The MC: The Mackinac Center Blog

Texas Looks to Decrease Occupational Licensing

Michigan should follow suit, remove more barriers to work

Greg Abbott (via Gage Skidmore)

Texas Attorney General Greg Abbott, who is running for governor of that state, has rolled out a plan that would repeal a number of occupational licensing rules. These standards restrict individuals from engaging in certain commerce without permission from the state (and often include paying extra money, taking tests, and meeting other requirements).

The plan notes, “Regulation by licensure results in less competition, fewer choices, higher costs, and the potential to thwart innovation. These effects are not always visible to the consumer, but they are nonetheless built-in costs without justification in most instances.”

The National Center for Policy Analysis notes, “Of all the proposals designed to help poor and lower-income people, this one deserves major kudos. It does not involve expansion of a massive government program, and it reduces the cost to those who wish to profit from their knowledge and skills. It will also boost economic growth and tax revenue, since studies indicate that such licensing reduces job growth by 20 percent.”

Abbott’s plan would specifically get rid of or significantly reform licensing for interior designers, salvage vehicle dealers, dog trainers, coaches, auctioneers, barbers, cosmetologists and towing boat operators.

According to “License to Work,” a national study on the burdens of occupational licensing from the Institute for Justice, Texas has the 17th most burdensome laws. Michigan is ranked 21st and is particularly burdensome towards moderate-income occupations. Michigan also licenses painters, barbers, lower-level contractors like those putting up gutters and laying tile, and other areas rarely licensed in other states like floor sanders, alarm installers, glaziers and other alteration contractors.

The main opposition to Abbott’s proposal comes from the groups representing industries which are being deregulated. The stated claim, of course, is that the repeal of licensing and regulatory rules would harm health and safety. This is the standard assertion, but there is little or no evidence that removing most licensing standards will cause harm — and the entrenched interests who make that claim rarely even try to show that it does.

The reality is that these organizations are looking to use government to protect their members from competition in the marketplace. But that is not a proper role of government.

Flanagan Goes too Far on Charter Schools

State TTB ranking a proxy for poverty

Mike Flanagan

Just one out of every two entering high school freshmen manage to graduate from Pontiac Public Schools, a rate lower than the vast majority of Michigan conventional districts and charter public schools. And Pontiac's finances are just as bad as its academic performance: The district is overspending by close to $40 million per year.

Despite these failings, the Michigan Department of Education has allowed Pontiac to remain open. No Pontiac school has been closed for poor academic performance. And earlier this year, State Superintendent Michael Flanagan allowed Pontiac to take an entire decade to clean up its spending, even though state law requires districts to eliminate their deficits within two years.

These actions stand in stark contrast to the hard line Flanagan is taking on public charter schools. MDE has just announced that Flanagan is threatening to stop 11 charter public school authorizers from offering new schools:

  • Detroit Public Schools
  • Eastern Michigan University
  • Education Achievement Authority
  • Ferris State University
  • Grand Valley State University
  • Highland Park Schools
  • Kellogg Community College
  • Lake Superior State University
  • Macomb Intermediate School District
  • Muskegon Heights Public Schools
  • Northern Michigan University.

The charter school authorizers Flanagan is threatening to stall include some of Michigan's best. Indeed, just a year ago, MDE recognized Grand Valley State University and Lake Superior State University as the best charter school authorizers in the state.

According to MDE's press release, these charter authorizers are being targeted in part because of their schools' rankings on the state "Top-to-Bottom" list. The Center has repeatedly criticized the state ranking system for being a proxy for poverty — meaning that by using this measure, Flanagan is penalizing schools that take in students from low-income backgrounds.

And yet, even if the department prioritizes TTB rankings, it is unfairly penalizing charter schools. Some of the worst-scoring schools on the list are conventional schools. Indeed, about 50 schools have been ranked among the bottom 5 percent of Michigan schools for the past three consecutive years. Only four were charter public schools, and three of those four schools have been closed.

Inexplicably, state officials continue to ignore the best study on Michigan charter schools. Stanford University found that Michigan charter school students learn two extra months of material every year compared to their conventional school counterparts. No other study in Michigan has come close to Stanford's rigor, and attempts to characterize charter school performance as poor lack substantiation.

The best evidence suggests that unwarranted limitations on charter school growth will harm student academic outcomes. And, if authorizers are prevented from opening new charter schools, some of Michigan's most struggling students will be underserved.

Nowhere is this clearer than at Covenant House Academy, a charter school serving students struggling with homelessness, past expulsions, pregnancy or a criminal record. GVSU recently authorized Covenant House to open a school in Grand Rapids, enrolling 150 students this year.

And with GVSU's help, Covenant House Executive Director Sam Joseph is opening another school in Muskegon this fall. If the state superintendent stops allowing GVSU to authorize charter schools, he will be blocking future schools like these and the students they hope to serve.

State officials are ignoring the best evidence on Michigan charter school performance. Worse, they are specifically targeting charter schools while letting conventional districts, like Pontiac, continue to fail their students.

While the Legislature is on a summer break the Roll Call Report is reviewing key votes of the 2013-2014 session.

Initiated Legislation 1, Ban abortion coverage through federal health care law exchange: Passed 27 to 11 in the Senate on December 11, 2013

To prohibit health insurance policies sold in Michigan through the federal health care law’s “exchange” from including abortion coverage. Individuals could use their own money to purchase a policy “rider” for this outside the exchange if they choose, but no federal subsidy would cover the cost. The measure was placed before the legislature through a petition drive organized by Right to Life of Michigan, after Gov. Rick Snyder vetoed a 2012 bill with the same measure.

Who Voted "Yes" and Who Voted "No"

Senate Bill 661, Prohibit mandating issue-ad contributor disclosure: Passed 20 to 18 in the Senate on November 14, 2013

To establish that third party political "issue ads" need not include a disclosure of who paid for the ad, which preempts a proposal made by the Secretary of State. The bill would also allow the Republican and Democratic caucuses in the legislature to raise and spend money promoting their preferred candidates in primary elections, and increase the maximum campaign contributions allowed by state election law.

Who Voted "Yes" and Who Voted "No"

Senate Bill 443, End automatic school tax increases to pay union contract lawsuit judgments: Passed 27 to 10 in the Senate on October 30, 2013

To revise a provision that requires school property taxes be raised to pay off lawsuit-related judgments against a school district, by establishing that this does not apply for judgments to enforce union labor or other contracts that specifically relate to school operations.

Who Voted "Yes" and Who Voted "No"

Senate Bill 711, Extend Cobo sales tax exemption; Passed 34 to 1 in the Senate on January 29, 2014

To extend for another two years the 2014 sunset on a law that exempts from sales tax the purchase of tools and equipment by a contractor if these are used to fix or renovate Cobo Hall in Detroit.

Who Voted "Yes" and Who Voted "No"

Senate Bill 319, Repeal mandatory life sentences for minors: Passed 36 to 0 in the Senate on October 24, 2013

To revise Michigan's mandatory life sentence with no chance of parole for certain very serious crimes committed by minors. Life without parole would no longer be automatic in these cases but prosecutors could request it. The measure responds to a U.S. Supreme Court decision, and would not automatically apply retroactively to the approximately 350 current prisoners in this category.

Who Voted "Yes" and Who Voted "No"

Senate Bill 396, Restrict replacement-construction property tax hikes: Passed 38 to 0 in the Senate on November 14, 2013

To revise a provision restricting property tax assessment increases on construction that replaces parts of a structure damaged by accident or an act of God, so that no assessment would be imposed as long as the construction is of substantially the same materials and square footage. This cap would also apply to value-increasing improvements required to meet current health, sanitary, zoning, safety, fire, or construction codes and ordinances.

Who Voted "Yes" and Who Voted "No"

Senate Bill 553, Extend already-extended renaissance zone tax breaks longer: Passed 36 to 1 in the Senate on October 31, 2013

To allow an eight year extension of the extensive tax breaks granted to residents and businesses in a particular "renaissance zone" located in Saginaw County. This would be in addition to a previous seven-year extension.

Who Voted "Yes" and Who Voted "No"

Initiated Legislation 1, Ban abortion coverage through federal health care law exchange: Passed 62 to 47 in the House on December 11, 2013

The House vote on the bill described above. No signature from the Governor is required for initiated legislation to become law, which this did as "Public Act 182 of 2013."

Who Voted "Yes" and Who Voted "No"

Senate Bill 661, Prohibit mandating issue-ad contributor disclosure: Passed 56 to 52 in the House on December 11, 2013

The House vote on the bill described above. The House clarified that issue ads must still disclose the organization sponsoring them, but not the individual contributors. This was signed into law Gov. Rick Snyder on December 26, 2013.

Who Voted "Yes" and Who Voted "No"

Senate Bill 443, End automatic tax increases to pay union contract lawsuit judgments: Passed 76 to 33 in the House on December 12, 2013

The House vote on the bill described above. The House added several exceptions to the proposed ban. This was signed into law on December 13, 2013.

Who Voted "Yes" and Who Voted "No"

Senate Bill 319, Repeal mandatory life sentences for minors: Passed 62 to 48 in the House on February 4, 2014

The House vote on the bill described above. This was signed into law on March 4, 2014.

Who Voted "Yes" and Who Voted "No"

Senate Bill 396, Restrict replacement-construction property tax hikes: Passed 82 to 27 in the House on February 11, 2014

The House vote on the bill described above. This was signed into law on February 13, 2014.

Who Voted "Yes" and Who Voted "No"

Senate Bill 553, Extend already-extended renaissance zone tax breaks longer: Passed 87 to 21 in the House on February 18, 2014

The House vote on the bill described above. This was signed into law by Gov. Rick Snyder on March 4, 2014.

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.

Pension Systems Hurt Workers, Taxpayers

Defined-benefit plans cannot be supported

(via WikiCommons)

There is an ongoing debate about spending in the state of Michigan. Almost every major sector of government complains that it doesn’t receive enough funding — this is true of cities, townships, school districts and state government.

History shows that it is the nature of government (at all levels) to try and expand. And the Mackinac Center has written a lot about each of those areas and taken on many of the specific complaints to try and counter that nature.

But there is one particular area of government that flies under the radar and is putting a real squeeze on public services: Retiree benefits. The pension and health care costs of current and future government workers is an albatross around the necks of everyone.

Taxpayers are on the hook for many of these benefits. And cities, even those that irresponsibly want to ignore these costs, are forced to cut other areas of public services to pay for these benefits.

Defined-benefit pensions have proven to be unaffordable. They also make for bad government. In the words of one city manager who oversees a grossly underfunded system: “We aren’t able to provide services because we are paying for people who no longer work here.”

A recent Capitol Confidential investigative series took a deep dive into municipal pension systems across the state. There’s the bad (“The Worst Funded Pension Systems In Michigan”), the very bad (“What Will Cities Do To Solve Their Pension Issues?”), and the hopeful (“How Cities Are Solving Their Pension Problems – and the Bill That Makes It Easier”).

Having an open defined-benefit pension system is telling politicians that they can be trusted to not spend money now on constituents in order to put away for the needs of people decades off into the future. But that goes against strong political incentives, which helps explain why most pension plans rack up unfunded liabilities. The sooner elected officials realize that, and remove the ability for them to bankrupt government entities, the better everyone will be.

Skorup on WSJ's 'Opinion Journal Live'

Discussed 3rd Congressional District primary

Research Associate Jarrett Skorup today was a guest on “Opinion Journal Live” with The Wall Street Journal, discussing the outcome of the Republican primary in Michigan’s 3rd Congressional District, which incumbent Rep. Justin Amash won 57-43.

Vernuccio Discusses 'August Window' for Teachers

How MEA members can opt out of union

Labor Policy Director F. Vincent Vernuccio was a guest on “Capital City Recap” with host Michael Cohen on WILS AM1320 in Lansing Tuesday evening, discussing www.Augustoptout.org and how Michigan Education Association members can resign from the union during the month of August.

Michigan Education Digest

Teachers leaving the MEA, Benton Harbor overspending crisis

The latest version of Michigan Education Digest is available at http://www.mackinac.org/20378. Topics include how teachers can resign from the MEA, the overspending crisis in the Benton Harbor school district and support for a new charter public school in Jackson.

Job Announcements Don't Equal Job Creation

Too many candidates propping up corporate welfare

The campaign season has been filled with claims from candidates that they will create jobs. A common strategy is to target a business or an industry for special state support and to claim credit whenever jobs are added by companies receiving support. A quick look at the job creation and loss figures for the economy as a whole shows that this approach is not a workable one.

There is a surprising amount of job creation and loss in the economy. Michigan added 214,000 jobs and lost 194,000 jobs in the fourth quarter of 2013, according to the Bureau of Labor Statistics. In just three months, one out of every 16 jobs was created and one out of every 18 jobs was lost.

Michigan Quarterly Job Gains and Losses

The state already has its own programs to give state tax money to select businesses that locate or expand in Michigan. The most frequently used program today is the Michigan Business Development Program. As Michigan was adding 214,000 jobs and losing 194,000 jobs, the state offered 22 companies $17 million to produce 2,962 jobs.

While MBDP appears to have a better track record at converting announcements into jobs than its predecessor MEGA, the actual jobs created at these companies do not equal the number of jobs promised. They are also not likely to appear in the same quarter as announced, nor can it be guaranteed that these jobs would have located elsewhere without state assistance.

But even at its best, selecting these companies for special favors would only account for 1.4 percent of the job gains in the last quarter of 2013. And the $17 million offered to these companies has to come from somewhere, including the struggling companies that shed jobs in the quarter.

The sheer magnitude of job turnover suggests that the way to improve the economy is to enact broad-based changes to the state’s business climate. Gov. Snyder's administration has a number of accomplishments in this area — eliminating the Michigan Business Tax and enacting right-to-work, for instance.

The state should move away from the programs that use tax money in an attempt to pick winners and losers and provide a fair field for all.

State, National Media Report on MEA Opt Out

August is chance for members to resign if they want to

State and national media are reporting on the Mackinac Center’s efforts to inform Michigan Education Association members about their rights to opt out of the union during the month of August.

Fox News, The Detroit News, Livingston Daily Press & Argus, MLive and the Cadillac News have all reported on the Center’s website, www.Augustoptout.org, which provides teachers with the information if they so which to resign from the union.

Truth Squad’s Failed Proposal 1 Fact Check

Three exemptions to personal property tax, not elimination

The Center for Michigan’s Truth Squad recently rated an ad to support Proposal 1 as clear of factual issues. The ad, however, contains multiple problems.

The ad states, “Proposal 1 will make Michigan more competitive by eliminating the unfair double tax on personal property that small businesses are forced to pay. That will create up to 15,000 new jobs without raising taxes.”

Proposal 1 does not eliminate personal property taxes. Instead, it creates three new exemptions: for businesses that own less than $80,000 in equipment in a taxing jurisdiction, for new manufacturing equipment and it phases in exemptions for older manufacturing equipment. Non-manufacturing businesses that own more than $80,000 in equipment will be unaffected by this proposal.

The state already mitigated the “double tax” on industrial business equipment. Sales taxes are typically levied on purchases of equipment by businesses, and personal property taxes are levied on the value of equipment annually, making the combination a “double tax” on equipment. However, industrial processing equipment is already exempt from sales taxes.

Non-manufacturing businesses with more than $80,000 in personal property will keep paying both sales taxes and personal property taxes.

The ad would be accurate if it was only about eliminating personal property taxes on businesses with less than $80,000 in equipment — the proposal will eliminate double-taxes on non-manufacturing businesses that own less than $80,000 in equipment. Otherwise, the “double tax” will not change. This context may be understandably left out in an ad supporting the Proposal. If the ad were only referencing the small parcel exemption, however, the jobs projections the ad uses afterwards would no longer be accurate.

The jobs projections are based on the entire proposal, a proposal which includes manufacturing exemptions in addition to the small parcel exemption. Moreover, these projections are based on an earlier version of the proposal, one that was later amended this year. The same group analyzed the newer version of the proposal and found smaller job impacts — that it would create between 5,000 jobs and 11,700 jobs.

Proposal 1 is a remarkably clean cut to an economically inefficient tax. But the ads have oversold it, and the Truth Squad incorrectly certified the accuracy of those ads.