December Legislative ReportLegislature Passes Road Fix Plan with Poison Pill Hidden Inside
Governor Snyder and leaders from the Michigan House and Senate have worked for the past several months to try and find a common-ground solution on transportation funding. As of early October, it seemed like the effort was failing with House and Senate leaders sniping at each other over a failure to move forward. However, in late October, the House suddenly put forth a proposal that became the foundation of a final agreement. The Senate adopted the plan with a few modifications, and the House concurred with the Senate changes on November 3. Governor Snyder signed the bills into law on December 1.
The plan will add an additional $1.2 billion for road construction and maintenance (with about $60 million of that amount being used for public transit). Half of that $1.2 billion will come from new revenues in the form of an increase in the Motor Fuel Tax of 7.6 cents per gallon and a hike in auto registration fees of approximately 20%. The remaining $600 million will come by shifting that amount from other General Fund expenditures. In addition, the plan offsets the tax increase by increasing the Homestead Property Tax Exemption. With these pieces in place, the General Fund (or the approximately $10 billion annual amount that is unrestricted) will be reduced by approximately $800 million when this plan is fully phased in.
Added in to the road funding plan was a bill that will restrict future Income Tax revenues. Senate Bill 414 creates a formula by which the Michigan Income Tax will be automatically rolled-back in any year in which increases to General Fund revenues outpace inflation by a certain amount set by a formula created in the bill. This would be a similar mechanism to the “Taxpayer Bill of Rights” law passed in Colorado in 1992. After that state saw massive cuts to state support of higher education and (ironically) road maintenance, voters approved a ballot measure placing the law on hold in 2005.
The House Fiscal Agency estimates that if such a formula had been in place over the past two budget years (years when the economy was pulling out of the Great Recession), it would have mandated a cut in the 2016 Michigan Income Tax from 4.25% to 3.92%. The effect of this would have been a General Fund revenue reduction of nearly $680 million. Moreover, Senate Bill 414 has no mechanism to allow for the Michigan Income Tax to come back up during a decline in the economy. This “ratchet-effect” would prevent the tax rate from increasing to offset economic downturns, and has the potential to create perpetual budget difficulties in the future.
This plan to fix the roads should – once it is fully phased in – allow an additional $1.2 billion annually to be dedicated to road construction and maintenance. The problem is that it also has the capability of requiring massive cuts in other areas in order to fix our roads and bridges. Once the initial shift in funds from the General Fund to roads is absorbed, the regular growth in the economy would hopefully make up for those cuts. However, as SB 414 becomes law along with the rest of the package, those cuts would never be restored, and there is a great likelihood that more will be necessary in the future.
Minimum Nursing Staffing Level Bill Introduced
Representative Jon Hoadley (D-Kalamazoo) recently introduced legislation that would mandate minimum nursing staff levels for hospitals in Michigan. House Bill 5013 seeks to require Michigan hospitals to develop nursing staffing plans that adhere to minimum registered nurse to patient ratios depending on the type of unit. For example, intensive care registered nurse to patient ratios could not be less than 1 nurse per patient, while rehabilitation care could be no less than one registered nurse for 5 patients. The bill would also prohibit the use of mandatory overtime for nurses except in “unforeseen emergent situations.”
As currently written, the bill would not apply to state hospitals. However, Representative Hoadley has expressed his intent to amend the bill so that it also applied to state-run facilities. The bill was referred to the House Regulatory Reform Committee.
Senate Bills Target Union Leave Time
On November 10, the Michigan Senate passed legislation aimed at banning collective bargaining clauses that allow for employer-paid union leave time for public employees. Senate Bill 280 seeks to prohibit collective bargaining agreements with public employers from including a clause that allows for the employer to reimburse employees for union leave time. This practice, which is standard in the private sector, has been used by public employers and their unionized employees for decades without an issue. Proponents of the bill argue that unions themselves should pay for any time in which they are doing union business. However, most union employers have negotiated the payment of union leave time for their employees because it makes the labor/management arrangement much easier.
For example, if an employer wishes to have meetings with union officials during business hours, either to discuss contractual issues, work out a grievance or settle a disciplinary matter, it is in the employer’s best interest to reimburse the employee on union leave time. Otherwise, it is much more likely that such meetings will need to be held outside of business hours, since most public employee unions do not have the resources to cover lost time for union officials.
Senate Bill 280 was referred to the House Commerce and Trade Committee, where it could be taken up early next year.