, a position from which he resigned to run for Attorney General in the last election.
Jon Braeutigam has been appointed Deputy State Treasurer and Chief Investment Officer. He has been acting in that capacity since last summer. He joined the Treasury Department in 1988.
Felicia Wasson has been named AARP Michigan Governmental Affairs Director, succeeding Bill Knox who recently retired. Ms. Wasson had been a lobbyist and a legislative aide prior to the most recent appointment.
Return to top of page