May Legislative Report

As the weather finally begins to thaw in Michigan, the State Legislature is focused on its annual ritual of formulating the state budget for next year.  The process was over halfway completed by the beginning of May, and most observers expect the final document to be completed by early June.  Aside from some critical needs regarding the city of Flint and the Detroit Public Schools system (which are primarily being addressed in separate legislation), this year’s budget process has so far been relatively quiet.  The House and Senate have also been spending time reviewing negative reports from the Auditor General’s office regarding the Grand Rapids Veterans Home, and hearing testimony regarding problems with the computerized system for unemployment benefits. 
 
Revenue Estimates Make Budget More Difficult
 
As of May 4, both the Michigan House and Michigan Senate have passed their own versions of the 2016-2017 budget.  They each made various changes to Governor Snyder’s initial budget recommendation, but the main targets for funding stayed relatively stable.  Both chambers were close in overall spending, with spending on state operations at approximately $38 billion, with approximately $8 billion of that coming from the General Fund. 
 
However, even with some outstanding differences between the House and Senate versions of the budget (see article below), the task of the Legislature and the Governor to complete the 2016-2017 budget will be getting much more difficult.  On May 13, the House and Senate Fiscal Agencies issued their preliminary projections for state revenues, and both of them expect the state to bring in significantly less money than was expected.
 
The Senate Fiscal Agency is now projecting that General Fund revenues for the current year budget (FY 2015-16) will come in $144 less than expected; and that the GF will be down by $207 million below projections for the FY 2016-17 budget year.  The House Fiscal Agency is slightly more optimistic, but they still project a $90 million shortfall in the current year, and a $100 million shortfall for next year.  The Department of Treasury, which will join the SFA and HFA for the Revenue Estimating Conference next week, does not release their own projections until the day of the conference. 
 
Once the three organizations come to consensus on revenue projections, the Legislature and Governor Snyder will be responsible for adopting balanced budgets.  Based on the early news from HFA and SFA, that job will be a bit more difficult than had been predicted.
 
The House and Senate are expected to complete the budget process for 2016-17 by early June.
 
Senate Pushes for Prison Closure – Possible Privatization
 
Despite Governor Snyder’s budget proposal that made no major changes to the Department of Corrections, the chair of the Senate budget subcommittee that oversees that department is pushing for major changes that could have a huge impact on departmental operations.  Senator John Proos (R-St. Joseph) has successfully inserted into the Senate version of the state budget language that would close two existing prison facilities and require the department to lease and operate the former privately-run prison in Baldwin.  The current Senate proposal would leave the decision as to which facilities to close up to the Department.  It would also at this time have the Baldwin facility operated and staffed by state employees.  However, there is great concern that such a change would be a prelude to eventual privatization.
 
The original Baldwin facility was constructed to be a privately operated prison for juvenile offenders.  Built and operated by the GEO corporation, it was closed during the Granholm administration due to the high cost of operation per prisoner and the fact that it was no longer focused on juveniles.  The facility has operated on and off since 2009 by accepting prisoners from other states.  In 2015, it signed a contract with the State of Vermont to house over 600 prisoners.  The facility has a capacity of nearly 1,800. 
 
The House did not include the Senate language in its version of the bill, and the Department of Corrections has stated its opposition to the move.  This will be one of the more hotly debated issues going forward as the House and Senate try to work out their differences over the 2017 budget.
 
 Investigations Continue in Flint Water Crisis
 
Attorney General Bill Schuette is continuing his investigation into events that led to high amounts of lead and other contaminants being placed into Flint’s drinking water.  On early May, the Attorney General’s office announced that a plea deal had been reached regarding charges to the former supervisor of the Flint Water Treatment Plant’s lab, Michael Glasgow.  The plea deal has been widely interpreted as an offer of leniency for Mr. Glasgow in exchange for testimony against other – possibly higher ranking – officials.  So far, only two other public employees have been charged with crimes.  These are Steve Busch and Mike Prysby, two employees in the Department of Environmental Quality’s Office of Drinking Water and Municipal Assistance. 
 
Attorney General Schuette has indicated that he expects more charges to be filed soon against public officials who were connected to the oversight of Flint’s drinking water.
 
No Movement Yet on Pension Changes
 
Earlier this year, legislation was introduced aimed at providing limits on the use of overtime and banked vacation and sick leave in the calculation of Final Average Compensation for public pensions.  House Bill 5438, sponsored by Rep. Patrick Somerville (R-New Baltimore), as introduced only applies to municipal employees.  State and public school employees were specifically exempted from the bill.  However, the bill sponsor has indicated an interest in broadening the scope to include state workers.
 
The bill was introduced in response to anecdotal stories describing public employees who bank their vacation days or sick leave for years before they retire in order to artificially inflate their final average compensation, and therefore their lifetime pension benefits.  Stories of police chiefs or high ranking local officials who obtain pensions that surpass their working salary have caught the attention of several Michigan lawmakers.  They fear that these types of activities not only harm the solvency of pension systems making them more likely to fail, but they also tarnish the public perception of public pensions.
 
However, the bill as written provides broad restrictions to the use of overtime that would very likely create hardships for lower-paid employees who are mandated to work extra hours.  The bill does not differentiate between voluntary or mandatory overtime, and does not distinguish between employees in management positions and those who are not.  The Coalition of Secure Retirement, which represents a number of public employee unions, has indicated support for the concept of protecting public pensions from abuse, but has cautioned that the bill would need substantial revisions to ensure that it did not harm public employees.
 
Other public employee organizations, such as the Michigan Professional Fire Fighters Unions, are opposing the bill regardless of whether it is altered.  The bill is awaiting a hearing in the House Financial Liability Reform Committee. 
 
In other pension news, despite several rumors that the state is contemplating extending the current 3-year averaging of Final Average Compensation to 5-years, the Office of Retirement Services has said that there is no such plan in place at this time.  There has also been no legislation introduced regarding state run pension systems (e.g. SERS and MPSERS) that would make such a change.  There have also been no substantiated news regarding potential early retirement plans. 
 
State Legislature Considers Applying FOIA to Itself and Governor
 
When the Freedom of Information Act was initially passed in Michigan in 1976, it included a number of exemptions.  Two of those exemptions – the Michigan Legislature and the Governor’s office – have been receiving a great deal of attention lately.
 
The House Oversight and Ethics Committee has held a number of hearings in the past month on a package of bills that would expand FOIA to include legislators and the Governor’s office.  House Bills 5469-5478 would create a new section in the Freedom of Information Act that would be dubbed the Legislative Open Records Act.  It would apply to state legislators and mirror for the most part requirements in FOIA.  However, the Legislature would have a different appeals process than other public bodies for denial of requests for information, and personal communications between legislators and their constituents would be exempt (unless the constituent was a registered lobbyist).
 
The bills would also remove the exemption currently in FOIA for the Govenor, the Lt. Governor and the executive office.  This issue has been the subject of extra scrutiny after numerous recent crises including Flint water, the Grand Rapids Veterans Home and the Detroit Public Schools in which reporters often sought documents from the Governor’s office that were not subject to FOIA.
 
Representative Ed McBroom (R-Vulcan) who chairs the House Oversight and Ethics Committee has indicated that he hopes to hold a vote on the package next week.
 
Written by Todd Tennis, Capitol Services