Last year saw passage of a number of free-market measures that will help Michigan’s economic recovery, eliminate ineffective government policies and benefit taxpayers. Mackinac Center Senior Legislative Analyst Jack McHugh compiled the 25 top reforms for the year, starting off with the simplification of Michigan’s business tax and the balancing of the state budget.
1. Business taxes cut. For the first time in many decades Michigan has a business tax system that takes much less, is much less burdensome in compliance and doesn’t tax firms even when they lose money. According to the Tax Foundation, we’ve gone from the second worst to the seventh best corporate tax. Next up: Eliminating personal property taxes imposed on business tools and equipment.
2. Budget balanced. Much more important than getting it done quickly was the fact that it was done with none of the accounting gimmicks from recent years — bipartisan gimmicks — that in the private sector would trigger fraud charges.
3. “Best Practices” in budgets. Gov. Snyder’s innovative use of best practice “carrots and sticks” in the local government revenue sharing, K-12 schools and higher education budgets is already starting to change the culture in these institutions (more on each below).
4. Charter school cap eliminated. An artificial cap of 150 on the number of charter schools authorized by state universities (the means by which most charters are created) has been eliminated. How far we’ve come since 2003, when a Michigan governor said “No thanks” to a philanthropist who wanted to give $200 million to create Detroit charter high schools with a “90 percent graduation rate guarantee.”
5. MEGA special corporate tax deals eliminated. That’s the good news. The bad news: corporate welfare handouts will still go on, but on a much smaller scale, and with more accountability. Still, this is real progress toward a genuine free-market economy where the government provides a fair field with no favors instead of “picking winners and losers.”
6. Emergency manager law strengthened. Collective bargaining agreements that “gave away the store” to government employee unions are the primary culprit driving many cities and school districts into virtual bankruptcy. Under the new law, these budget-busting agreements can now be shredded by emergency managers appointed to correct the fiscal malpractice.
7. Government employment benefits in balance. Mackinac Center research shows that government and school employees annually in this state collect benefits worth $5.7 billion more than private-sector averages. A new law requiring greater employee health benefit copays may eventually knock a billion dollars off that burden.
8. K-12 spending restrained. Restrained a little bit, anyway. Still, employee health benefits reform and school district “best-practices” incentives in the budget portend better news in the future. Next on the to-do list: School employee retirement benefits reform.
9. University tuition hikes curbed. Those “best-practice” carrots-and-sticks at work again: The budget provided no increased funding “carrots” to universities that hiked tuition more than 7.1 percent, and it (mostly) worked. (Yes, that’s triple the inflation rate, but in higher education this is considered progress.)
10. Teacher tenure reform. No more “rubber rooms” and “dance of the lemons” for ineffective teachers because they’re too hard to fire. No more laying off effective, newer ones ahead of more high-seniority teachers. Fingers-crossed on this: A lot depends on how much the school establishment and unions are able to “game” new definitions of “effective” and “ineffective” teachers, but the pieces are in place for this to be real reform.
11. Welfare limited. Truck-sized loopholes were eliminated from a four-year cap on cash benefits.
12. Unemployment benefits limited. Sustained high unemployment rates, plus unemployment benefits sweetened by a previous (Republican) governor and Legislature, led to a $3.3 billion debt to the federal government that threatened to crush state employers, on whom the burden ultimately falls. A new law that trims state benefits from 26 to 20 weeks will make a huge difference in that.
13. Revenue sharing tied to fiscal discipline. Local governments are more prudent and frugal when they must rely on their own local tax revenue, rather than “free money” from a Santa Claus state. Some of that “free money” is mandated by the Constitution, but Gov. Snyder made the rest contingent on adopting “best practices” that include employee health benefit and pension reforms, more competitive bidding of non-core services, consolidating services and increasing transparency.
14. Regulatory permits modestly improved. There may be a bit more “adult supervision” at the Department of Environmental Quality, and laws were passed requiring periodic review and “benchmarking” of regulations, regulatory “impact statements,” and more. However, additional work is needed here to make Michigan truly competitive.
15. Worker’s compensation streamlined. There’s universal consensus that employees injured on the job deserve compensation, but avoiding abuses in the workers comp insurance system is an ongoing “devil in details” challenge. A new law corrects many of those devilish details —a very big deal to current and prospective job providers.
16. Project labor agreements banned. A gift to labor bosses from too-cozy-with-unions city and school officials, PLAs mandate above-market wages on construction projects. Not anymore: The practice is prohibited under a new law. About time.
17. Item pricing law gone. Repeal of this state’s absurdly obsolete “item pricing” law will save retailers millions of dollars wasted placing stickers on every item. That’s good for everyone.
18. Automatic raises for teachers banned when union contract expires without replacement. Within weeks of enactment, school district labor negotiators told attendees at a Mackinac Center forum that this new law had already created a rush by unions to settle contracts, and on terms much more favorable to taxpayers.
19. Minimum staffing requirements banned in government union contracts. Another little gift from municipal officials to government employee unions, it suggested confusion over whether taxpayers or union bosses deserve their loyalty. This new law clears things up.
20. No more dues for the illegal day care union. One down, one to go: The “stealth unionization” of independent contractor day care providers ended, but due to Senate Republican inaction, $7 million annually is still being funneled from mom-and-pop home health care providers to the SEIU (parent of ACORN).
21. Post-retirement state employee health benefits reformed. Critically important and long overdue reforms of these optional benefits were adopted, plus requiring state employees to contribute more toward their benefits. This will save taxpayers billions of dollars in the coming years. Still undone are comparable reforms for school employees, which will save tens of billions — once the Legislature summons the will to challenge the state’s largest government employee union, the MEA.
22. School board elections moved to November in even-numbered years. Another step away from union-dominated “stealth school elections.”
23. “Bad driver tax” trimmed. Enacted in 2003 as a cruel way to avoid government spending cuts, these draconian penalties have wrecked the lives of many low-income workers who can’t afford to pay them. Unfortunately, the revenue they generate is addictive to state spending interests, which means even a minor reform is worth celebrating.
24. School union “prohibited subjects of bargaining.” If we’re going to have government and school employee unions (not a given), they should at least be limited to bargaining over compensation. Seven additional items were taken off the table for school unions to quibble over: teacher evaluations and placements, layoff decisions, classroom observations, employee discipline/discharge, merit pay programs and notification to parents about teacher performance.
25. Redundant/unnecessary regulations eliminated. A “sword of Damocles” over the heads of job providers disappeared with enactment of a ban on administratively imposed workplace “ergonomics” regulations. Widely available “consumer fireworks,” including firecrackers and bottle rockets, will now be legal and taxed here instead of another state. A woefully obsolete, comprehensive regulatory regime on landline telephones was updated and streamlined.