In September 1988, the state Legislature passed PA 326-29, which placed two questions on the ballot concerning state general obligation bonds issued under Article 9, Section 15 of the 1963 Constitution. Both bond issues were approved by voters, allowing the state to sell $660 million in general obligation bonds to finance environmental protection programs and $140 million in general obligation bonds to finance state and local public recreation projects. Though not known at the time, this was HOST's beginning.
The language in the two bond issues states they may bear interest at a rate or rates specified by resolution adopted by the state Administrative Board. The language was included to allow the Department of Treasury to issue securities at competitive market rates, and which provide the least cost to taxpayers. The state is now using this language to establish HOST, a program that has not been granted legislative authority in the normal manner.
Rather than sell HOST bonds through standard channels, the state will sell variable rate zero coupon bonds, in small denominations and on a monthly basis, to first-time home buyers. The bond's interest rate will be tied to an index of statewide housing prices. Bond purchasers are guaranteed a rate of return equal to "the annual housing inflation rate throughout Michigan." They would receive the tax exempt rate if housing prices rise more slowly than the interest on one-year tax exempt securities.
However, what happens if housing prices increase at a rate faster than the rate of return of tax exempt securities? The guarantee to,HOST participants would then have to be fulfilled at the expense of the general fund.
At this point, the natural question to ask is, "Why should Michigan voters pay more than necessary for environmental and recreation programs they approved at the ballot box in order to underwrite a housing program they never had a chance to vote on?"
While HOST appears to be a home down payment guarantee program, it is really just an investment vehicle restricted to first-time buyers. But if one accepts the hyperbole that HOST is a housing program, one faces a separation of powers question. 
Though the legislature passed a statute which gave the state the power to sell general obligation bonds at a rate to be determined by the state administrative board, it did not give the panel the authority to implement a housing program. The executive branch will violate the spirit, if not the letter, of the acts which created the voter-approved bonds.
A HOST proponent might respond, "This is not a housing program, but merely the issuance of variable rate zero coupon bonds." The state has the authority to issue such bonds under Section 3 of the Environmental Protection Bond Implementation Act, and Section 3 of the Recreation Bond Act. 
But this argument leads to two further legal questions with regard to the program. The first is the ability of the state to restrict the issuance to first-time home buyers. While Section 3 of each Act states that the state administrative board may subject the issuance to restrictions, it specifies that these are to be "as necessary to insure the marketability, insurability, or tax exempt status" of the bonds. It would be surprising if the courts held that the restriction to first-time home buyers met this requirement.
The second issue is related. Section 4 of each implementation act states that bonds issued under the acts are to be fully negotiable under the uniform commercial code.  How can the HOST bonds be fully negotiable under the restrictions of the program? Neither the bond implementation acts nor the uniform commercial code define "fully negotiable." In Nicholas v Michigan State Employees Retirement Board, 144 Mich App 70,74:372 NW2d 685 (1985), the rule of statutory construction that "specific words in a statute are given their ordinary meaning unless a different interpretation is indicated" was concisely set forth. "Fully negotiable" would seem to indicate a secondary market in HOST bonds. But how can this market operate fully if the only one who can buy the bonds in the first place must be first-time home buyers? Can a HOST bond be sold by a first-time buyer to a home owner? Or will the secondary "market" consist entirely of the state Department of Treasury? It is difficult to imagine how the bonds can satisfy the Section 4 requirement.
Voters might be willing to take on the extra tax burden of HOST, but that is not what they were asked to do in November 1988 when they voted on an $800 million bond issue for the environment and recreation.
Is HOST really needed? Common sense suggests that HOST bonds will be purchased primarily by those with higher marginal tax rates who are wealthy enough to diversify their portfolio. These are likely to be first-time buyers planning to purchase a home in Bloomfield Hills, East Grand Rapids or Troy, not Detroit, Flint or Pontiac. Although this may be where the votes are, it is not the home of the middle-class taxpayers who could be forced to underwrite HOST.
While HOST is not really a housing program, it does represent a trend in state government which is worth noting – the use of the state's borrowing and investing power to serve political goals. This recent trend was foreshadowed by the 1982 revision of PA 314 of 1965, which dealt with the investment of assets of public employee retirement systems.  PA 314 originally restricted the investment of these assets. For example, investment in common stocks was limited to 10 percent of total ledger assets, and no more than three percent of total assets was to be invested in common stocks in any one year. Severe restrictions were placed on the kinds of stocks in which the pension fund could be invested. There was no provision for the purchase or taking of equity interest in realty. The rewritten act broadened the scope of investing to allow up to 60 percent of the system's assets to be placed in common stock, five percent in venture capital improvements, and, if the state treasurer is the investment fiduciary, more than five percent of the assets in investment in real or personal property.
The old law substantially reduced the ability of the pension funds to earn a reasonable rate of return on assets. The provision of PA 55 allowed the state to make spectacular gains in the rates of return of the pension funds through the 1980s. There is little question of the benefits from the passage of this act. However, these amendments make it more necessary for the citizenry to ensure that the provisions of subsection 13(3) are followed. This subsection requires an investment fiduciary to discharge his or her duties solely in the interest of the participants and beneficiaries of the funds. The temptation to make investments which are politically, rather than financially sound, will be great. Investment in a new firm that promises jobs in a politically key district should be seen in financial, rather than political terms. This is difficult to do because the legislature included a stipulation that the venture capital provisions may be used only to invest in firms which have 50 percent of their assets or employees within Michigan. Such action comes close to political motivation for investing, rather than investing "solely in the interests of the participants and beneficiaries."
Creation of the Michigan Education Trust (MET) in 1986 is further evidence of this trend. MET utilizes the state's investing capacity to act as a competitor to private sector investment programs. The state purports to guarantee tuition at its colleges and universities to those state residents who invest their funds in a state trust. MET puts more than 4,000,000 state taxpayers in the position of possibly guaranteeing tuition for less than 50,000 families.
The philosophy underlying HOST forces state taxpayers to continue down this dangerous path. Use of public funds to achieve political outcomes goes far beyond what is "just law" as defined by the 19th Century French political philosopher Frederic Bastiat. Once government exceeds its primary function, Bastiat wrote, "you will then be lost in an uncharted territory, in vagueness and uncertainty, in a forced utopia or, even worse, in a multitude of utopias, each striving to seize the law and impose it upon you. This is true because fraternity and philanthropy, unlike justice, do not have precise limits. Once started where will you stop? And where will law stop itself?" 
Where will the State of Michigan stop in its use of assets and taxes to benefit select groups who are deemed politically important? When will the state stop playing philanthropist with the taxpayers' money?