Under the Dome
Capitol Update for May 16-June 8, 2007
Cynthia Ann Paul
Revenue Estimating Conference- May 18, 2007 state officials at the Revenue Estimating Conference on May 18, 2007 lowered revenue estimates for both the current fiscal year - by a total of $195.3 million - and for the 2007-8 fiscal year - by $338.2 million - from the already depressed forecasts adopted in January. With the lowered revenues, the remaining deficit for the current fiscal year now stands at more than $800 million and next year approximately $1.6-2 billion.
07 Budget Deal On May 30, the Michigan House and Senate passed SB 436 effectively dodging the issue for yet another year by selling approximately $400 million in bonds secured by future tobacco settlement revenues, drawing down balances in several restricted funds, and implementing program reductions that address a small percentage of Michigan’s out-year structural deficit. The following table reflects the major components of the agreement intended to resolve a deficit of approximately $800 million for the current fiscal year ending September 30th.
One-Time Asset Sales, Accounting Adjustments, Payment
Delays and Restricted Fund Withdrawals
1. Securitize Future Tobacco Settlement Payments $406.8 MIL
2. Withdrawal from the Refined Petroleum Environmental Remediation Fund 70 MIL
3. Withdrawal from the Higher Education Student Loan Fund (estimate) 90 MIL
4. Withdrawal from the State Campaign Fund 7.2 MIL
5. Withdrawal from the Convention Facilities Upgrade Fund 35 MIL
6. Withdrawal from Uncommitted 21st Century Funding 30 MIL
7. Withdrawal from Comprehensive Transportation Fund (Soo Locks set-aside funds) 5.3 MIL
8. Withdrawal from the Michigan Conservation Corps Endowment Fund 20 MIL
9. Withdrawal from Department of Labor and Economic Growth Fund Balances .5 MIL
10. Defer Current-year University and Community College Funding into FY2008 69.4 MIL
Subtotal $734.2 MIL
FY2007 Program Reductions
1. Higher Education Funding Reductions $25.9 MIL
2. Arts and Culture Grant Reductions 3.6 MIL
3. Healthy Michigan Fund Reductions 3.2 MIL
Subtotal $32.7 MIL
Other Unspecified Adjustments and Program Reductions $33.1 MIL
Total One-time Adjustments and Program Reductions $800 MIL
Despite the Governor’s indication that failure to address the current-year deficit through an
Increase in state revenues by June 1 would force her to reduce the K-12 Foundation Allowance by approximately $122 per pupil, reduce Medicaid provider reimbursement rates by 6 percent, and institute state employee lay-offs, she is expected to approve the finalized legislative agreement and suspend her reduction plans. While those at risk of cuts under the Governor’s announced plan may be breathing a sigh of relief, it is recognized that the tentative solution to the state’s FY2007 budget deficit will significantly exacerbate what had been identified as a $1.5 billion deficit in FY2008, raising the shortfall for the fiscal year beginning October 1 to approximately $2 billion – equivalent to 40 percent of funding for state programs that could be classified as “discretionary spending”. It is very similar to the Conference Report on SB 220. It increased spending by $69.4 million as funds had to be appropriated to meet increased welfare and Medicaid caseloads as well as increased numbers of prisoners. The tie-bar to HB 4500, the income tax increase, was also removed. It eliminated a $30 million cut to revenue sharing proposed by the Senate. However, the budget does still use $35 million local convention center funds that local governments said would hurt funding for substance abuse programs.
O8 Budget Negotiations-
Elected officials are currently considering a mix of an income tax increase and luxury tax proposal to help keep the 2007-08 budget balanced. And in the ongoing discussions over a new business tax proposal, officials are now weighing the possibility of a three-part tax that would assess on the basis of a company's gross receipts, profits and assets.
Reforms That Have Passed The House-
1) A -5 percent salary cut and loss of their lifetime health care benefits for legislators. HCR 26 requests that when the State Officers Compensation Commission meets next in 2008 that they reduce legislative salaries by 5 percent - which would mean lawmakers currently receiving a salary of $79,650 before taxes would be cut nearly $4,000 annually. Applies to legislators elected afer January 1, 2007.
2) No Life Time Health Care Benefits for Legislators- HB 4580 takes away the lifetime health care benefits lawmakers receive at age 55 after serving six years in the Legislature. But the measure applies only to individuals elected after January 1, 2007.
3) School Superintendent Salary Cap - HB 4796 caps any newly hired superintendent's compensation - wages and benefits - to that of the governor, who is paid $177,000 a year. The legislation was amended to also stipulate that the cap would increase with inflation every year - unlike the governor's - and that schools would be barred from offering a vehicle or paid membership to social clubs as part of their compensation package.
4) State and School Employee Double Dipping- HBs 4799 & 4800 state and school employees who retire and then directly or indirectly come back to work for the state or public school system will be prohibited from receiving both the salary and pension. Under these bills they would be prohibited from collecting their pension during their re-employment.
5) Municipal Consolidation Bills Moves the House- HB 4246 & 4266 stipulate that when local governments consolidate they don’t have to adopt whichever one had the better labor agreements this has passed the House and been sent to the Senate Committee on Local, Urban and State Affairs.
May 22- Layoff notices went out State Employees- Governor Jennifer Granholm on May 22 issued a notice to Michigan's unionized civil service workers of possible layoffs in 30 days. Each state contract with its unionized workers requires that they be notified before layoffs occur (most the contracts call for 15 days notice, some call for 30 days notice). Last month, the Civil Service Commission approved rules allowing for temporary layoffs of non-unionized workers. Additionally each department was ordered by the administration to develop a list of vital services that would need to continue operating during a partial shutdown of state functions
June 4,2007, Layoffs called off, but not completely- Large-scale layoffs of state workers will not be needed to help balance the 2006-07 budget, but the state department directors have been notified by the administration of Governor Jennifer Granholm that some layoffs may be needed in specific departments because of overspending issues, layoffs remain a possibility for the 2007-08 fiscal year.
Dept. of Civil Service Eliminated May 24, 2007- The Department of civil service was eliminated. Its functions and the human resources functions of the other 18 departments were moved to the Department of Management and Budget (DMB) EO 2007 30. DMB was also put in charge of all of the state's accounting and internal auditing under executive order EO 2007-31 and accountants EO 2007-32.
Other Executive Orders issued the same day eliminated extraneous boards and commissions. Eliminated this time:
· 2007-33: Environmental Education Advisory Committee
· 2007-34: Great Lakes Protection Fund Technical Advisory Board
· 2007-35: Organic Advisory Committee
· 2007-36: Consumer Food Safety Education Fund Advisory Committee
· 2007-37: Task Force On Cervical Cancer Awareness
The orders take effect unless both houses reject them in the next 60 days, Ms. Boyd said.
DHS Offices Will be Closing- The Tireman District office in Detroit will close May 25, and force 16,000 clients to change offices and move 65 employees. The Hamtramck District office will close June 29, it has 9,800 clients and 57 staff. The Dexter Elmhurst Community Center will close May 29 it has only two staff and does not have a dedicated client list.
House Oversight Committee Moves to House Floor Bills Taxing Public Pensions Like Private Pensions (Ward)- HBs 4801& 4802 eliminates the full subtraction of most public pension benefits from taxable income in Michigan. Instead, public retirement and pension benefits exceeding $40,920 for a single filer or $81,840 for a married filer (2006 tax year amount) would be subject to the state income tax. Federal and military pensions would remain fully exempt from the state income tax.
Insurance Pooling Bills (SBs 418-421)- AFT and Operating Engineers Package- Allows schools districts, colleges, university, local municipalities to create an insurance pools, requires transparency of the claims data, good consumer practices and insurance pools to solicit at least 4 bids. SB 418 was substituted to put some greater controls on the pools, which would be voluntary for local agencies to join. The pools would have to have a minimum of 250 employees, any entity joining a pool would have to remain in the pool for a minimum of three years and if it left the pool would have to stay out for two years. Joining the pool would be completely voluntary; pools would have to solicit for bids from at least four carriers, including a VEBA, though they are not required to receive at least four bids.
Graded Scale Premium for School Employees- Senate and House Education Committee took up a package of bills to change school employee retirement system and changing their retiree health care benefits to a graded scale premium, (SB 546, SB 547, HB 4797, HB 4798). Under these bills school employees do not get full health care benefits unless a retiree puts in 30 years of service, and under the Senate version, it bars collecting health care benefits until reaching age 60. In tying the benefit to the years served, retirees would get a subsidy of the health care premium costs of 3 percent for each year after they served 10 years until the maximum is reached with 90 percent for 30 years of service. Retirees could buy up to five years of credit to qualify for benefits, but only if they had served at least 10 years. The graded premiums for school employees' contributions to the system would be changed for those who earn over $15,000 a year, who would have to pay 6.4 percent, instead of the current 4.3 percent, of the amounts over $15,000 in addition to continuing to pay a base amount of $510 annually. For those earning less than $15,000, the premiums would remain unchanged. The change would save local districts an estimated $7.35 million the first year. A similar system was implemented for the state employees retirement system in 1997.
The Senate Government Operations and Reform Committee Takes up Part-time legislature- The Committee took testimony on creating constitutional part-time legislatures, SJR B, HJR H, HJR M.
DEQ Budget Fee Problems-
Senate DEQ Approps Subcommittee states that the department will not get all of the fee increases it is seeking says Subcommittee Chair Sen. Valde Garcia.
DEQ Removed from Wetland Permits- Instead of asking for fee increases to administer the wetlands permits program, the Department of Environmental Quality would relinquish those duties back to the federal government under legislation to be introduced by Rep. John Moolenaar.
Prison Senate Subcommittee Report- Governor Jennifer Granholm's proposal to release more than 5,000 prisoners should be rejected because it is "reckless," "ill-advised," "fatally-flawed," and deliberately designed to mislead the public, the final report from a Senate Judiciary Subcommittee said, and greater efforts to reduce recidivism and find other savings in the Department of Corrections should be pursued instead to save the department money.The 33-page report was ordered when the subcommittee was formed in February after Ms. Granholm announced the state would close the Southern Michigan Prison in Jackson. They also recommended the DOC outsource many of its current services.
DHS Clears Senate Approps- A controversial proposal to largely take the state out of both direct operations of child foster care and juvenile justice was approved on a largely party-line vote by the Senate Appropriations Committee Wednesday. The privatization proposal is part of SB 232, the 2007-08 budget for the Department of Human Services, which was sent to the full Senate.If the measure in its current form were to become law - it could mean that some 800 state workers would be laid off as the functions for administering child foster care and implementing adoptions and for handling juvenile justice that does not involve dangerous youths would be handled by private agencies.
Credit Report Freeze- Credit reporting agencies would have to put a freeze on releasing the credit reports of state residents victimized by identity theft under legislation that passed the Senate. SB 340 provides that if a victim of identity theft asks a credit-reporting agency to freeze releasing reports about the individual's credit, and includes a copy of a police report filed of their incident, the agency would have to honor that request.
House Moves Bills to Help Homeowners and Buyers- HB 4215 allows a homeowner to carry the two exemptions for up to three years as Michigan's housing market sags. The measure was amended on the floor to allow a person to advertise the home for lease and not just for sale, and still keep the exemption, but that would be rescinded if the homeowner actually leased or sold the house. HB 4440 places an 18-month moratorium on the pop-up tax that occurs when a home is sold. Both of these bills have passed the House and been referred to the Senate Committee on Finance.
Civil Service Appointment- Bryan Waldman, of Okemos and a partner in the law firm Sinus, Dramis, Brake, Boughton & McIntyre, P.C., was named to succeed James Pitz representing Democrats for a term expiring December 31, 2014.
Michigan Supreme Court to Hear DP Benefits- The legal dispute over whether the 2004 voter-approved constitutional amendment barring same sex marriages also prohibits public employers from offering benefits to same-sex partners will be heard by the Supreme Court. In agreeing to take the case on Thursday, a 5-2 majority refused to stay the February Court of Appeals decision, which prohibited benefits to be provided to same-sex partners.
Medical Marijuana- June 6, 2007, Board of State Canvassers approved petitions to legalize marijuana for medical purposes. Diane Byrum, spokesperson for the Michigan Coalition for Compassionate Care said success elsewhere gives the group hopes for success in Michigan. Ms. Byrum said 12 other states and five cities in Michigan have all made marijuana legal for medical purposes. Petitions are currently being circulated.