The MC: The Mackinac Center Blog

Many people have stopped looking for work and are thus out of the labor force. This is one of the criticisms of the nation’s current economic recovery. The labor force participation rate has declined and this is a sign of fewer good opportunities. Michigan, however, just posted record gains in labor force growth. 

Michigan added 27,000 people to the labor force from December to January and 32,000 people from January to February. Michigan has not posted a monthly gain of more than 20,000 in the labor force in the entire data series except for once — the month after the 1998 GM strike ended. These data go back to 1976.

There is a question about whether these reports are a surveying or modeling error. Monthly surveys are the most timely, but they are not as comprehensive as other economic data.

Don Grimes at the University of Michigan is not sure about whether these two months indicate record labor force gains. He pointed out that the Bureau of Labor Statistics is using new estimation methods, noting, “The household data series has been very strange these past few years, even at the national level. Traditionally, the establishment series has been both more consistent and reliable, but for several years it was off too, until revised using the Quarterly Census of Employment and Wages.” 

Data also get smoothed during annual revisions. Unless the state keeps adding record levels of people to the labor force, these are likely to be mixed in with other months of less impressive labor force gains.

But if these gains are real, it is the mark of a strong economy. There was an even larger growth in employment in addition to having more people in the labor force. In other words, it is a sign that there are both more people looking for work and more people finding it.

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Michigan’s labor force fell substantially more than the population decreases from 2000 to 2011. It is possible that a thriving economy can attract large numbers of people back into the labor force in a way that is more significant than Michigan has seen in the recent decades.

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Skorup in Midland Daily News on Occupational Licensure

It’s Time to Address Michigan’s Burdensome Licensing Laws

The Midland Daily News published an op-ed this week by Mackinac Center policy analyst Jarrett Skorup about the many problems that stem from Michigan’s overbearing occupational licensing laws and what can be done to change this.

Though typically less talked about than minimum wage and right-to-work laws, government-mandated licensing requirements people must meet in order to hold a job affect more workers than those two laws combined, Skorup noted. These government rules — which include mandated training, testing and fees — hurt the economy and increase income inequality while failing to help consumers.

Skorup explained the solution is found in rejecting new licensing supported by industry insiders trying to block out competition and reviewing licensing laws already on the books to ensure they are necessary and effective. From the op-ed:

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Even if a license cannot be eliminated, the state should look to other, less-stringent regulatory tools like inspections, antifraud legislation, insurance requirements, registration or optional state-approved certification. In today’s information age, where reviews and opinions of nearly every business are available instantly in the palm of our hands, do we really need state licenses to tell us if a business is any good? When’s the last time you considered whether a business had the appropriate state license when deciding if you wanted to buy its service?

 Read the full op-ed in the Midland Daily News.

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The Michigan House passed a bill eliminating bonds for forfeited property. According to MichiganVotes.org, House Bill 4629, sponsored by Rep. Peter Lucido (R-Shelby Township), would “repeal a requirement for a property owner whose property has been seized by police and is subject to ‘civil forfeiture’ to provide a cash ‘bond’ to contest the taking, and if unsuccessful to pay all the expenses of the proceedings.” It passed 100-7.

In Michigan, law enforcement can forfeit someone’s property without convicting them of criminal activity – the property goes through the civil system rather than the criminal system. A bond is cash that someone has to pay to start the process for getting their property back.

Only five states have explicit bond requirements in order for someone to litigate to get their own property back. This bill is another step in the right direction towards solving Michigan’s civil forfeiture problem, and the Senate should quickly take it up.

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Whether or not a student can read in the early grades is a clear indicator of future success. Schools should not keep sending kids onto the next grade if they lack basic reading skills. This “social promotion” often does more harm than good.

As the state Legislature debates House Bill 4822 and strategies to advance early literacy, the Battle Creek Enquirer’s editors have laid down a strong claim. Their March 10 editorial argued against any use of the strategy of third-grade retention (holding back students) —  presumably out of a desire to protect kids. To follow their recommended course, though, would eliminate an approach that promises to help many of Michigan’s neediest students.

Clearly, the decision to have a struggling reader repeat third grade should not be made lightly or without considering a student’s unique situation. The evidence for focused retention strategies, though, points toward real benefits for those students who arrive at school lacking some of the building blocks of literacy. These students need some extra time to catch up.

The critical importance of becoming proficient by the end of third grade is well understood. According to research by the Annie E. Casey Foundation, missing that benchmark increases the chances a student will fail to graduate on time — fourfold.

Under former Gov. Jeb Bush, the state of Florida took the lead in pioneering a slate of reforms to address the challenge. Michigan policymakers would be wise to take heed.

One thing Florida does is prohibit third-graders who score in the lowest level on the state reading test from automatically advancing to the next grade. Struggling readers get several opportunities to pass the test and are provided alternative ways of showing that they meet the basic reading standard. Specific exemptions are allowed for students with disabilities, newer English Language Learners, and those who have already been held back twice.

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Struggling Florida readers receive interventions both before the end of third grade and during the remedial year, including summer reading camps and 90-minute daily periods of tutoring, guided by scientifically based reading instruction. The Sunshine State has invested heavily in disseminating SBRI principles and techniques to its teachers. That’s significant because a major 2014 report by the National Council on Teacher Quality found most of the nation’s education schools do not adequately equip elementary teachers in this area.

Tracking two comparable groups of Florida students, a 2006 study showed that those who were retained made measurable progress in reading skills for the first two years, while students experiencing social promotion fell further behind. According to a later analysis by Harvard’s Program on Education Policy and Governance, Florida’s policy led to “large positive effects on achievement” and decreased a student’s likelihood for future retention (though like most tested education interventions, the advantage eventually fades).

Results from the National Assessment of Educational Progress bring the challenge closer to home. Over the past 12 years, Michigan’s fourth-grade reading scores have slipped below the national average, while Florida’s scores have soared and plateaued. Today, Florida’s scores in fourth-grade reading just for low-income students are higher than Michigan’s overall average reading scores, counting both low-income and non-low-income students.

To bolster its case for social promotion, the Enquirer editorial cites two less relevant pieces of research. The first, a brief summary from the National Association of School Psychologists, predates the Florida program and includes important caveats about the value of remedial strategies. The second explores a data set of students from the 1970s and 1980s, finding broad harms caused by student retention. Its conclusions clash with rigorous academic research on specific programs targeted at struggling low-income elementary students in Chicago and New York City.

The Enquirer suggests that a host of alternatives to retention, including large-scale class size reduction and preschool programs, would be better. Yet the best evidence for each indicates very little or no benefit in return for large sums of taxpayer expenditures.

Third-grade retention is not a magical cure-all that will make all kids competent lifetime readers. But Florida’s example shows that far more Michigan students stand to benefit if we put aside warm feelings about social promotion.

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A new study from the R Street Institute, a free-market think tank with a pragmatic approach to public policy, gives Detroit an A-minus grade for its regulatory structure regarding short-term lodging rentals. The report grades are based on whether a legal framework exists, the level of restrictions, taxation, licensing, and enforcement.

Short-term renting is exploding in popularity. People sign up through companies or websites — like Airbnb or HomeAway — to rent out an extra room or a house for a short period. If you live in a city that is going to host the Super Bowl and have extra space, renting out a room for two nights gets you extra money and saves the renter from higher-priced or less convenient lodging options.

Detroit’s high ranking comes mostly because it isn't trying to regulate short-term renting at all; it is simply allowed. The study says, “Detroit has taken a permissive approach to short-term rentals, though it has remained officially silent as to their legality.” The highest-graded city, Savannah, Georgia, gets an A-plus because it explicitly allows short-term renting with minimal regulatory constraints.

Right now in Michigan residents who offer short-term rentals or peer-to-peer ride-sharing are in a legal gray area. But just as taxi cab companies are working to shut out their Uber and Lyft competitors, hotels and lodging interests see peer-to-peer renting as a threat.

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The best approach for consumers would be state legislation that explicitly legalizes short-term renting and ride-sharing, with minimal regulatory restrictions.

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Detroit school bailout, extra liquor license for big stores, digital assets

Senate Bill 314, Authorize truck weight limit exceptions for maple sap haulers: Passed 26 to 12 in the Senate

To include maple syrup sap under an agricultural products exception to the truck weight limits that are applied during March, April and May.

Who Voted “Yes” and Who Voted “No”

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Senate Bill 802, Appropriate $1 million for firefighter cancer presumption: Passed 37 to 0 in the Senate

To appropriate $1 million to cover workers compensation benefits paid to former firefighters who have cancer that they assert was caused by their job (a presumption that would not apply if the person was a smoker).

Who Voted “Yes” and Who Voted “No”


House Bill 5034, Give fiduciary, trustee or executor control of digital assets: Passed 106 to 0 in the House

To create a new law giving access and authority over the digital assets and accounts of a vulnerable individual or an estate to the fiduciary, trustee, conservator or executor responsible for the person's property. Digital asset would include online usernames, passwords, terms-of-service rights and more.

Who Voted “Yes” and Who Voted “No”


Senate Bill 507, Impose registration and reporting mandates on larger recyclers: Passed 99 to 10 in the House

To impose registration and government reporting mandates on recycling facilities that recycle more than 100 tons of material annually.

Who Voted “Yes” and Who Voted “No”


House Bill 4895, Let larger liquor retailers operate secondary gas station outlet: Passed 68 to 41 in the House

To allow the owner of a retail store that has a liquor license to sell beer and wine under the same license at a subsidiary location that is a gas station. The bill would limit this to retailers who maintain $250,000 worth of inventory, which is opposed by smaller retailers and supported by large ones and by the state-authorized beer and wine wholesaler cartel.

Who Voted “Yes” and Who Voted “No”


House Bill 5296, Make down payment on Detroit schools bailout: Passed 104 to 5 in the House

To appropriate $48.7 million to keep the insolvent Detroit school district afloat until the end of the current school year. This is essentially a down payment on a larger bailout package whose details have yet to find a consensus (the House majority wants more education reforms). The bill also places the Detroit school district under the same state oversight commission created to oversee the city after its 2014 bailout.

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.

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March Madness Betting Pools are Illegal in Michigan

Bet with friends at your own risk

The NCAA men’s basketball tournament, March Madness, kicks off today. But if you’re one of the millions that takes part in filling out your brackets and putting some money into a betting pool with your friends, you’re breaking Michigan law.

State law allows an exception for small bets during poker games, but almost everything else is against the law. The state department notes, “Participating in betting pools based on sports, or anything else, is illegal.”

Michigan sponsors a state lottery (with the funds benefiting government), but individuals gambling on themselves is a no-no. So enjoy the tournament – but bet at your own risk.

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Your Tax Return Fundraises For These Nonprofits

Acton Wins Tax Dispute in Grand Rapids

City unfairly targeted the group

Two years ago, the city of Grand Rapids denied the Acton Institute a local tax exemption. But the free-market think tank demonstrated in court it was indeed a charitable organization, and therefore eligible under state statute to be exempt from certain taxes.

Mlive reports on the city’s aggressive approach to the nonprofit, calling them "a politically driven think tank that publishes right-wing libertarian, philosophical, and political propaganda tempered with extreme right-wing viewpoints" and claimed Acton is “ironically and hypocritically ... anti-charity."

I know several of the people who work for Acton and that last point couldn’t be further from the truth. Like my colleagues at the Mackinac Center, the Acton Institute believes strongly in civil society and people helping each other through volunteering, making private donations to social causes and many other means. Sometimes public officials and politicians confuse real charity with government welfare programs.

When we tried to find out information about which organizations were eligible for tax exemptions in Grand Rapids, the city also treated us in a hostile manner, eventually refusing to talk or release information unless explicitly required by law.

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This issue in Grand Rapids was not about whether nonprofit groups or charities should have tax exemptions; it was about the city choosing to unfairly target a group often critical of government policies. As Ross Emmett, a professor of political economy and political theory at James Madison College at Michigan State University put it, “This is very good news. No taxing authority should be able to make an arbitrary decision about a non-profit's status (whether one thinks that tax-exempt status for nonprofits is generally a good rule or not!).”

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New Bill Fixes a Pension Problem, Leaves Major Problem Untouched

Boosted pensions aren't the main cause of underfunding

Rep. Pat Somerville (R-New Boston) introduced a bill last week that would prevent local government employees from using overtime and other extra compensation to boost their taxpayer-funded pension benefits. The bill could can lower the costs of those benefits and make them more predictable, but unfortunately it will do little to contain the runaway costs of an underfunded pension system.

The problem with public pensions in Michigan is not how generous they are, but how politicians tend to kick the costs of funding them into the future.

When public employees work for one year, they earn credit towards a pension that they will collect when they retire. In order to pay for this, their employer puts money into a pension fund. This ensures that the pension credits employees earn in a year are paid for in that same year.

But to make this happen how much does the employer need to prefund the pension fund on behalf of each employee? Determining this amount requires making a number of assumptions about the future, for instance: how long a retiree will collect a pension, how large that pension will be, and — most importantly — how much will the pension funds' investments grow before money is needed to cover benefits.

The value of an individual's pension is typically determined by three things — average compensation, years of service and a multiplier applied to these. Excluding overtime and other salary boosters from the definition of compensation can help make the average amounts used in the benefits formula more predictable. There have been a number of cases in which individuals' pensions were artificially boosted (Michigan Capitol Confidential has covered several of them). The Somerville bill will make these cases rarer.

But this is not the core problem governments face with pensions. The multi-billion-dollar gaps between how much is owed to employees and how much has been set aside to pay are the real problems.

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There are two fixes. The first is to lower investment return assumptions. On paper, this would appear to increase the gaps between the amount saved and the amount owed, and it would require larger contributions to prefund pension credits earned each year. But it would also help prevent this state's pension systems from becoming the kind of problem that drives governments toward insolvency.

Governments can also start getting out of the defined-benefit pension game altogether. Contributing money into a retirement fund that each employee controls would prevent governments from promising benefits that history shows they haven't been willing to pay for in advance.

The rising cost of meeting pension commitments means governments are spending more than ever paying for services that were delivered some time in the past. This is unfair to pensioners, taxpayers and current managers who have to dig deep into their budgets catch up on past pension underfunding. Tweaks to retirement rules can help, but lawmakers need to focus more on the real pension problem.

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Flint Shows Importance of Open Government

Reitz in The Detroit News

The Detroit News today published an op-ed by Mackinac Center for Public Policy Executive Vice President Mike Reitz calling on lawmakers to make Michigan government more accountable.

In the piece, Reitz says, “The Flint water crisis provides a vivid and tragic reminder about the importance of open government.” Referring to a recent article in Michigan Capitol Confidential, Reitz shares that the Mackinac Center received a bill from the City of Flint for $172,000 when it asked to see two years’ worth of city emails that include the word “lead.”

Sunshine Week, this week, is a reminder that government accountability is strongest when citizens can evaluate the decisions and the decision-making process of public officials.

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Reitz went on to offer five reforms the Legislature could enact to increase accountability in the state, including placing the office of the governor under FOIA’s purview, strengthening the penalties for not complying with open records laws and providing records electronically.

Read the full op-ed in The Detroit News.

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