In Remembrance on Independence Day: William T. Wilson, Ph.D.

Economist once paid steep price for intellectual honesty

Dr. William Wilson, former senior policy analyst with the Mackinac Center for Public Policy, died last April of cardiac arrest, according to his official obituary. He was 54. Bill Wilson was a longtime friend to the Mackinac Center, a talented scholar and economist and recipient of the Mackinac Center’s Lives, Fortunes and Sacred Honor Award.

It seems only fitting that we wish an old colleague goodbye on Independence Day, that sublime day in U.S. history when this nation chose to set itself apart from England and declare itself free and independent.

Originally from York, Penn., Wilson attended Towson State University in Maryland before earning both a master’s degree and doctorate in international economics from Purdue University. Wilson eventually taught at Purdue as well as at Ohio Northern University and the University of Glasgow before joining Comerica Bank at its then corporate headquarters in Detroit. It is during his time at Comerica Bank that Mackinac Center employees befriended this good man and ultimately asked him for a favor that would change his life.

Wilson was a regular at many Mackinac Center functions and provided assistance as needed for the “Ask the Economist” feature of our early web site. Ask the Economist was a module that allowed students of economics to ask broad questions of Center scholars. In addition, he published everything from short “Viewpoint” commentaries on subjects as varied as Social Security and the International Monetary Fund to Michigan Renaissance Zones to the Mackinac Center’s first study on the economic impact of adopting right-to-work laws.

It is in regard to this latter subject that the Mackinac Center turned to Wilson in 1999 when it needed a scholar to testify on the topic before a state committee in Lansing. Wilson agreed to testify. He told us the room was packed with an audience that was strenuously opposed to right-to-work. After his testimony, Wilson was informed that he would be let go from his job at Comerica. Apparently, unions that kept their money on deposit at his bank were organizing large withdrawals in response to Wilson’s testimony about the positive economic development aspects of right-to-work laws.

Wilson’s termination led him to find new work in Chicago as chief economist for the business consultancy Ernst and Young. Eventually, his work would lead him to live in Kuwait, China and Moscow. It was this latter home from which he traveled in early 2013 when the Mackinac Center hosted a small party in Lansing to celebrate the adoption of Michigan’s right-to-work law the year before, 14 years after Wilson had testified in support of the idea.

We asked Wilson to say a few words to our audience at this event and on his way to the podium he noticed a Comerica Bank branch across the street. This prompted him to recount for our guests the story of his firing from Comerica. Pausing for effect he concluded by saying he was here in Lansing, “From Russia, with love.” The audience, including the authors, roared with laughter and approval.

Wilson’s contribution to the right-to-work debate, and ultimately the adoption of the law, should never be lost to history. Recognizing the special role played by him, the Mackinac Center gave him its prestigious Lives, Fortunes and Sacred Honor Award, and a plaque denoting as much hangs in the Mackinac Center’s Midland headquarters. It reads:

Dr. William T. Wilson has earned the Lives, Fortunes and Sacred Honor award for his courageous defense of free labor markets in testimony before the Michigan Legislature and in the press.

His principled analysis incurred the wrath of organized labor and ultimately cost him a job, even though his calls for an end to compulsory unionism find support among legions of Michigan workers.

David Littmann, his former Comerica Bank colleague, described Bill as “a principled, top-notch economist scholar and friend” and we couldn’t agree more.

The world lost a talented economist and good man last April in William T. Wilson. His legacy will live on in his published research, interviews, testimony and in his comments that ultimately helped see a right-to-work law adopted in Michigan.

People in the Great Lake State are a little freer this Independence Day because of Bill Wilson’s contributions. The staff feel privileged to have known him.


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Return of the Mega Subsidy

Corporate welfare still demonstrably ineffective

Less than five years after Gov. Rick Snyder and the Legislature pulled the plug on the state’s Michigan Economic Growth Authority corporate handout program, many Lansing politicians are eager to increase the size and number of favors they can provide.

The governor is pressing for a July 12 vote by the Legislature on a new MEGA of sorts that will give politicians one more device for providing financial favors to a favored few. Legislators should not agree to this. Such programs are demonstrably ineffective, expensive and unfair.

Senate bills awaiting action in the House and sold as “Good Jobs for Michigan” amount to a state tax “capture” program that allows a lucky few corporations chosen by state bureaucrats to enjoy special tax treatment under the law. This is the new part of the proposal. The rest reads like a cut-and-paste job from the original MEGA law, passed in 1995.

For instance, both the old MEGA law and new jobs proposal contain language that the “expansion or location of the eligible business will benefit the people of this state by increasing opportunities for employment and by strengthening the economy of this state.” Yet this promise is empty.

By one estimate, only 2.3 percent of MEGA deals met their original promises from 2005 through 2011. There have been five formal studies done on the program and four showed a zero-to-negative impact despite spending billions. In 2016 alone, MEGA cost the treasury $1 billion, roughly equal to all the money generated by the state’s corporate income tax payers.

MEGA is not the state’s only failed attempt at job creation and business and industry attraction. The state wasted $500 million subsidizing Hollywood. It spent more than $14 million on rural broadband deployment through a program that was supposed to create 500,000 new jobs by 2010.

Studies by university scholars published in academic journals also largely take a dim view of state and local economic development programs. One 2014 study of the Promoting Employment Across Kansas initiative is particularly noteworthy. Kansas operates a state tax capture scheme similar to the Good Jobs proposal. Scholar Nathan Jenson examined the program and found that firms which received incentives under the PEAK program were no more likely to create new jobs than like firms which had not gotten tax favors.

Another study worth mentioning is a 2004 analysis of academic literature reviews about state and local economic development programs. The authors, Peter Fishers and Alan Peters, titled their review “The Failures of Economic Development.” These scholars report, after noting hundreds of studies have been done on the subject, that claims that economic development programs spur growth or are a fiscal plus for governments operating them are probably false.

No scholarship to my knowledge has been cited in favor of the new Good Jobs for Michigan proposal, although proponents had the chance to do so at a June 14 House Tax Committee hearing.

Despite 14 people testifying in favor of the bill — the proposal’s primary sponsor, a mayor, and economic development officials, not one offered any evidence aside from personal anecdotes. Nor did any explain how this program would be a success where other programs — such as the MEGA program, several admitted — had failed. Lawmakers should reject this parade of corporatist philosophy and make decisions based on rational arguments that are steeped in scholarly evidence.

The Good Jobs for Michigan proposal should go the way of MEGA, film subsidies and rural broadband deployment before it has the chance to do any damage.


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Note: The House and Senate are adjourned until July 12 (at the earliest). There will be no Roll Call Report next week (July 7).The Roll Call Report will resume July 14.

House Bill 4759, Sell Senate's former office building in Lansing: Passed 26 to 9 in the Senate

To sell the former state Senate office building in Lansing for fair market value. Last year the Senate moved into a new building acquired through a lease-purchase agreement that reportedly will cost taxpayers more than $134 million over 30 years.

Who Voted "Yes" and Who Voted "No"


House Bill 4759, Sell Senate's former office building in Lansing: Passed 107 to 0 in the House

The House vote on the bill described above.

Who Voted "Yes" and Who Voted "No"


Senate Bill 274, Restrict opioid prescription quantities: Passed 36 to 1 in the Senate

To restrict the amount of opioid pain pills a doctor may prescribe to a seven day supply for acute conditions and 30 days for chronic ones.

Who Voted "Yes" and Who Voted "No"


Senate Bill 270, Require bona fide prescriber-patient relationship” for opioid prescription: Passed 37 to 0 in the Senate

To require a doctor have a “bona fide prescriber-patient relationship” before prescribing opioid and other painkillers that are subject to abuse.

Who Voted "Yes" and Who Voted "No"


House Bill 4559, Let beer and wine cartel members hold tastings for staff: Passed 37 to 0 in the Senate

To permit the handful of members in the state-protected beer and wine wholesale and distribution cartel to hold educational product sampling sessions for employees.

Who Voted "Yes" and Who Voted "No"


Senate Bill 160, License Polaris “Slingshot” type vehicles as a motorcycle: Passed 68 to 39 in the House

To revise the regulations on motorcycles in the state vehicle code so they also apply to “autocycles,” in particular to three wheeled vehicles like the Polaris “Slingshot.” Under current law vehicles like this happen to fit a particular definition requiring they be enclosed and have other car-like features such as windshields and wipers.

Who Voted "Yes" and Who Voted "No"


Senate Bill 248, Create World War I centennial commission: Passed 105 to 2 in the House

To create a state World War I centennial commission that would plan and encourage activities to commemorate the centennial of World War I. Also called The Great War, WWI was the first fully “industrialized” war. It began in August of 1914 and ended on November 11, 1918; the United States entered in April 1917. The Senate approved the bill unanimously in April.

Who Voted "Yes" and Who Voted "No"


House Bill 4355, Ban police sex with prostitutes: Passed 93 to 14 in the House

To repeal an exemption that allows police to have sex with a prostitute as part of an investigation.

Who Voted "Yes" and Who Voted "No"


House Bill 4584, Mandate giving spina bifida information to new parents: Passed 64 to 43 in the House

To mandate that a physician or other medical provider give an expecting mother or new parent specified information about spina bifida if this is detected in a fetus or newborn. Opponents were concerned that these tests produce a large number of false-positive results.

Who Voted "Yes" and Who Voted "No"


Senate Bill 245, Repeal switchblade ban: Passed 106 to 1 in the House

To repeal the state law against owning, selling or possessing a switchblade knife. Reportedly the ban is outdated and unevenly enforced.

Who Voted "Yes" and Who Voted "No"


House Bill 4170, Authorize more comprehensive "Do Not Resuscitate" type forms: Passed 106 to 1 in the House

To authorize a process for creating a standardized form for individuals to express their wishes regarding medical treatment and end of life care, which is called Physician Orders for Scope of Treatment (POST). This would be like the current Do Not Resuscitate form but with more details.

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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The Model Facade: Selling Jobs to the Public, Press and Policymakers

History shows models are used to obscure costly, ineffective programs

“The models are used in ways that systematically exaggerate the public benefits of proposed government projects, thus biasing government decision making in the direction of excessive government spending and expansion into areas that should be left to the private sector.” – Edwin Mills, author of “The Misuse of Regional Economic Models.”

Legislation up for consideration (Senate Bills 242-244), colloquially known as “Good Jobs for Michigan” or “New MEGA,” contains a mandate that the state employ “an industry-recognized regional economic model cost-benefit analysis [that] reveals [that] … [the program] … will result in an overall positive fiscal impact to the state.” This means nearly nothing as state-bought analyses can and have failed to accurately predict and measure impacts and are at times steeped in secrecy or used mischievously.

The “industry-recognized regional economic model” is almost invariably (should the proposal become law) going to be “REMI,” which stands for Regional Economic Models, Inc. I say this with some confidence because the state has for years wielded this computer model in its service directly and also indirectly through the consultants it hires. The model was employed to estimate the jobs and revenue impacts of the state’s failed Michigan Economic Growth Authority projects (which are maintained online here), the state’s film subsidy program and the current and secretive Michigan Business Development Program analyses.

Like the current proposal, MEGA law mandated a cost-benefit analysis to ensure that each project would be a net plus for Michigan. We now know from hindsight that the vast majority of these impact analyses were profoundly inaccurate. This was a function of one deal after another not living up to expectations. The model’s output is only as good as the accuracy of the modeler's input assumptions, or what the modeler tells the computer about a project. In other words, and in a supreme twist of irony, the models can’t accurately predict the future because the model’s operators can’t accurately predict the future.

Consider just two of many examples: Webvan.com and Kmart. The REMI analysis performed by the state reported that Webvan Group, Inc., would employ 900 people directly at its Livonia location by 2004 and a total of 1,200 in the state by 2015 while increasing tax revenue to the Michigan treasury by $27.3 million. This, if only the state would offer up millions in incentives through the MEGA program. The state did give Webvan these tax breaks but the jobs never materialized. Just over a year after being declared a MEGA winner, the company was no more.

Kmart was given its second MEGA deal less than 17 months before it declared bankruptcy. The company later moved its headquarters to a different state. The REMI model reported that the Kmart deal would create 753 jobs in Michigan by 2013 and provide a net tax gain to the Michigan treasury of $27.2 million. But this never happened.

From 2005 to the time it closed in 2011, only 2.3 percent of MEGA’s projects met their job creation expectations. The most generous accounting reports that MEGA was responsible for about 19 percent of all direct jobs it had said it would create. Five empirical studies have been done on the overall program and four found a zero-to-negative impact from the program.

This suggests that a mandate to perform such analyses ultimately counted for little-to-nothing save for the public relations surrounding alleged jobs that would be created. Previous administrations reported the REMI jobs output with a verve and passion and many news agencies simply reported the claims without a hint of skepticism. They should not have done so.

The state mandate for MEGA and the Good Jobs for Michigan proposal does not mandate an opportunity cost-benefit analysis. The REMI analyses are not required to investigate alternative uses of precious resources, either from spending on a different basket of public goods or an across-the-board tax cut. What if, instead of handing out goodies to one company, the REMI analysis projected the economic impact of a tax cut for all? The Anderson Economic Group once made such a calculation for the MEGA program and found that an across-the-board tax cut would have created more jobs on net balance than MEGA.

Regional models can also be used irresponsibly. For instance, the Michigan Economic Development Corporation once hired Michigan State University consultants to estimate the impact of their new film incentive subsidy program after its first year. The consultants likewise employed REMI to make their estimations. They failed to note in their report, however, that their estimations did not include any of the costs associated with the program. That’s not how the real world works. Everything has a cost. Yet this study was released and pointed to as evidence of the film subsidy program’s success.

The state’s corporate welfare machine, the MEDC, has also used REMI models to forecast the impact of its subsidies to corporations under the Michigan Business Development Program. This replaced the now defunct MEGA. The MEDC claims that the development program forecasts a return on investment of more than $8 to $1. It refuses, however, to make public the input assumptions it fed into the REMI model for review. In other words, MEDC officials are just expecting everyone to take their word that their programs are successful. It is naive to do so when you consider the MEDC’s own incentive to engage in self-aggrandizing puffery.

I’m hardly the only person to notice the use (or misuse) of these types of models as a justification for an otherwise unwarranted intrusion in the marketplace. Edwin Mills, professor emeritus at Northwestern University, wrote a classic takedown of such models titled, “The Misuse of Regional Economic Models.”

He examined the use and misuse of REMI by governments and their consultants. He noted that deploying models like REMI can be effective because “it is a complex computer model that lay people cannot understand or evaluate, and it has important scientific merits. Thus, the frequent government claim that the best scientific model available shows that ‘x’ thousand jobs will be created by the project helps to carry the day.” Carrying the day is precisely what state jobs officials are trying to do. Using REMI or another regional model provides economic air cover for corporate handouts.

John Crompton, a distinguished professor at Texas A&M University, published a 2006 paper titled, “Economic Impact Studies: Instruments for Political Shenanigans?” and argued that economic impact studies “are commissioned to legitimize a political position rather than to search for economic truth. Often, this results in the use of mischievous procedures that produce large numbers that study sponsors seek to support a predetermined position.”

A mandate that forces bureaucrats to employ a particular type of model to estimate the benefits of particular policies should serve as a warning to lawmakers, not a signal that all is well. Past model use (or abuse) by state officials has shown that these models are used to help obscure the fact that such programs are costly and ineffective.


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The Double Standard in Environmental Protection: A Reprise

Delving further into sewage system failures

Downtown Midland, Michigan

Last week, several areas in Mid-Michigan experienced heavy rains and near-record flood conditions. As the rain fell and water levels rose, basements began to fill with water and untreated sewage from the area’s overloaded sewer systems. Throughout the streets of Mid-Michigan towns, the impacts are clear. Sewage and water damaged carpet and furniture; boxes of ruined property are piled high on city streets, waiting for sanitation crews to pick them up.

This unusual and unfortunate weather event coincided with research being carried out at the Mackinac Center. In November 2016, we had discovered what appeared to be a clear double standard in environmental protection. When private industry harmed the environment, it was (rightly) met with fines, regulatory penalties and a great deal of media attention and condemnation. When governments harmed the environment, on the other hand, their actions were met with a collective shrug of the shoulders.

For example, in 2010, when an Enbridge pipeline leaked over 1 million gallons of crude oil into the Kalamazoo River, the company faced a $177 million settlement. In 2014, the cities of Michigan released 11.56 billion gallons of untreated sewage into public waterways, including the Great Lakes. At the time, we believed the government agencies responsible for the damage faced little to no consequence for their actions.

But a deeper look at the situation uncovered a surprising — and at least partially reassuring — truth. At the enforcement level, the double standard we had highlighted earlier does not appear to exist, or, at least, should not be inferred from these types of examples. The key information comes from the history of Michigan wastewater management: how wastewater spills compare to industrial spills, and the enforcement actions taken in response.

Let’s start with the billions of gallons of raw sewage released into Michigan’s environment by government-run water systems. Contrary to what many would think, these discharges are not accidental. They are an intentional and designed response to naturally occurring phenomena.

In times of heavy rainfall, sewers fill, and if enough water enters the system, they reach their capacity and overflow. To avoid sending human waste on a roundtrip — back into our homes — sections of municipal sewer systems are actually designed to release sewage into lakes and rivers. These design features are known as outfalls.

So, this is a conscious decision on the part of sewage system planners and managers — and the public who employ them, meaning taxpayers. Faced with an either-or decision regarding potential damage from sewage overflows, we effectively choose to protect our personal property over our natural environment. But this is no small choice to make, as published research indicates that Michigan’s “recreational beaches are being adversely impacted by human fecal pollution,” leaving nine to 15 swimmers per 1,000 at risk of acquiring a viral infection each season.

Email discussions with researchers at Michigan State University also indicated that there are hundreds of disease-causing pathogens in sewage. Those pathogens can cause a variety of acute and chronic gastrointestinal and respiratory diseases. As many as 13 million cases of illness per year result from contact with infected surface water systems in the U.S.

So back to the double standard. Private industry actors clearly pay a hefty fine when they spill. But do municipalities that operate sewer systems designed to release disease-causing sewage into lakes and rivers simply go free? The short answer is no.

Michigan’s state and municipal governments have spent the last 30 years working to redesign sewer systems to help minimize the impacts of outfalls. In 1988, Michigan implemented a strict sewer overflow policy to limit the amount of sewage being diverted from houses into lakes. At the time, state employees found 80 systems, containing 613 outfalls, that had repeatedly discharged untreated wastewater. By 2015 — 27 years later — the total number of outfalls had decreased to 124. That’s a reduction of nearly 80 percent. As a result, the entire state of Michigan now releases only half as much untreated sewage as the city of Detroit did by itself in 1988.

While the state’s overflow policy did acknowledge that having zero sewage releases a year was an impossibility, state regulators still set minimum standards. When those standards are violated, some form of enforcement or remediation action is taken, regardless of whether the violation came from a municipality or a business.

Take the nearby city of South Bend, Indiana, where the wastewater facility annually dumped 600,000 pounds of euphemistically renamed “suspended solids” into the St. Joseph River. That river runs past the Michigan cities of Niles, Buchanan, Berrien Springs, St. Joseph and Benton Harbor and then into Lake Michigan. The city’s spills were above permitted levels, so South Bend was legally required to make $509.5 million worth of improvements — significantly more than Enbridge’s $177 million settlement. The authority to demand these improvements exists in the federal Clean Water Act, under which a roughly 50-50 split between actions has been taken against municipalities and private businesses.

Enbridge made the improvements and cleaned up its spill, but what happened to South Bend? The improvements scheduled under the Clean Water Act aren’t due to be completed until 2031, and South Bend’s city council reports the cost of improvements has ballooned to $861 million. So, the environment will be protected, but it will be a long, drawn-out and expensive process, and the bill must be paid by state and local taxpayers.

Every municipality in Michigan is engaged in a long-term plan, like South Bend’s, to meet federal standards for water quality. We’re doing much better, but we’re not there yet. It’s essential to recognize that the process takes time and a lot of money.


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MEGA 2 Hearing Demonstrates Desperation

New corporate welfare proposal gets hard sell in tax committee

Forty.

That is our count for the number of times a group of 14 lobbyists and a handful of Republican lawmakers referred to corporate welfare as a needed “tool” (or some variation thereof) at a state House Tax Policy committee hearing on June 14.

In this instance, corporate welfare means unelected bureaucrats at the Michigan Strategic Fund or Michigan Economic Development Corporation picking and choosing select large companies with at least 250 new employees to bestow up to $200 million in tax incentives over the next decade — foregoing revenue that would otherwise go to state government.

Advocates dismissed most criticism of the proposed laws, colloquially known as “Good Jobs for Michigan,” as merely philosophical or theoretical opposition. They regurgitated the same buzz words that accompanied the passing of Michigan’s prior major tax-incentive scheme, the infamous Michigan Economic Growth Authority program.

Perhaps the only thing more common than the utterances of the word “tool” during the testimony was the agreement that MEGA was indeed a failure, always followed by assurances that this package of bills was no MEGA.

“We don’t have a tool such as MEGA’s, and quite frankly, I’m not sad that they’re gone or that we stopped them,” said bill sponsor Sen. Jim Stamas, R-Midland. “We’re still paying though.”

MEGA, now being phased-out, was a multibillion-dollar program that doled out business subsidies. Taxpayers were on the hook for an estimated $1 billion in 2016. One tally indicates that only 2.3 percent of all MEGA deals lived up to their billing.

Five scholarly studies have been done about the program over its life and four found a zero-to-negative impact. It’s no wonder Stamas and others worked so hard to distance this corporate welfare proposal from MEGA.

Furthermore, despite assurances to the contrary, previous Mackinac Center research demonstrates the old MEGA and the proposed Good Jobs for Michigan program share at least 12 instances of identical or near identical language and concepts. The only major difference is the mechanism by which fiscal favors to a favored few corporations will be delivered.

The proposal itself is another “jobs” program that stands on the shoulders of MEGA and other corporate welfare boondoggles across the nation. The Kansas PEAK program is perhaps most similar to the one being proposed in Michigan now. A 2014 study about PEAK found no evidence that program recipients created more jobs than similar businesses who had not received subsidies.

The proposed Good Jobs program should not be adopted. It is unfair to hand out goodies to those chosen by a handful of government appointees, and there is no data-based evidence (anecdotes don’t count) to suggest it would be effective.

Despite the four hours of testimony, not one person who asked for the state to provide an additional tool expressed any concern that it may not be an effective tool.

It seems to be assumed the proposed program will create jobs that otherwise would not exist — and that it would be costless, too. Not a single person testifying in favor of the legislation cited any study from any scholar on the subject as evidence that the new program would work as advertised.

Indeed, when pressed about a study of incentive programs by the Upjohn Institute of Kalamazoo, one guest simply dismissed the study as being philosophical rather than addressing any specific concerns. That seems to be the new talking point distributed around Lansing: proponents of corporate welfare dismissing criticism by arguing opponents are only philosophically or ideologically opposed.

The insinuation is that there is no practical reason for being opposed to such legislation. This is nonsense. There are loads of empirical reasons why lawmakers ought to be skeptical of this program.

One needs not to delve deep into Michigan’s past to find evidence that the state’s attempts to pick winners and losers in the marketplace has been ineffectual. The MEGA program, film subsidies and broadband deployment were all colossal failures of state incentive programs.

These alone should be reason enough not to try the state’s hand at more.

When is enough, enough? How many programs are needed to achieve jobs nirvana? How many individual deals must be struck?

No proponent of the Good Jobs for Michigan was interested in providing an answer to any of the above questions, while they seemed oblivious to the actual nature of job creation in the state.

The market has been creating jobs long before government officials ever presumed it was their responsibility to try to do likewise. It will continue to do so. Every quarter, Michigan gains and loses about 200,000 jobs, with slightly more gained than lost as of late. Michiganders accomplished this and reached a projected May unemployment rate of 4.2 percent without the Good Jobs corporate welfare scheme in place.

Businesses that receive special tax incentives represent a fraction of a fraction of the actual jobs in the state. Moreover, it is estimated at least 94 percent of businesses that received incentives would have remained in or relocated to the state even without tax incentives.

A better solution is to end all of the state’s incentive programs and return the money to the taxpayers who earned it in the first place. No special favors to special interests. After all, if tax cuts are good for a few select businesses and corporations, why aren’t they good for all of them?


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Michigan's Robust Municipal Finance Model

Taxpayer protections don't stop revenue growth

(Editor’s Note: The following is a modified version of a presentation given by James Hohman, assistant director of fiscal policy, as part of a debate hosted by the Midland Chamber of Commerce on June 19, 2017.)

So there are some things that I think the [Michigan Municipal League] and I are going to agree on. For instance, that unfunded liabilities for pension benefits and retiree health care are a huge cost driver for local governments. But we are not here to talk about the things we agree on but instead the things that we disagree on. So I am going to talk about our remarkably robust municipal finance system, while I assume that Anthony [Minghine] is going to talk about the broken municipal finance system.

In building the case for my opinion, I’ll emphasize one point most of all: From 2000 to 2007, Michigan went through a one-state recession. Michigan was down one out of every 11 jobs.

Then the rest of the nation joined us for the prolonged Great Recession. At the worst of it, Michigan had just one-third of the auto jobs that existed in 2000. Of course, not everything else in Michigan was as bad as that. Michigan didn’t lose two-thirds of its GDP. Nominal GDP was flat from 2000 to 2009, real GDP was down 13 percent, by far the worst in the country.

This meant major changes to government as well. State revenue was down 2 percent from 2000 to 2009. Now, that has to be taken with a grain of salt since lawmakers did a lot of spending outside of the budget. They ramped up refundable tax credit programs over that period, for instance, which lowers the total revenue available to spend in the budget.

Yet even with that, property tax revenue — the largest source of revenue for local governments — increased. While everything else was going down in Michigan, the state was still participating in the housing boom. That was in a much more muted way, but still an increase. Property tax revenues increased from $9.5 billion in 2001 to $14.1 billion in 2009, a 49 percent increase at a time when few other things were growing as much. Local governments only get a share of that, of course, but it’s a share of a growing pie.

So it’s not surprising that the discretionary payments that the state makes to local governments is down. The state’s total revenue sharing payments to local governments declined from $1.6 billion to $1 billion over the period. Note that the decline is far less than the $1.9 billion increase in city, village, township and county property tax growth over that period.

It was the same for the money that the state gives to state universities. The state was struggling and schools were not. The schools would be fine with fewer dollars — they’d just have to have to raise tuition more than otherwise. Hence, real cuts to state universities.

(And it was not as if the state even had the money to keep tuition from increasing if it wanted to, given the ever-inflating costs of higher education. But that’s a lecture for another day.)

Now things are different. Michigan is rebounding. It’s attracting people back to the labor force. Wages, personal income and production are all up.

That’s meant more money in the state budget and more money going to local governments. Revenue sharing increased from $1 billion to $1.2 billion.

State payments to local governments went beyond that. As part of the personal property tax package approved by voters in 2013, local governments are being reimbursed for the money they lose out on new exemptions. But the amounts approved in the bills over-reimburse governments, this year to the tune of $135 million.

Plus, there’s been more money for local roads and road commissions. The 2015 road package ramps that up another $700 million over time.

There is one lagging piece in the recovery: construction. Housing construction fell from roughly 4,500 units per month in 2004 to around 1,000 units per month from 2009 to 2012. And it’s been a slow recovery. We’re around 2,000 now and there is upward trend.

This is very important for local governments. New construction is exempt from Headlee calculations, which automatically lowers property tax mill rates when property values grow without approval of an overriding vote. The exemption of new construction is one of the reasons why local property taxes increased faster than inflation.

And it’s the reason that total property taxes are not back to their peaks. They are up from their troughs, though even with newer property tax exemptions. And perhaps this growth will continue.

So with these two general purpose spending sources — the larger property tax sources and the smaller revenue sharing — here’s what’s happened over the past 16 years. It’s kept up with inflation at a time when few things did before the recession, even as the state cut revenue sharing.

During the Great Recession, there was a reduction in local government revenue of 6 percent. Since then, it’s increased above the inflation rate.

Here’s my takeaway about our revenue system. It’s been remarkably robust through a historic change in the state economy. And it’s rebounding.

It’s unreasonable to expect that the taxpayer financing of our local governments should continue to increase regardless of the state of the taxpayers that support them. And during a time when there have been profound economic changes, our local governments have been remarkably protected.

I wanted to comment on a couple of the proposed policy changes. In the past, and I presume today, our friends at the Michigan Municipal League have recommended two things: give more state taxpayer money to local government and loosen constitutional restrictions.

As to revenue sharing, we are giving more of it in addition to other assistance.

But let’s talk about this further. If our friends at the MML are interested in making the case for more, they ought to say how much, what residents will get out of it, and where it will come from. There aren’t too many options for where it will come from — either from ongoing growth, from somewhere in the budget specifically, or from a specific increase in taxes.

I would also question some of the necessity. There are some important declines in government service cost drivers. Violent and property crime is down 30 percent from 2007 to 2015, according to data from the state police. In 2006, local agencies reported 35,000 fires. That was down to 22,000 fires in 2016. Those are impressive improvements in public safety, and ought to provide some very positive fiscal effects on local governments.

The next recommendation that has been made is a request to loosen constitutional taxpayer protections from the 1978 Headlee Amendment and the 1994 Proposal A.

There are two limitations on local government provided by the Headlee Amendment: when a community’s tax base is broadened through property value growth above inflation, tax millage rates get automatically rolled back. This prevented what was considered unfair and unpopular increases in the burden of government. But even this limitation still allows for above-inflation growth since new construction is exempt. Officials can also call for voters to approve overriding the automatic rollbacks. The other limitation is to require new millages to be voted upon. But both ensure that local tax policy carries direct popular support. And you should want your residents to directly support your tax policies. If you don’t, then we have to have a much different discussion about democracy in municipal government.

Proposal A prevents individual property assessments from increasing faster than inflation. This protects people on fixed incomes from being taxed out of their homes if their neighborhood takes off. But it also provides some general tax protections to individual homeowners that I imagine are both popular and preferred. While we hope that our homes increase in value over time, it’s rarely something that is in our direct control and people probably don’t want to be penalized much for it.

I think there are some ways that we can ensure that local governments have the resources to provide important services to residents. But I think the revenue side of the equation has been remarkably robust, while there are glaring improvements that need to be made on the spending side.


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Trump’s Crime Policy Comes to Lansing

Rhetoric about US cities’ “serious violent crime problem” is misleading and distracting

The federal justice department has launched a new Public Safety Partnership that aims to help 12 U.S. cities, including Lansing, Mich., with what Attorney General Jeff Sessions calls “their serious violent crime problems.”

Sessions announced the program on Tuesday, June 20, at a criminal justice summit in Washington, D.C. He cited a “staggering” increase in the national violent crime rate and touted the PSP as fulfilling President Trump’s promise to “make America safe again.” The program will make additional federal resources available to help cities fight violence. A U.S. Department of Justice spokesman explained that to be considered for inclusion in the program a city “must have levels of violence that far exceed that national average.”

But Lansing is far from a dangerous city. “I disagree with the Attorney General on that,” Lansing Chief of Police Michael Yankowski said. “Violent crime in Lansing has gone down by 30 percent over the last 30 years, and property crime has gone down by 50 percent. We have a violent crime reduction plan that’s seen tremendous success.”

In fact, the Trump administration’s narrative on crime and criminal justice does not line up with the facts. Crime rates both in Michigan and nationally have steadily declined over the past couple decades to near-historic lows. To sustain this momentum, it’s critical that politicians and policymakers have a correct understanding of the true nature and extent of the problems on our streets and in our justice systems. Overstating the issue of violent crime could result in knee-jerk reactions to a perceived “crisis,” while diverting attention from other issues that are long overdue for successes like the one we’ve had in reducing the violent crime rate.

In the meantime, Lansing is poised to proceed with this federal collaboration. Chief Yankowski attended the summit in D.C. and said he expects federal help in the form of diagnostic services, not necessarily cash.

“We haven’t been guaranteed any money,” he said. “We’ll continue strengthening our relationship with the federal government and will always be open to learning best practices and how to fight the root causes of crime.” The LPD might get additional technology or training, assistance with grant writing or a consultant to help with data collection and analysis. The particulars won’t be known until a site visit is completed and an action plan written.

One thing, at least, is clear – Lansing has joined the PSP because Yankowski wants to be proactive, not because the city is overrun by violence. Trump and Sessions should stop misleading the American people with headline grabbing rhetoric about “serious violent crime.” Instead, they should get serious about expanding the success and attention of this issue to other areas.


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Michigan would join the vast majority of states in freeing prospective painters from needless government licensing requirements and fees if it passes proposed changes. That’s a good move, and would be another step towards right-sizing regulations.

The state requires anyone who wants to earn a living as a painter to complete 60 hours of courses, pay nearly $300 in fees and pass an exam. The would-be painter must be at least 18 years old — meaning two high schoolers can’t legally team up to paint barns for the summer.

By any standard, this is unjustified. Painting has virtually no impact on public health and safety, knocking down the usual argument used to justify state licensing. According to the Institute for Justice, only 10 states require licenses for painters. If unlicensed painters were a harm to society, we’d have heard about it by now from our neighbors in Indiana and Ohio.

The state licensing agency isn’t doing much to enforce the state-mandated licenses anyway. According to the U.S. Bureau of Labor Statistics, there are nearly 4,000 professional painters in Michigan – but according to the state, only 425 of them are actually licensed. Not all of the people painting in Michigan without a license are earning a living illegally (you can work under the supervision of a licensed painter), but many are. Yet the state has not cracked down on any unlicensed painters in the past two years, according to an open records request. That means painters who follow the law are competing with those who don’t.

House Bill 4608, sponsored by Rep. Jeff Noble, R-Plymouth, recently passed the state House. When the Legislature returns in the fall, the state Senate should pass it.

Michigan’s overbearing licensing laws cost approximately 125,000 jobs and $2,700 per family in higher consumer costs, according to one estimate. Removing the state requirement that painters be licensed is a positive step on the path toward comprehensive reform of our occupational licensing laws. Learn more at www.mackinac.org/licensure.


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House Bill 4323, State budget for fiscal year that starts Oct. 1 2017: Passed 26 to 11 in the Senate

The non-education portion of the state government budget for the fiscal year that begins on Oct. 1, 2017. This would appropriate $39.9 billion, compared to $38.7 billion authorized the year before. Of this, $21.2 billion is federal money. When combined with the education budget (next bill), the state will spend $56.5 billion next year, vs. $54.9 billion last year, or a 2.9 percent increase.

Who Voted "Yes" and Who Voted "No"


House Bill 4323, State budget for fiscal year that starts Oct. 1 2017: Passed 64 to 43 in the House

The House vote on the budget bill described above.

Who Voted "Yes" and Who Voted "No"


House Bill 4313, State education budget for 2017-18: Passed 23 to 14 in the Senate

The final K-12 school aid, community college and university budgets for the fiscal year that begins Oct 1, 2017. This bill appropriates $16.608 billion, of which $1.838 billion is federal money. Of this total, $14.580 billion would go to K-12 public education, compared to $14.161 billion approved last year. Another $1.629 billion is for state universities, compared to $1.582 billion the prior year. Community colleges would get $399 million, up from $395 million last year.

Who Voted "Yes" and Who Voted "No"


House Bill 4313, State education budget for 2017-18: Passed 72 to 35 in the House

The House vote on the education budget bill described above.

Who Voted "Yes" and Who Voted "No"


House Bill 4427, Regulate access to police body camera images: Passed 37 to 0 in the Senate

To establish that police body camera recordings taken in a private place are exempt from disclosure under the Freedom of Information Act. Individuals whose image is captured, owners of property seized or damaged in a crime and some others could still request a copy of the recordings subject to privacy exemptions. Police body camera recordings would have to be kept for at least 30 days, or longer if there is an related investigation.

Who Voted "Yes" and Who Voted "No"


House Bill 4557, Authorize prison for bringing 26 cases of beer or wine into state: Passed 36 to 1 in the Senate

To authorize up to four years in prison and a $5,000 fine for bringing more than around 26 cases of wine or beer into the state without all the required licenses mandated by the state. Smaller quantities would be subject to 93 days in jail.

Who Voted "Yes" and Who Voted "No"


House Bill 4213, Require court order to breathalyze minor who says no: Passed 37 to 0 in the Senate

To establish that a police officer must get a court order to get a breath test for alcohol from a minor who objects. This is not related to drunk driving or vehicles, but to enforcement of a state law that bans minors from being in possession of alcohol. Recent court cases have suggested that doing this without a court order is unconstitutional.

Who Voted "Yes" and Who Voted "No"


Senate Bill 245, Repeal switchblade ban: Passed 106 to 1 in the House

To repeal the state law against owning, selling or possessing a switchblade knife, “the blade or blades of which can be opened by the flick of a button.” Reportedly the ban is outdated and unevenly enforced.

Who Voted "Yes" and Who Voted "No"


Senate Bill 94, Accelerate vehicle trade-in “sales tax on the difference”: Passed 88 to 19 in the House

To accelerate the 24-year phase-in of a 2013 law that exempted from sales tax the value of a trade-in when buying a new vehicle. This would save buyers $28.7 million in 2021, which would gradually increase through 2028.

Who Voted "Yes" and Who Voted "No"


House Bill 4608, Exempt residential painters and decorators from licensure mandate: Passed 62 to 45 in the House

To exempt painters and decorators from the licensure mandate imposed residential maintenance and alteration contractors.

Who Voted "Yes" and Who Voted "No"


Senate Bill 249, Ban government discrimination against charter schools in property sales: Passed 60 to 47 in the House

To prohibit a school district or local government from refusing to sell property to a charter or private school, or taking other actions designed to keep these potential conventional public school competitors from using property for a lawful educational purpose. Prohibited actions could also include imposing deed or zoning restrictions. A number of local governments and conventional school districts have adopted such restrictions in the past.

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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