The MC: The Mackinac Center Blog

December 17, 2014, MichiganVotes Weekly Vote Report

Obamacare “navigators,” unionized college athletes and more

Note: House and Senate votes on a road funding/tax increase package taken after midnight on Dec. 19 came too late for inclusion in this report. A supplemental report on these and other late votes will be sent on Monday, Dec. 22.

Tax Hike/Road Funding Package

In the early hours of Friday, Dec. 19, the House and Senate passed several large tax increases and tax shifts intended to generate an additional $1.2 billion for roads, $300 million for schools, $130 million for municipal bus system subsidies and $95 million for local governments. The roll call vote details will be included in a supplemental report to follow. Key elements of the package include:

-- House Joint Resolution UU, a constitutional amendment increasing the state sales tax from 6 percent to 7 percent. This will appear on a May 12, 2015 ballot, and if it is not approved by voters then other road tax increases and shifts in the package will not go into effect.

-- House Bill 5477, which converts the state gas and diesel tax from a cents-per-gallon tax to one imposing a 14.9 percent levy on the wholesale price of fuel. Reportedly this is equivalent to a 42 cents per gallon tax at current fuel prices, compared to the current 19 cents per gallon gas tax and 15 cents per gallon diesel tax. Most of the increase would be offset by exempting fuel purchases from the state sales tax.

-- House Bills 4539 and House Bill 4630 increases various vehicle registration taxes, which will extract an additional $95 million from car and truck owners each year. Senate Bills 658 and 659 impose sales and uses taxes on many catalog or internet purchases made from sellers outside the state, which is projected to collect an additional $50 million in from taxpayers.

Other action during this final week of the 2013-2014 Legislature included these House and Senate votes:

House Bill 6074, Exempt college athletes from unionization: Passed 25 to 11 in the Senate

To establish that college students who participate in intercollegiate athletics on behalf of a state university are not considered “public employees” subject to unionization under the law that mandates schools and local governments must engage in collective bargaining with government employee unions.

Who Voted “Yes” and Who Voted “No”

House Bill 4576, Regulate federal health care law “navigators”: Passed 32 to 6 in the Senate

To impose regulation and a “certification” requirement on the “navigators” authorized by the federal health care law (“Obamacare”) to assist persons applying for government-subsidized health insurance benefits through agency this law creates (the “exchange”). The bill authorizes background checks, testing and training requirements, and more.

Who Voted “Yes” and Who Voted “No”

House Bill 4480, Require more corporate & developer subsidy transparency: Passed 37 to 0 in the Senate

To require the Michigan Strategic Fund and the Michigan Economic Development Corporation to annually submit and post online more detailed reports on the costs and outcomes generated by their various “economic development” loan, tax break and subsidy programs targeted at specific corporations, developers or industries.

Who Voted “Yes” and Who Voted “No”

House Bill 4783, Expand a corporate/developer subsidy regime: Passed 31 to 6 in the Senate

To authorize creation of a seventh “Next Michigan Development Corporation,” which is a government agency that gives tax breaks and subsidies to particular corporations or developers selected by political appointees on the entity’s board for projects meeting extremely broad “multi-modal commerce” criteria (basically, any form of goods-related commerce). This would probably be in the Detroit area.

Who Voted “Yes” and Who Voted “No”

Senate Bill 910, Ban enforcement of new woodstove emissions limits: Passed 68 to 41 in the House

To prohibit Department of Environmental Quality from imposing new state regulations limiting emissions from woodstoves and heaters, or enforcing federal regulations that do this. The bill was introduced as news reports indicated that proposed federal Environmental Protection Agency rules would impose restrictive new limits on wood burning heaters.

Who Voted “Yes” and Who Voted “No”

Senate Bill 791, Revise, make permanent non-transportation 7/8th cent gas tax: Passed 108 to 0 in the House

To eliminate the 2016 sunset on a 7/8ths cent-per-gallon gas tax that was originally supposed to expire in 1998 and be used to clean up leaking underground fuel tanks, but which has been extended several times and was diverted to other government spending by a 2004 “fund raid.” However, the bill would earmark $20 million of the annual revenue of around $50 million from this tax to underground tank cleanups (as originally intended), and add some limits on using money from this tax to support unrelated activities.

Who Voted “Yes” and Who Voted “No”

SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

Top 25 of 2014

Our most popular offerings of the year

Asset forfeiture, illegal language in teacher contracts, union bullying and intimidation and Michigan Education Association finances were the most popular items on our website in 2014. Below are the top 25 articles you, the readers, clicked on during the past 12 months.

Please note that the list below is not scientific, but rather based on page views relative to posting dates.

  1. Man Who Speaks Out About Police Seizing His Property Without Charges Is Arrested Hours Later
  2. Wisconsin Wind Turbines Declared Health Hazard
  3. Non-Christians Given ‘Special Consideration’ in Union Teacher Contract
  4. All Four Teachers in New Schauer Ad Claiming School Cuts are in Districts Receiving More Money
  5. Which Michigan School Districts Pay the Most?
  6. Property Seized, Money Taken — But No Crime
  7. Disabled Family Sees 300 Percent Increase in Health Insurance Costs Under Obamacare
  8. Making Sense of the Complicated Ballot Language for Proposal 1
  9. SEIU Membership Drops 80 Percent After Dues Skim Ends
  10. Legislators Block Low-Cost Eye Exams in Michigan
  11. Brighton Teacher Who Served in Afghanistan Sues Union, School District over Right-to-Work Violation
  12. Union Says Photo IDs not Necessary to Vote — Unless You Vote to Leave Union
  13. Union, District Force Non-Union Teacher to Pay for Release Time
  14. MEA Sends Credit Agency After Teacher Who Stopped Paying Dues
  15. MEA Executives Take Big Pay Raises While Liabilities Continue to Grow
  16. Detroit Expected $55 Million in Property Tax Revenue; It Brought in $6.7 Million
  17. Hospital Union Resorts to Intimidation Tactics Against Workers Who Opt Out
  18. Little House on the Subsidized Prairie
  19. Early Returns on Michigan as a Right-to-Work State: Incomes Rising
  20. From Detroit to the Ivy League: One Student’s Journey
  21. Michigan Teachers Rank No. 2 for Salary
  22. Do As I Teach, Not As I Governed
  23. MEA Says 8,000 Haven’t Paid Dues; Some Teachers Say Union Intentionally Misled Members
  24. SEIU Allowed to Keep Millions in ‘Dues’ Money it Siphoned Away from Medicaid in Stealth Unionization, Court of Appeals Rules
  25. Minimum Wage Increase — A Serious Effort or Just Rhetoric?

No 'Replacement Revenue' for Taxpayers on Roads

New plan would give Michigan 2nd highest sales tax

Legislators are trying to make a deal for more road funding before they finish their term. Their latest proposal show less sympathy for taxpayers than for spending interests.

The new deal is reported to move the sales tax on gasoline to fund the roads instead of schools, local governments, and other general budget items. Few states levy sales taxes on gasoline. They would also ask voters to approve increasing the state sales tax from 6 percent to 7 percent. The changes reportedly will not go into effect if the proposal loses at the ballot box.

Thus, Lansing politicians are asking for a large tax hike. If approved, Michigan will be tied for the nation’s second highest state sales and use tax rates, second only to California’s 7.5 percent assessment.

This is much different from the plan introduced by House Speaker Jase Bolger, R-Marshall,which gradually allocates sales taxes on gasoline to the transportation budget. Because the state’s economy is recovering and tax revenue is increasing, Rep. Bolger's proposal would not require any budget cuts — just mitigated growth of future revenue.

This proposal to devote more funding for the roads without reaching deeper into taxpayer pockets was met with anguish from state spending interests, who claimed that it did not find replacement revenue for the money that would otherwise be spent on schools and local governments if sales taxes on gasoline were spent on roads.

Some believe these spending interests are entitled to grow by 32 percent over the course of Rep. Bolger's plan instead of 25 percent.

Yet that sympathy for those budget items does not extend to taxpayers. A proposed $1.3 billion increase in sales and use taxes does not identify replacement revenue for the taxpayers who will foot the bill for this spending.

Michigan is starting its fifth year of an economic expansion that has generated more revenue for the state government budget. Between revenue growth and the savings opportunities in the state budget, this deal unnecessarily protects spending interests at the expense of taxpayers.

(Editor's note: Jack Spencer is capitol affairs specialist for Michigan Capitol Confidential and a veteran Lansing-based journalist. His columns do not necessarily represent the views of the Mackinac Center for Public Policy or Michigan Capitol Confidential.)

Taxpayers in Michigan and across the nation are generous. They don’t mind welfare dollars being spent on the needs of the less fortunate; however, if the money were to end up being used to buy beer, cigarettes or lottery tickets, they would be justifiably outraged.

With this year’s lame duck session drawing to a close, one striking feature stands out. While lawmakers wrestled over how best to get funding to fix up and keep up Michigan’s roads, legislation to perpetuate the state’s flop-filled film subsidy program shot through the Senate and House like a hot knife through butter.

Make no mistake about it, the state’s film subsidy program is nothing more than a government-sponsored luxury; a giveaway paid for with other people’s money and — as always — those other people are the taxpayers. Over the five years of its existence the program has cost nearly half a billion dollars and there are fewer film jobs in Michigan now than before it started.

Politicians in Lansing, who love to talk about the importance of priorities, apparently felt supremely confident that the regular news media would miss the farcical joke. It is no surprise that their confidence proved well-founded. A bill to continue film subsidies zips through the Legislature ahead of a debate involving a potential fuel tax hike; and yet the irony of it doing so attracts little news media attention — not even a few sarcastic jabs.

No mystery here

If a script were written based on why the Legislature voted to keep the film subsidy program alive, it wouldn’t qualify as a mystery.  It takes little imagination to understand the forces that were at work.

First, the Michigan Film Office was established under former Gov. Jennifer Granholm, and once established virtually all government agencies become virtually immortal. For government agencies, departments, commissions, etc., the goal is survival; their stated missions are a secondary concern. Whenever one of these entities is formed, what is really being created is a self-serving constituency within the halls of government dedicated to remaining in existence, getting as many dollars appropriated for its use as possible, and then — finally — taking on whatever the task is that was supposedly its primary function.

Second, it’s a sure bet that a publicity-minded industry like the “Hollywood movie-making crowd” would push all the right promotional buttons to sell the idea to lawmakers that keeping Michigan’s film subsidies intact was a politically smart thing to do. No doubt; the glamour of stars and celebrities was utilized, egos were stroked and well-timed and targeted letters and emails were sent to help secure the legislative victory.

Admittedly, another aspect of the situation that could have been a factor is that the film subsidy program might be superficially popular. Absent any publicly released polling on the topic, it is possible that when given a brief and general description of Michigan’s film subsidy program a significant percentage of voters might tend to say “that sounds OK to me.”

But the sort of polling that would be most useful would ask voters whether the $5 million, $10 million, $20 million, $50 million, or whatever the amount appropriated to the program ends up being, would be better spent for things like schools, law enforcement or roads. It seems probable that the film subsidy program would fare poorly in that kind of survey.

Don’t buy the excuses

A lot of lawmakers voted to keep the film subsidy program running through 2021; the bill passed 73 to 37 in the House and 33 to 4 in the Senate. If your local representative or senator tries to explain a “yes” vote on the bill (SB 1103) by claiming it didn’t appropriate any actual funding for the program, don’t buy it. Outside of a handful of legislators on next year’s appropriations committees, the only vote lawmakers are accountable for regarding film subsidies is the one that just took place.

Eventual funding for the film subsidies will be a line item in a bundled up appropriations spending bill. Those are the kind of bills lawmakers always explain their “yes” votes on by saying, “I didn’t agree with everything in the bill, but I couldn’t vote against the entire state’s general fund budget just because there are parts of it I didn’t like.”

Film subsidies are nothing more than a flashy brand of corporate welfare. Though dressed up to look like something else, they are on a par with allowing food stamps to be used for booze, cigarettes and lottery tickets.  At best, film subsidies are political feel-good food; a chocolate éclair dished up by government-centered chefs and served at the public’s expense in spite of the fact that as candidates a majority of legislators posture and pledge to limit the state to a lean fiscal diet.

One might have hoped the lawmakers would have at least shown enough sense of priority to tackle the main course (road funding) before indulging in their gratuitous dessert.

LaFaive: How to Cut $2.1 Billion in Spending

Guest on WILS in Lansing; ideas for road funding

Michael LaFaive, director of the Center’s Morey Fiscal Policy Initiative, was a guest on “The Tony Conley Show” on WILS-AM1320 in Lansing today, discussing his ideas to cut $2.1 billion from a state budget of more than $52 billion, allowing for tax cuts and providing money for road and infrastructure improvements.

The second part of LaFaive's interview with Conley can be heard here.

More Money for Roads Without Raising Taxes

Center analyst cited in Detroit News

The Michigan House and Senate continue to discuss competing plans to bolster road funding, with some claiming that the House plan would decrease funding for schools.

The Detroit News cites a blog post by James Hohman, assistant director of fiscal policy, titled “When a School ‘Cut’ Is an Increase,” in which he explains: “Rep. Bolger’s plan devotes more of the state’s resources to the roads without reaching deeper into taxpayer pockets. Continued growth can ensure that you can have both more funding for schools and more funding for roads without a tax hike.”

Fiscal Policy Director Michael LaFaive has also written about the issue here and here.

Parole, Sentencing Bills Can be Better

Op-Ed in Detroit Free Press

Fiscal Policy Director Michael LaFaive and Barbara Levine, associate director of the Citizens Alliance for Prisons and Public Spending, write in the Detroit Free Press that prison sentencing and parole reform bills now before the Legislature should be revamped to save money and end the practice of warehousing people beyond their parole dates.

Gov. Snyder’s Detroit Victory Dance Premature

Whether city succeeds remains to be seen

The statue of Revolutionary War Gen. Thaddeus Kosciuszko, located on Michigan Ave. in downtown Detroit.

Gov. Rick Snyder is touting his handling of the Detroit bankruptcy to media outlets around the country. While the bankruptcy went smoothly compared to other municipal proceedings, there is a difference between emerging from bankruptcy and fixing the city government’s problems. Whether Detroit will be successful remains to be seen.

The city emerges from bankruptcy having reduced its debt burdens, including large cuts to its retiree health insurance and to its pension benefits. City debts had been looming to take two-thirds of city operating revenue.

While easing these burdens was necessary, there is a lot more that needs to be done before the city government has officially turned the corner. It needs to get its day-to-day operations in order.

The city’s plan needed to be deemed “feasible” to exit bankruptcy. The judge’s expert in determining whether the proposal meets this requirement gave it good marks, but warned about city operations. The city needed better human resources and information systems, the basics of service provision. She notes: “If the City is to counteract the vortex of underachievement that has defined Detroit, City leadership must make a long term, concerted effort to maintain the momentum needed to ensure effective City services.”

She pins the city’s hopes on successful implementation of the reform and restructuring initiatives designed to invest in needed equipment, staff and systems.

But it remains to be seen whether the state is able to implement these improvements. 

Reports highlighted that progress is being made but not complete. The strings attached to the state bailout may or may not work to ensure that Detroit gets its ship in order.

So until Detroit is able to live within its revenues and provide basic quality services to its residents, we won’t know whether Detroit has been fixed. 

Economic Freedom Gains in Michigan

But the risk of backsliding remains

The Mackinac Center exists to educate Michigan residents about the importance of sound economic policy, and what it looks like. That often means discussing whether existing or proposed laws contribute to, or detract from, freedom and prosperity.

It’s no coincidence that states with greater economic freedom tend to prosper more over time and attract more inbound migration. We know this thanks to various efforts to measure the level of economic liberty in different places. Among the more interesting of these is a new report from the Canada-based Fraser Institute called “Economic Freedom of North America.”

The 2014 edition uses data through 2012, and the bad news is that Michigan ranks a sad 37th among the 50 states. The good news is that we’ve advanced eight places since 2009, when just five states were less free than Michigan. Also, the new ranking is based on data predating any benefits Michigan may derive from its new status as a right-to-work state.

This last point is no small thing. In “Rich States, Poor States,” an economic outlook index published by the American Legislative Exchange Council, Michigan leapt from 20th to 12th place between 2013 and 2014, in large part due to our Legislature enacting a right-to-work law at the end of 2012. This index ranked Michigan’s outlook in a dismal 34th place as recently as 2009.

The 2014 ALEC report incorporates state Gross Domestic Product and related measures. Texas comes in first, and not surprisingly, Texas also occupies the top slot in the Fraser freedom index. More economic freedom yields better economic performance, and Texas is big on both.

The Fraser index uses 10 variables, including the size of government, tax policy and labor market freedom. Joining Texas among top performers are South Dakota, North Dakota, Virginia, New Hampshire, Louisiana, Nebraska, Delaware and Tennessee. Among the least free are Maine, Vermont, Mississippi, New York, Rhode Island, West Virginia, New Jersey and California. Average per-capita economic output in the most free states is about $55,000, compared to $48,000 in the least free states.

The data and methodology used by the Fraser index are published online. The report also cites more than 100 scholarly, peer-reviewed papers from academic journals that have employed data from the same sources in research ranging from the importance of tax policy to education reform.

Economic liberty is just one variable that influences economic growth and well-being. Hundreds of independent, peer-reviewed studies from a wide variety of scholars have arrived at the same general conclusion: that greater freedom is positively associated with better outcomes for people, including stronger economic growth. State-specific literature tends to find the same relationships.

In light of all this evidence, it’s distressing to see how progress toward expanding economic freedom in Michigan has stalled after the magnificent policy gains of 2011 and 2012. Threats of higher taxes, failing to close unaffordable government pension systems, the persistence of corporate welfare schemes, cost-increasing interference in the state energy market, a huge expansion in the medical welfare establishment and more all represent steps in the wrong direction.

Michigan’s government already takes too much, spends too much and interferes too much with the peaceful efforts of our people to voluntarily truck and barter to our mutual benefit. No doubt Michigan has taken positive strides in recent years, but as the Fraser index makes clear, we’re not out of the woods yet and certainly can’t afford to be taking two policy steps back from freedom for each step forward.

One Step Toward 'Reinventing' Michigan

Governor, Legislature can embrace innovation

Over the past four years, there’s been a lot of talk about “reinventing” Michigan. Gov. Rick Snyder and this Legislature have made significant strides toward that goal by improving the state’s tax structure, modernizing education policies and beginning to revamp the state’s regulatory regime. On that last item there is more to be done. House Bill 5951 would embrace innovative ride-sharing technologies used by companies such as Uber and Lyft.

HB 5951, introduced by Rep. Tim Kelly, R-Saginaw Twp., would create a state-based regulatory framework for these so-called transportation network companies. The version of the bill passed out of a House committee last week would create reasonable requirements that strive to uphold the safety of drivers and riders. For instance, all drivers would need to be at least 21, undergo a thorough background check and be covered by a $1 million insurance policy. Additionally, all vehicles would need to get annual inspections by a Michigan-licensed auto mechanic.

Although statewide regulations can sometimes thwart disruptive innovations such as these, the proposed rules appear to be an improvement over the ones developed at the local level. For instance, Ann Arbor and Detroit do not appear to have figured out how to handle Uber and Lyft yet, with Ann Arbor trying to shut them down this past summer and Detroit threatening to do likewise. Rep. Kelly’s bill would prevent local governments from further overregulating ride-sharing companies, creating an opportunity for all Michiganders to benefit from these car services.

Establishing a welcoming environment for ride-sharing companies would position Michigan uniquely as a national leader in embracing technological innovations and investments. Unfortunately, the state recently took a step backward when it created new barriers for innovative automobile companies to do business here. Some car manufacturers, such as Tesla, would like to sell directly to consumers, but a recently passed state law jeopardizes its ability to do so. It’s obvious how this benefits car dealerships but unclear how it helps consumers.

If this state really is going to be “reinvented” and become “Michigan 3.0,” it will need to embrace disruptive change and the technological innovations that drive it. The state swung and missed on Tesla, surrendering to entrenched special interests and raising the cost of Michiganders enjoying the benefits of electric cars. But Gov. Snyder and the Legislature have another at bat. Here’s hoping for a different outcome this time around.