April Legislative Report by Todd Tennis
The Michigan Legislature spent the first part of the new session focused mostly on the upcoming budget battles. The House of Representatives made an attempt to repeal the Michigan Income Tax, but was stymied by a dozen Republican members who refused to support the plan. The Legislature also spent time on a plan to publish the name and salary of every state worker, but put that issue on hold once the Mackinac Center for Public Policy, a right-wing think tank, beat them to the punch.
The latest issue surrounds the state budget, where House and Senate Republican leaders are pushing to make major reductions in spending, far below the Governor’s recommendation. The rationale on the House side seems to be a desire to pay for a tax cut, while the Senate is apparently hoarding money to pay to close the public school pension system much like they did to state workers back in 1997. Either way, it spells reduced funds for a myriad of state programs.
More on these issues below.
Budget Process Complicated by Outside Pressures
The Governor presented his budget proposal back in February. It was a modest budget that kept funding fairly stable. Governor Snyder proposed making some key increases, including staffing increases for state mental hospitals to alleviate overtime issues, additional funds for road and bridge work, and small raises for home care workers. However, from the beginning of legislative budget deliberations, the House and Senate both have been working on efforts to make major cuts to the Governor’s recommendation.
Appropriations subcommittee chairs were each given direction to reduce their budget bills by a significant amount. Larger budgets, such as DHHS, saw reductions of over $100 million from Governor Snyder’s proposal. The Senate DHHS budget delayed the additional staffing of state mental hospitals and reduced funding for programs that support low-income seniors. Corrections saw a reduction in the Public Safety Initiative (designed to assist distressed communities with jail space concerns) from $4.5 million to $1 million. Governor Snyder recommended increased funding in the DEQ budget for drinking water and environmental health, as well as contaminated site investigations, but none of these increases were included in the House version of the budget.
In total, the House and Senate made reductions to the Governor’s budget recommendation of over $200 million. The thinking in Lansing is that Legislative leaders were making the cuts in order to fund the tax cut that the House had attempted to pass in February. However, while that may be the thinking in the House, it has recently come to light that the Senate leaders are making the cuts for a different reason. Senate Majority Leader Arlen Meekhof (R-West Olive) announced his hope that the funds would be used – along with a portion of the Rainy Day Fund – to close the Michigan Public School Employees Retirement System.
All in all, this year’s appropriation cycle may become more complicated than we have seen in recent sessions. An argument is brewing between the House who wants a tax cut, the Senate who wants to close school pensions, and the Governor who wants to invest in infrastructure, but the funds to do all three (or even two of the three) are not readily available. Complicating things even more are rumors that the next Revenue Estimating Conference may find that state revenues are underperforming to the tune of $100 million, further reducing the amount of available funds to accomplish these differing goals.
The House and Senate will continue budget deliberations at least through June when they normally will reach a final agreement. This year, however, with such differing opinions on funding priorities, the may be drawn out in to the summer months.
Tax Cut Bills among First to be Introduced This Session
Leaders in the House Republican caucus have made tax reform a top priority this session. In fact, the very first bill to be introduced in the Michigan House this session – House Bill 4001 – would have, as originally written, reduced the Michigan Income Tax from 4.25% to 3.9% on January 1, 2018, and gradually phase it out altogether over the next 40 years. The Michigan Income Tax currently is the main source of General Fund revenue for the state. According to the House Fiscal Agency, the bill would have generated a reduction to the General Fund of $680 million in 2018, and $1.12 billion in 2019. The bill then would have reduced the General Fund by an additional $400 million per year through 2057.
The bill was reported with no changes from the House Tax Policy Committee and brought up on the House Floor in late February. The Michigan House saw its first late night session as Speaker of the House Tom Leonard (R-DeWitt) and bill sponsor Lee Chatfield (R-Levering) pressed hard to win the necessary votes for passage. Initially, over 20 Republicans joined with a united Democratic caucus in opposition to the bill. Several changes were made to the legislation to make it more palatable, including the deletion of the 40-year phase-out. Eventually, the bill was pared down to a reduction from 4.25% to 4.15% over the next two years, with further reductions predicated on economic growth. This was enough to switch several Republican “no” votes to “yes.”
Somewhere around 2am, the Speaker put the final version of the bill on the board for a vote of the House. In the end, twelve Republicans held firm in their opposition leading to (when combined with Democratic members) the bill’s defeat by a 52-55 margin. Opposition centered on the fact that there was no plan for replacing the approximately $1 billion in reduced revenues the bill would create, and no plan for making cuts to existing programs to make up the difference.
Many House members are still hoping to make another run at the tax cut bill sometime this year. There is speculation that this is driving the Appropriations Committee to report a budget bill that is far less in expenses than the Governor’s budget proposal so those funds can pay for a tax cut (see related article). It is still unclear how this issue will be resolved over the next several months.
Legislation Seeks to Publish State Worker Salary Data
In a move that proponents claim will increase governmental transparency, Representative Brandt Iden (R-Oshtemo Twp.) introduced House Bill 4301 – a bill that seeks to require the state to post on a public website the names and salary information of all state employees. The bill was brought up in the House Oversight Committee and reported out on a party-line vote.
State employee organizations, including MAGE, UAW Local 6000, the Michigan Corrections Organization, SEIU Local 517M, and AFSCME all declared their opposition to the bill. Opponents expressed concern regarding potential risks to state workers – ranging from harassment to identity theft – from having their names and salaries posted online. Supporters of the bills, including the Mackinac Center for Public Policy and the Michigan Press Association, argued that the information was already available through the Freedom of Information Act, and that public employees gave up their right to privacy regarding their income when they agreed to work for a public agency.
The bill seemed set to pass the House of Representatives when many groups supporting the bill, including the Mackinac Center, beat the state to the punch and created their own website that listed names and salary data of state and school employees. The website was found to have posted inaccurate data in many cases, but that was due to problems with the transferal of information from the Department of Technology, Management and Budget. Those problems have reportedly been corrected.
In any case, having a private entity post the information seems to have removed the momentum for the legislation. Representative Iden has declared the bill to be “on hold,” since it may not be necessary for the state to spend the over $100,000 per year to maintain a public online database with the information if the private sector will do it. The bill is still sitting on the House floor, but it does not appear that it will be taken up any time soon.