The MC: The Mackinac Center Blog

When a School 'Cut' Is an Increase

As shown by the House road funding plan

In the subscription-only MIRS newsletter, Mitch Bean discusses how Michigan House Speaker Jase Bolger’s road funding plan would have affected the state budget had it been in place over the previous decade. While his takeaway was to say that schools would have had less money, it also points to the importance of economic growth to delivering both more school revenue and more road funding.

Rep. Bolger’s plan is to gradually replace the sales tax levied on gasoline with taxes that would go to the transportation budget.

The fuel taxes go to fund the roads, making fuel taxes work like a user fee. Michigan, however, is one of the few states that levy both a sales tax and fuel taxes on gasoline. This means that Michigan has high fuel levies but low road spending. When phased in, Rep. Bolger's plan would change this feature.

As Bean, former director of the Michigan House Fiscal Agency, noted in his analysis, there are no free lunches. Rep. Bolger's plan would mean that sales tax revenue going forward would be mitigated by the move. Currently, sales tax revenue goes to schools, is shared with local governments, and supports the state budget.

But Bean overstates his case when he calls this a cut in school revenue. Spending less than would otherwise be the case is not a "cut." A reduction from current levels is a cut. (This was gubernatorial candidate Mark Schauer’s big mistake.)

Rep. Bolger’s plan instead mitigates schools’ potential growth increase from the sales tax on fuel. This has fiscal consequences, but unless the economy takes a dive school revenue will continue to grow. Major sources of school revenue like the sales tax, the income tax and the property tax depend on economic growth and recessions strain the revenue from these taxes.

Yet Bean’s results note that school revenue would still have increased had Rep. Bolger's plan been implemented in 2004, a period when things were not especially good for the state.

The state economy is entering its fifth year of recovery and state tax revenue reflects that trend. 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

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How Outraged Is the Right, Really?

They could learn from their liberal counterparts

(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.)

Those on the “political right” in our nation aren’t nearly as aggressive as they could be.

Taken as a whole, the political right is probably underestimating its potential resources. For a movement claiming it wants to “take back America,” its focus is too narrow and should begin including opportunities beyond the voting booth. Ultimate success may require “full engagement,” not just “comfortable engagement.”

The “political right” in the United States has been in a nearly constant state of frustration a long time. Witnessing the most treasured principles of our constitutional republic being misrepresented and turned upside down is infuriating. Perceiving the prevailing disinterest of so many as freedom and liberty are being undermined by an overreaching government is like watching a loved one sleep-walk near the edge of a cliff.

Almost daily we hear propaganda telling us our individual rights must be sacrificed for the good of the many. Trumped up and made up threats in the form of pseudo-science, manipulated statistics, and out and out lies are ceaselessly advanced to justify the subjugation.

Those who understand the real world, know history, and know human nature see all this for what it actually is. With few exceptions these things are façades; cardboard hobgoblins painted in bright colors to mislead uninitiated and preoccupied segments of the public.

Over the past decade and a half the situation has worsened. In response, the political right has risen up in protest; its warning bark is heard, but too often it fails to bite. While one faction of our leaders sets about the work of discarding parts of the U.S. Constitution that they consider inconvenient, the alternative choices on the ballot talk tough but repeatedly balk when real action is required.

Meanwhile, the mainstream news media seems to operate under a code of self-censorship, picking and choosing which topics to focus on. Stories that deserve coverage are ignored or downplayed, while the escapades of sports stars and celebrities are treated as if they were important.

Clearly all this angers and saddens the political right but one senses that these reactions remain largely compartmentalized. Perhaps, because the political right consists of individualists, it often seems restrained by a natural aversion toward taking collective action. Too often, the sense of threatened values gets handled by reaching for the remote instead of reaching for the telephone.

Activism by the political right is currently too tame, too timid and lacks the true sense of rebellion needed to keep an organized movement vital. Those on the political right can abhor the way a certain national TV network covers politics; yet if a football game they want to watch is broadcast by the very same network, they’ll tune in. If they want the products advertised by the same companies that sponsor one-sided news coverage — no problem — they’ll purchase them anyway.

Admittedly, much of this comes from a feeling of helplessness. What can the complaints or boycotts of two or three former viewers mean to a big national network? But national networks depend on local affiliates, and those local affiliates depend on local advertisers. Two or three complaints to an advertiser about how a network covers (or doesn’t cover) “the news” probably wouldn’t have much impact — but two or three dozen well-orchestrated complaints could.

A few years ago when the outrage of the political right reached critical mass, grass roots movements began springing up across the nation. It was only natural that these movements targeted politicians, a political party and elections. Articulate candidates and the money it takes to run modern campaigns to challenge the status quo were and continue to be scarce. That approach should not be abandoned; it is still worth pursuing, but activism by the political right need not be limited to this alone.

So far the political right has failed to set its sights on areas where the liberal establishment might be more vulnerable. Organized consumerism can be a powerful tool and one that serious activists should consider. Some economists like to describe making a purchase as essentially casting a vote for a product and the business that sells it. But how many on the political right ever think in those terms?

Liberal activists seem more willing to translate their convictions to their lifestyle. They boycott businesses that support things they don’t like and they are vocal about doing so. In general the political right either fails to connect the dots and realize where it could exert influence, or it is too reluctant to make a fuss. Although this subconscious “reasonableness” may be seen as an attribute of conservatism, it bodes poorly for a movement seeking to bring about change.

House Road Plan Is Solid

A way to fix roads without raising gas taxes

Editor's Note: On Dec. 4 the state House approved a road reform package similar to the one described below that does not raise taxes. The state Senate earlier took the opposite approach, hiking taxes by $1 billion. Now the two chambers must hammer out a compromise. Any deal should favor the House plan, which is superior.

Should the Senate insist on partially funding a road package through a tax increase, the House could demand other reforms that stabilize the state’s finances and relieve burdens on families and taxpayers. Among the reforms the House could pursue are eliminating the prevailing wage law, closing the Michigan Public School Employees Retirement System or perhaps adopting a proposal to put a Taxpayer Bill of Rights on a future ballot.

The first idea could save $224 million a year just for schools (more could be saved on road repair) and other two could save billions more in the coming years.

Every once in a while Lansing politicians give me a good reason to offer praise. House Speaker Jase Bolger, R-Marshall, has advanced a plan to fund roads without imposing new taxes or fees on Michigan families (Editor's Note: The plan has now passed the Michigan House). These ideas deserve attention and applause.

Mackinac Center experts have pointed out repeatedly that the Legislature is right to set road repairs as a high priority, and that it should examine how to reorganize existing revenue or eliminate non-essential spending to facilitate greater infrastructure investment.

The road financing debate in Lansing is now front and center. House Republicans want to redirect $1 billion in existing state revenuesto roads. Meanwhile, the Senate has already voted (23-14) to individual tax revenues than it did less than four years ago simply due to some policy changes and an improving economy. That makes the Senate’s proposal to take an additional $1 billion from motorists all the more troubling.

Will the Senate’s desire for more of our money be sated? Will a different tax hike – say on Internet transactions – greet us in the New Year? It’s a reasonable question.

At least the House is trying to get the state to live within its means. Linking road taxes to road spending is sound policy. It helps improve accountability because those who pay know precisely how revenues are being deployed in their service. It also becomes something more akin to a user fee for services rendered.

The House road plan, however, does have minor drawbacks. It relies on taxes imposed at the wholesale level instead of at the pump and relies on revenue growth to maintain other spending. Taxing at the wholesale level reduces the transparency of that which is paid by motorists to support the state’s transportation infrastructure. Levying the tax at the pump would remind taxpayers of government’s costs more clearly.

Another solution has been provided by Mackinac Center analysts time and again: cut spending. Just last month we released a list of 35 ideas for cutting state spending by $2.1 billion. There’s no need to wait for a recession to adopt or adapt these in part or whole.

The House plan to fund roads deserves applause for its creativity, political courage and thoughtfulness. It should be preferred to the Senate’s proposed tax hike idea should any compromise legislation be borne of the two efforts.

RTW 'Freeloader' Claim Still a Farce

MEA is the one freeloading off of teachers

In the debate over whether or not people should be forced to pay money to unions as a condition of employment, opponents of right-to-work laws often claim that workers who exercise their rights under the law are “freeloaders.” That is, that they are taking advantage of benefits from union bargaining while not paying their “fair share.”

The Michigan Education Association, like most unions, supports collectively representing workers whether they are in the association or not because of the leverage it gives them at the bargaining table. Still, no private organization should have to provide benefits to people who aren’t paying for them.

But a look at the MEA’s just-released financial reports shows it is the union that is freeloading off of dues-paying members. According to the organization’s LM-2 form, just 11 percent of total spending goes toward “representational activities.” The majority of spending is for the salaries and benefits of the union’s central staff. The retiree pension and health care costs for the organization also have liabilities totaling about $190 million – and those costs have been skyrocketing.

In other words, the vast majority of what school employees in the state of Michigan pay as union dues go for things other than directly representing them at the bargaining table. The good news is that as contracts expire, those people now have a choice of whether they want to keep spending their money that way.

Top 10 Charter High Schools in 2014

Center's report card accounts for student background

The Mackinac Center has just released its biennial high school Context and Performance report card. Though there are several report cards for Michigan schools, the Center is the only organization in the state to publish a school report card that adjusts for student socioeconomic background, which allows schools serving diverse communities to be compared throughout the state.

Below are the Top 10 public charter high schools. These schools are some of the highest-scoring in the state. Star International Academy is, once again, ranked No. 1 among all public high schools

Of the 10 public charter schools listed below, six were ranked among the best high schools in the Center's 2012 report card, as well (Star International Academy, Cesar Chavez High School, Riverside Academy, Universal Academy, Excel Charter Academy-Grand River Prep and International Academy of Flint).

Other schools, including Wellspring Preparatory High School and Detroit Edison, made this Top 10 list in their first few years of serving high school students.

Vernuccio on Fox News, in The Hill

Discussed bogus Black Friday protests, the future of unions

Labor Policy Director F. Vincent Vernuccio was a guest on Fox News recently, discussing worker centers and labor front groups involved in Black Friday protests. He also wrote about the issue in The Hill and explains why unions need to move away from politics and embrace workers’ needs in order to adapt and stem membership losses. You can read more in his recent study: “Unionization for the 21st Century: Solutions for the Ailing Labor Movement.”

Job Churn Shows Futility of Corporate Welfare

Cutting income taxes a better way to spur growth

(Image via Paul Keheler at Wikicommons)

Monthly job reports on payroll employment and the unemployment rate hide the massive job creation and job loss that occurs in the economy. This turnover challenges the state’s ability to influence job creation by offering tax money to select businesses to locate their business in Michigan.

According to the Bureau of Labor Statistics, Michigan’s private sector created 193,208 jobs in the first quarter of 2014 and lost 179,299 jobs in the same period.

The job creation was caused by 40,862 existing businesses adding to their payroll plus the opening of 11,150 new business establishments. The losses were caused by 41,565 businesses decreasing their payroll and 5,571 business establishments closing. While these numbers are preliminary, this was the lowest number of business closings recorded in this data series, which goes back to 1992.

Over the same period the state’s primary business attraction and retention program, the Michigan Business Development Program, offered subsidies to 15 companies to create 1,931 jobs. The subsidies will cost taxpayers up to $24 million, depending on how many of the recipients meet their milestones. The program’s annual report shows that since it was launched only 48 percent of the promised jobs have materialized, although that may improve given time lags between when the grants are offered and when firms hire workers.

Even if the jobs are created as expected and during the period that they were announced, it would account for less than 1 percent of the actual job creation. And these incentivized jobs would replace just 1.1 percent of the jobs that disappeared over those months.

Subsidizing particular firms is a poor way to foster broad-based economic growth. Policies that improve a state’s the business climate, like a personal income tax rate reduction, are a proven way to generate sustainable growth in the economy.

Voters have Diminished Clout in Lame Duck

How much, if any, will gas taxes increase?

Lame duck sessions in the Michigan Legislature provide a no holds barred setting for Lansing lobbyists and special interests. Many lawmakers will be leaving the Legislature at the end of the year or the end of their next term; others who were just elected to new terms know they won’t have to face the voters again until two or four years from now.

The political environment is ripe for deal cutting. Some lawmakers who have measures they want to see enacted will gladly support unrelated legislation in order to get “their own bills” passed. Trying to predict what will happen during a lame duck session is risky. A line from the Kenny Rogers song “The Gambler,” describes the situation. “There’ll be time enough for countin’ when the dealing’s done.”

This year’s lame duck session started shortly after the election. It will resume again after the two-week Thanksgiving/deer hunting break and could run up to Christmas week. The headline-making big item on the agenda is road funding. Gov. Rick Snyder has made it clear that his No. 1 priority is securing a new revenue stream (pegged at between $1.2 billion and $1.5 billion) before year’s end.

To most Lansing special interest groups and lobbyists, the simplest means of getting the money would be hiking the state’s fuel tax and registration fees. Others, including some lawmakers, argue that all or much of the road funding dollars could — and should — come out of the $52 billion state budget. Still others question whether $1.2 billion is needed immediately and assert that the revenue stream could be secured in smaller bites over the course of the next few years.

When the collective will of Lansing’s special interests is weighed against that of ordinary voters, the special interests win out more than their share of the time. In a lame duck session, such as this year’s, the deck is stacked even more to their advantage than usual.

Last week the Senate passed House Bill 5477, which would double the state’s fuel tax. In past years the fact that the bill moved so quickly could have been interpreted as assurance of its eventual passage in the House. That dynamic, however, has changed since Gov. Snyder came to office. Legislation that is bound to be unpopular with voters now frequently moves from one chamber to the other only to ultimately wither on the vine.

Gov. Snyder and Senate leadership tried to pass the fuel tax hike in June. Attempting this only six months prior to an election seemed like a fool’s errand, and predictably it failed. But a key question now may be: How many lawmakers promised in June that they would vote for the tax hike after the election was over?

It seems likely that House Bill 5477 moved before the two-week break to allow lobbyists, special interests and the administration additional time to try to line up enough “yes” votes for the fuel tax hike to pass in the House. That task might not be easy. There are indications that the House is reluctant to pass the fuel tax increase; but indications are not guarantees.

If it was left up to House Republicans alone, the legislation would seem to be doomed, but there are 51 House Democrats who are part of the equation. Some Democrats probably see supporting the fuel tax hike as an opportunity to cut deals on legislation that is important to them.

One indication that there currently aren’t enough “yes” votes in the House to pass the fuel tax hike is the recent posturing of the Michigan Chamber of Commerce. The Chamber has supported the fuel tax hike, but it is now threatening to back a ballot proposal in 2016 that would require all of the taxes collected at the pump to go toward fixing and maintaining roads. At present a portion of taxes drivers pay for gas goes to the School Aid Fund and local governments. Changing that so all the money is dedicated to roads would likely force lawmakers to adjust the budget to make-up the lost education and local government funding by eliminating or trimming other programs.

No doubt, the Chamber’s threatened proposal would ruffle the feathers of Lansing special interests; but is the threat of this sort of proposal enough to make House members, especially Democrats, vote for the fuel tax hike? That could depend on how seriously the Democrats take the threat, how they think it would impact the 2016 election, and whether they see the road funding issue as a hot potato they are in no hurry to help remove from the laps of the Republicans.

Last spring House Republicans forwarded legislation that would produce roughly $500 million for road funding, while barely nicking drivers’ wallets. That approach could still be part of the mix. One possible outcome might be a hybrid solution that includes the House GOP plan coupled with a smaller fuel tax hike.

A theory often repeated in the lobbies of the Capitol is that: “Voters will be just as upset over a small tax hike as they would be over a larger one; therefore, just go ahead and pass a larger one.” We can bet lawmakers will be hearing that self-serving special interest wisdom uttered again and again as this lame duck session unfolds.

Media Reporting on H.S. Report Card

Rankings available for all public high schools

The Dearborn Press and Guide is reporting that Star International Academy in Dearborn Heights has again been ranked as the top-performing high school in the state according to the Mackinac Center’s “Michigan Public High School Context and Performance Report Card.”

Ludington Daily News, the Battle Creek Enquirer, Kalamazoo Gazette, The Macomb Daily, St. Joseph Herald-Palladium and The Oakland Press also reported on how high schools in their readership areas scored.

WSJM-FM94.9 also interviewed Audrey Spalding, director of education policy and author of the study, about the results.

November 21, 2014, MichiganVotes Weekly Vote Report

Constitutional amendment proposals

While the legislature is in a two week recess with no voting, the Roll Call Report examines recent constitutional amendment proposals of interest.

Note: There will be no Roll Call Report during Thanksgiving week. The Report will return on Dec. 5.

House Joint Resolution KK: Replace House and Senate with unicameral legislature

Introduced by Rep. Martin Howrylak (R), to place before voters in the next general election a Constitutional amendment to establish a nonpartisan unicameral legislature (instead of a separate House and Senate) with 110 districts apportioned on the basis of formulas specified in the resolution. Legislators would have four year terms and term limits would be repealed. Referred to committee, no further action at this time.

HJRs B and MM, SJR Z: Repeal constitutional prohibition on graduated state income tax

Introduced by Rep. Jeff Irwin (D), Rep. Jim Townsend (D) and Sen. Rebekah Warren (D), respectively, to place before voters in the next general election a constitutional amendment to repeal an existing prohibition on a graduated income tax (as opposed to Michigan's current flat tax). The measures do not specify a rate structure, which would be left to future legislatures. Referred to committee, no further action at this time.

House Joint Resolution BB: Call for restrictions on corporation and nonprofit political spending

Introduced by Rep. Jeff Irwin (D), to submit an application to Congress calling for a “convention to propose amendments to the U.S. Constitution,” limited to proposing an amendment to “address concerns such as those raised by the decision of the United States Supreme Court in Citizens United v Federal Election Commission,” which affirmed that unions and “corporations” (including non-profit groups motivated by ideological or political concerns) possess the same right already recognized for individuals to spend however much they want on independent political expenditures. Referred to committee, no further action at this time.

House Joint Resolution NN: Call for congressional term limits convention

Introduced by Rep. Tom McMillin (R), to submit an application to Congress calling for a “convention to propose amendments to the U.S. Constitution,” limited to proposing an amendment that prohibits members of congress from being in office for more than 12 years (combined House and Senate terms). Referred to committee, no further action at this time.

House Joint Resolution OO: Require congress approve large-impact rules

Introduced by Rep. Tom McMillin (R), to submit an application to Congress calling for a “convention to propose amendments to the U.S. Constitution,” limited to proposing an amendment establishing three year sunsets on all federal departments without congressional re-authorization, and requiring congressional approval of all major administrative regulations that impose an economic burden exceeding $100 million. Referred to committee, no further action at this time.

House Joint Resolution PP: Call for limits on federal interstate commerce regulation

Introduced by Rep. Tom McMillin (R), to submit an application to Congress calling for a “convention to propose amendments to the U.S. Constitution,” limited to proposing an amendment clarifying that Congress's power to regulate commerce does not extend to activity within a state, whether or not it affects interstate commerce, or extend to compelling an individual or entity to participate in commerce or trade. Referred to committee, no further action at this time.

Senate Joint Resolution DD: Revise allowable School Aid Fund uses

Introduced by Sen. Bruce Caswell (R), to place before voters in the next general election a constitutional amendment to replace state constitutional language allowing tax revenue earmarked to the state “School Aid Fund” to be used for “higher education,” with new language limiting this to community colleges. In other words, tax dollars earmarked to this fund could only be spent on K-12 public schools and on community colleges. See also SJRs H, U and AA, and HJR Z, which would restrict School Aid Fund use to K-12 schools only. Referred to committee, no further action at this time.

Senate Joint Resolution EE: Make state constitution “gender neutral”

Introduced by Sen. Steve Bieda (D), to place before voters in the next general election a constitutional amendment to edit the document to make it “gender neutral.” For example, the current constitution adopted in 1963 establishes that “Every person has a right to keep and bear arms for the defense of himself and the state.” Under the proposal, that would become “for the defense of himself or herself.” Referred to committee, no further action at this time.

 

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.