From taxing free meals to creating a Bank of Michigan
It might be Halloween, but the ghosts and goblins aren’t necessarily the scariest things roaming our state.
In the spirit of the season, here’s some of the spoooookiest policy ideas we’ve seen let loose recently to terrify the (mostly) innocent people of Michigan:
- The never-ending vampiric hunger for tax revenue that drove a state lawmaker to propose taxing the free meals traditionally enjoyed as perks for restaurant employees.
- The Creature from the Muskegon Lagoon: A proposal to create new public-private port authorities that may rampage up and down the coastline, crushing privately-owned docks.
- It’s the return of the Monster That Ate All Our Business Tax Revenue, this time with powerful allies.
- You cannot run. You cannot hide. And if your homeschooled children try to, you’d have to report them to the state government.
- Government scientists in secret labs have released fiscal toxins like Fannie Mae and Freddie Mac, laying waste to entire communities. You’d think we learned our lesson. But deep in a lab in Lansing, someone’s brewing up a state-owned Bank of Michigan and we’re not sure the containment fields will hold it.
- The Lonely Mountain. Mount Doom. The Mountains of Madness. There’ve been some terrifying mountains in the past, but none so portentous as the “mini mountain ranges” the EPA is using to justify its latest power grab.
- The quirky farmer often turns out to be the villain, who would have gotten away with it if not for those darned kids. These windmill-toting “farmers” are even more suspicious.
- Entire industries of workers, turned into zombies with no individuality or self-control through mandatory industry-wide labor bargaining agreements. That’s the “future of worker voice and power,” they say.
Beating odds the beginning for Flint charter school
Flint’s Northridge Academy is still settling into its new, more spacious Coldwater Road campus. The public charter school has shown significant growth in core academics. Now the opportunity lies ahead to expand its footprint and its range of programming.
Northridge’s board recently acquired an unoccupied facility on the city’s east side, which the school possessed only shortly before the academic term began. More amenities are available to students now, including a gymnasium and larger outdoor space that could be used for a playground and athletic field.
Some rough edges can still be seen. A leak in the roof is being addressed. The classical music Northridge students are accustomed to hearing on the hallway speakers is not yet set up.
Like the building, the school and its 300 students — nearly all low-income and African-American — represent a work in progress. Students bring many challenges, including the effects of the Flint water crisis, with them to school. But Northridge Academy is committed to pursuing excellence rather than providing excuses.
“We have not arrived yet,” school leader Latricia Brown-Coates insists. The Detroit native was promoted to her position in 2012. Key results bear out the academic improvement that has taken place.
Every other year the Mackinac Center releases a report card that grades the state’s elementary and middle schools based on multiple years of achievement, adjusted to compare with expectations based on the share of low-income students schools serve. Northridge Academy ascended from a middle-of-the-road C in 2013 to an A grade and the top 5 percent statewide on the most recent edition.
In 2014, the Michigan Department of Education designated Northridge Academy as one of 55 Reward Schools for beating the odds of student poverty.
At least part of the explanation for the accolades can be found on classroom and hallway walls. The emphases are consistently visible: learning objectives, vocabulary words, behavioral expectations, and school mission and vision statements are present in every classroom.
Also posted are student results and goals on the NWEA assessments, administered three times a year to measure learning progress in key areas of mathematics and reading. The display of data is more than just an adornment. Of the 14 total tests, one for each subject in grades two through eight, Northridge students hit the targeted goal of being in the top half nationally for making progress from fall to spring. More impressively, they reached the 90th percentile or above on eight of the 14 tests.
Brown-Coates clearly conveys high expectations for Northridge students and staff. Teachers are required to keep up to date on their grade books and lesson plans.
Yet as a former teacher of “last-chance” students at Detroit Edison Public School Academy, she understands the challenging environment and the demands to provide a successful and supportive school culture. Every morning she sends her staff members a text message with a reminder of her love for them. Teachers have freedom to choose background music for their classrooms, and this year have been able to provide more innovative setups than the traditional rows of desks or tables.
Northridge’s school leader is proud of her team’s accomplishments — not only improving the school culture and raising the academic bar but also inspiring respectful behavior that has created a safe environment. While maintaining an atmosphere of discipline, she also regularly communicates her care for students and is seen by many as a mother figure.
Brown-Coates emerged from difficult childhood circumstances at home and at school. Her own beat-the-odds story drives a passion to get the best out of students who figure to have their own share of serious obstacles to overcome. “I don’t want these kids to have my experience. I want them to have a no-excuses mindset,” she said. “Because I did it, they can do it, too.”
The school partners directly with the Leona Group, a management company that employs its staff, on a range of support services; the charter is authorized by Ferris State University. The academy has just launched a chapter of National Honor Society. The leader’s vision for the school’s future includes enriched offerings more often seen in a suburban setting than in an inner city school: robotics, debate and a stronger arts program.
“We want to remain on the path where we continue to grow.”
Taxpayers already provide local governments more money
As Wayne County exits its direct state oversight, some are continuing the call for more money to local governments. Yet Michigan’s taxpayers already are providing local governments with more revenue.
Cities, villages, townships and counties have two major sources of operating revenues: property taxes and sales taxes. No local government levies a sales tax, but the state shares a portion of its sales tax revenue with local governments, with a portion mandated by the constitution and a portion that lawmakers determine annually.
Property taxes are a larger source of tax dollars for local governments than the sales tax revenue sharing, but both are important and experienced different trends over the past 15 years.
From 2001 to 2008, combined revenue sharing and local government property tax revenue increased by $1.2 billion, a 21.4 percent gain. Property taxes increased by $1.7 billion but revenue sharing dropped by $479 million.
The recession took its toll on property values in Michigan, so there were fewer dollars generated by property taxes. This decreased revenues by $579 million, an 8.3 percent decline from 2008 to 2012. Revenue sharing declined only $29 million.
Both property tax revenue and revenue sharing have recovered since then, with overall revenue increasing by $553 million from 2012 to 2015. Total property tax revenue is up $381 million and revenue sharing is up $171 million.
There isn’t a report out yet on property tax revenues in 2016, though the state’s revenue estimators predict growth. The state already approved the fiscal year 2017 budget, which includes a small increase in shared revenue.
While these are the overall state trends, each government unit is going to vary.
It is tough to say the revenue system is broken when revenues are up, and especially when the state still hasn’t fully recovered to its 2000 job levels. Better to look on the spending side of local finances.
Gas tax increase, more college building debt, ‘culpable mental states,” liquor oligopoly and midwife licensure
The Legislature did not meet this week, so the Roll Call Report continues its review of key votes from the 2015-2016 session.
House Bill 4713, Require “culpable mental state” for criminal conviction: Passed 106 to 0 in the House on October 1, 2015
To establish a presumption that if a law does not indicate whether a culpable mental state (“mens rea”) is required to establish guilt for a crime, then this is required (subject to various specified exceptions). This means prosecutors must show that a defendant violated the law “purposely, knowingly or recklessly.” Currently, many complex administrative offenses authorize criminal penalties for actions that a regular person would not know are illegal.
House Bill 4713, Require “culpable mental state” for criminal conviction: Passed 38 to 0 in the Senate on December 15, 2015
The Senate vote on the bill described above.
House Bill 4095, Authorize more college & university building debt: Passed 103 to 1 in the House on December 3, 2015
To authorize $51.3 million in new government spending for several state college and university construction projects. The bill would cause the state to increase its own debt burden by $33.1 million.
House Bill 4095, Authorize more college & university building debt: Passed 38 to 0 in the Senate on December 15, 2015
The Senate vote on the bill described above.
House Bill 4738, Increase gas and diesel tax: Passed 55 to 52 in the House on November 3, 2015
To increase the 19 cent per gallon state gasoline tax and 15 cent diesel tax to 26.3 cents per gallon starting in 2017.
House Bill 4738, Increase gas and diesel tax: Passed 20 to 18 in the Senate on November 3, 2015
The Senate vote on the bill described above.
House Bill 4736, Increase vehicle registration tax: Passed 54 to 53 in the House on November 3, 2015
To increase the annual vehicle registration (license plate) tax by 20 percent per vehicle, and impose a surtax on electric and alternative fuel vehicles whose owners don't pay gas tax.
House Bill 4736, Increase vehicle registration tax: Passed 20 to 18 in the Senate on November 3, 2015
The Senate vote on the bill described above.
House Bill 4321, Restrict warrantless residence searches: Passed 83 to 22 in the House on October 28, 2015.
To establish that a law enforcement officer may not search a residence without a search warrant if a resident expressly objects, even if another resident consents after the objector is no longer physically present. This would not apply if one resident is the victim of a crime committed by another resident, or if there is imminent danger to people, a suspect may escape or evidence may be destroyed. The Senate has not voted on this bill.
House Bill 5023, Establish more “dark sky preserves”: Passed 88 to 18 in the House on November 10, 2015
To designate the Rockport State Recreation Area, Negwegon State Park and Thompson's Harbor State Park as “dark sky preserves,” which means state authorities must restrict outdoor lighting to only that needed for safety, security or reasonable use and enjoyment.
House Bill 5023, Establish more “dark sky preserves”: Passed 36 to 0 in the Senate on February 3, 2016
The Senate vote on the bill described above.
House Bill 4581, Increase state payments to liquor distribution oligopoly: Passed 102 to 4 in the House on October 8, 2015
To increase from $7.50 to $8.25 the per-case fee that the private company or companies granted a state monopoly to warehouse and distribute liquor to retailers can collect from the state as a "reimbursement" for its distribution costs. This will increase annual payments to these private companies by some $10 million annually.
House Bill 4581, Increase state payments to liquor distribution oligopoly: Passed 36 to 2 in the Senate on December 15, 2015
The Senate vote on the bill described above.
House Bill 4598, Impose licensure on midwives: Passed 79 to 25 in the House on December 3, 2015
To impose a state licensure mandate on midwives, including regulations and a $200 annual license fee. The Senate has not voted on this bill.
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.
Mackinac Center experts recently in the news
Workers deserve a choice not only when it comes to union membership, but also in whether they will work under a union-negotiated contract.
F. Vincent Vernuccio, director of labor policy at the Mackinac Center for Public Policy, and Jeremy Lott, an adjunct scholar with the Center, wrote about Rep. Gary Glenn’s new Worker’s Choice bill in an op-ed published by the Midland Daily News. House Bill 5829 would give Michigan’s government employees the freedom to pay dues to a union and allow it to bargain on their behalf, or not pay union dues and negotiate directly with their employer.
Labor leaders might not like such a setup, but if the bill were enacted, their legal and crocodile-tear complaint against “free riders” (who are more like “forced riders”) in Michigan’s public sector unions would go away.
Rank-and-file members may already be far ahead of their leadership in understanding the basic fairness of Worker’s Choice. In one national survey, almost 70 percent of union members polled thought those people who don’t wish to pay union dues ought to represent themselves.
They reference Flint teacher Stephen Hall, who wants the freedom to negotiate a contract that fits the unique needs of his family, rather than accept the one-size-fits-all terms negotiated by the union.
Employees and unions in South Dakota would also benefit from a Worker’s Choice law, though a bill has not yet been introduced there. Instead, unions are pushing a convoluted ballot measure to undermine right-to-work and force people to pay for representation, even if they’d rather work directly with their employer and negotiate their own terms. Lott and Vernuccio wrote about the situation in the Washington Examiner:
Forget for a second that unions pushed for the current laws that give them a monopoly on bargaining in unionized shops. It may not be ideal that unions should have to negotiate for workers and not get paid for it. It is incredibly unfair to workers to not be given a choice in the matter.
In other labor-related news, Vernuccio recently spoke with WJR’s Frank Beckmann about the attempts to unionize student athletes, and Lott wrote in The American Spectator about a union’s misguided focus on the Black Lives Matter agenda rather than a potentially jobs-killing tax proposal.
Read the full op-ed in the Midland Daily News here.
Read the full op-ed in the Washington Examiner here.
Listen to Vernuccio’s interview with Frank Beckmann here.
Read Lott’s full op-ed in The American Spectator here.
As winter approaches, fossil fuels keep us warm
It is getting more crisp and cool in the morning. In Michigan, we’re getting back into the habit of scraping the frost off our windows before we get in the car and head to work. We’re also remembering the location of the thermostat in our homes so we can take the chill off the morning temperatures.
For most people, that heat, which we expect from our furnace, is brought to us courtesy of natural gas or propane, both of which are transported through pipelines that crisscross this continent. As the cold deepens and we move into winter, having the ability to simply flip a switch or push a button to heat our homes not only improves our daily lives, it literally saves lives.
But the actions of self-styled climate activists would keep that essential energy — and the warmth and security it provides — from Michigan residents. Working around their rallying cry of “keep it in the ground,” a few of these activists are so convinced that we must stop using these fuels that they are willing to forcibly block access to them for Michigan residents. They are moving beyond peaceful protest and political involvement to what they call “direct action” — an increasingly in-your-face style of protest that often involves threats or the actual destruction of industrial equipment and access structures. “Direct action” replaces negotiation when special interest groups want to compel an immediate change in policy.
These protest groups defend their actions, claiming that time is too short, the issue is too important, or that they have exhausted all other political and protest options. Their statements assert that their only recourse is to “step outside polite conversation,” and use direct action to “shut it down.” While they will typically stress that their actions are meant to be nonviolent, in the case of one recent climate-related direct action, the potential for danger, or catastrophic results, grew exponentially.
On Oct. 11, a group of climate activists calling themselves Climate Direct Action spread themselves across the country in Washington, Montana, North Dakota and Minnesota. The groups, each made up of one activist and one supporter, forced their way through security fencing at pipeline facilities belonging to Enbridge, TransCanada, Kinder Morgan and Spectra Energy. After filming statements justifying their actions, they cut the chains and locks protecting pipeline safety valves and turned off the flow of oil.
Other, better-known, environmental groups applauded the efforts. In one statement, Greenpeace Energy Campaign Director Kelly Mitchell even went so far as to threaten further action. “Greenpeace supports the brave activists who peacefully shut down all 5 tar sands pipelines into the US. ... If our leaders won’t take action to protect people and the planet, the climate movement is willing and able.”
Enbridge officials responded by first recognizing the rights of people to comment on energy issues. However, they drew a line at what they called “pipeline tampering incidents.” Enbridge spokesperson Jason Manshum described the group’s “attempt to tamper with energy infrastructure” as “reckless and dangerous,” noting the possibility for a pipeline failure or explosion as a result of the tampering.
“The groups involved in this ... claim to be protecting the environment, but they do the opposite and put the safety of people at risk — including themselves, first responders and neighboring communities and landowners.” Manshum went on to say that Enbridge would “support the prosecution of all those involved.”
The actions of Climate Direct Action against two Enbridge pipelines — Line 4 and Line 67 — hold direct significance for Michigan residents. Both pipelines run from Alberta, Canada southeast to Superior, Wisconsin. Line 5, the pipeline that supplies Michigan with 540,000 barrels per day of light crude oil for refineries and natural gas liquids (in many cases, propane) begins in Superior. If the oil flows to Superior were successfully stopped, the oil and propane flowing through Line 5 could also stop.
What the “shut it down” forces don’t tell Michiganders is that Line 5 provides the Upper Peninsula with 65 percent of the propane its residents use to heat their homes and cook their food. It also provides 55 percent of the propane used statewide. The approaching winter paints, in stark colors, the vital reality that we need a reliable, affordable source of energy to heat our homes and places of work. We must recognize there are risks associated with the transportation and use of gas and oil. But their benefits — reliable and affordable electricity, transportation and heating fuels, to name just a few — far outweigh those risks.
It is one thing to speak out about potential risk, to peacefully take part in the political process, and to work to make changes in energy and environmental policy. It is another thing entirely to deliberately endanger lives and communities because you refuse to wait for your worldview to be implemented. The direct actions of groups like Climate Direct Action damage the integrity of the political process that we rely on to set reasonable energy policies. Their actions against energy infrastructure also make the risks associated with the use of oil and natural gas far worse for both people and the environment.
Op-ed published in Bridge Magazine
Michigan residents and business owners need more choices when it comes to electricity, but a bill making its way through Lansing would put an end to the limited options that currently exist.
Mackinac Center for Public Policy’s Director of Environmental Policy Jason Hayes and adjunct scholar Ted Bolema wrote about the impact Senate Bill 437 would have in an op-ed published by Bridge magazine. Despite supporters’ claims that the bill would not affect consumers who use Michigan’s limited electricity choice program, Hayes and Bolema cite a report from UBS Financial Services that found electricity choice would “whither organically under the law.”
So the big utilities stand to make a substantial profit if choice “withers.” But Michigan energy users have repeatedly stated in public polling that they value electricity choice and would like to see it expanded. In one 2013 poll, 82 percent of Michigan residents supported electricity choice. A 2016 poll showed that 66 percent supported expanding electricity choice beyond the current 10 percent limit.
According to state data, more than 11,000 electricity customers were waiting to join the choice program in December and one in four residents said they would buy electricity from an alternative supplier were they allowed to do so.
Read the full op-ed in Bridge magazine.
Pushback against federal regulation should not preclude local reform
A resolution pushing back on proposed new federal guidelines for education funding received broad bipartisan support this week in Lansing. Where a top-down mandate meets resistance, local initiative could pick up slack to address the underlying issue.
MLive reports that State Superintendent Brian Whiston testified Tuesday before the Senate Education Committee against a regulation introduced by the U.S. Department of Education to implement the new Every Student Succeeds Act, or ESSA. The regulation would require local districts to demonstrate that low-income schools are funded at least on par with their wealthier peers before federal Title I dollars are released.
In other words, districts should be using designated federal funds for high-poverty schools to “supplement” state and local dollars, rather than to “supplant” or backfill their budgets.
Resolution sponsor Sen. Phil Pavlov says schools don’t need another federal mandate, a view that deserves sympathy. Michigan Association of School Administrators executive director Chris Wigent suggested the proposed rule is a solution in search of a problem. But it’s not clear that districts generally direct dollars to their schools in an equitable manner.
School districts with more low-income students already are rewarded with substantial federal dollars, resulting in greater total funding for them compared to schools in nearby wealthier neighborhoods. For example, in 2014-15, Detroit Public Schools and Ann Arbor Schools received about the same amount of combined local and state funding per student. But add in Detroit’s $5,125 versus Ann Arbor’s $300 in federal revenue per student, and the comparison greatly changes.
Under Proposal A, Michigan has established a broadly equitable funding floor at the district level. How dollars filter down from the central office to local schools can be much harder to see, though. Most school-based funding is tied to district programs and staffing formulas, with funding at each school largely determined by employee seniority rather than student need.
Consider the Detroit Community School District, where the Title I federal funding proposal would have direct impact. How much resource equity exists between Fisher Lower Magnet Academy near Gratiot and 8 Mile, where 99 percent of kids are low-income, and the University District’s Bates Academy, with half the student poverty rate?
An increasing number of school districts nationwide have been moving toward systems that distribute significant shares of funding to schools based on student characteristics. Such systems are referred to as “student-based budgeting,” “weighted student funding” or “backpack funding,” because the money (figuratively) goes with the child’s backpack to the place where he or she is served.
The benefits of the practice include more transparent allocation of dollars and more flexibility for principals to prioritize financial decisions that directly impact their student body. And though no decisive impact on learning has been found, the Reason Foundation observes that greater student-based budgeting allocations are highly associated with closing academic achievement gaps between students of different races and socioeconomic groups.
The challenge of pursuing this strategy comes in training principals and other staff, and in upgrading financial systems and tools. But since many larger urban districts have gone down this path, the learning curve for a willing Michigan district would not have to be so great.
The proposed federal mandate has caused many state officials and interest groups to recoil, perhaps for good reason. The strings that come along with D.C. dollars and noble intentions can undercut effective local solutions.
Yet a district like Detroit, in dire straits and looking for a fresh start, ultimately would benefit from empowering local school decisions and from distributing dollars in a fairer, more transparent manner. The question is whether the lift would be too heavy for local leaders to accomplish.
10 reforms state lawmakers can implement now
Michigan and other states are actively competing to become medical tourism destinations. Whether they succeed depends in large part on opening the state’s medical care delivery systems to competition and innovation and tearing down current protectionist barriers. These same reforms will make health care better and more affordable for our own residents too.
What steps are necessary to make this vision real?
Naomi Lopez-Bauman is director of healthcare policy at the Arizona-based Goldwater Institute and adjunct scholar at the Mackinac Center for Public Policy. She has identified what’s needed to bring it about, which the nationwide State Policy Network assembled into a new “toolkit” called “Ten Reforms State Lawmakers Can Implement Now.”
Here’s a quick summary. The full report offers clear explanations of the specific problems we face and how to address them.
1. Establishing Accountability and Transparency in Government Programs
Problem: Government programs to expand insurance coverage including the Affordable Care Act have added layers upon layers of bureaucracy and are often ineffective, inefficient and duplicative, not to mention unaccountable to both patients and taxpayers.
What Michigan Can Do: Before adding any new programs, start by auditing the ones we already have — state, federal and local — to identify who they are supposed to help and how much of the money actually benefits individuals. Then determine how these resources could be used to better meet the needs of those who need help the most.
2. Regain Control of the Health Insurance Market
Problem: Under the ACA states lost control of seven key insurance regulation factors for the individual market, including obtaining and keeping coverage; its cost; coverage mandates; cost-sharing limits; provider requirements and patient protections. Repealing the ACA will not affect these unless state laws are also changed here.
What Michigan Can Do: Lawmakers should review how the ACA was implemented here by state agency actions or new laws and prepare legislation now to take back control if the ACA is repealed.
3. Verifying Medicaid Eligibility
Problem: The number of Medicaid enrollees is skyrocketing, and many who may not be eligible are getting onto the rolls.
What Michigan Can Do: Implement a “robust and timely” verification system that, among other things, cross-matches Medicaid enrollees against other welfare programs. Adopt the best electronic and other tools to “systematically and routinely” verify eligibility.
4. Unwind the Medicaid Expansion
Problem: This state cannot depend on the federal government to keep funding its medical welfare programs at the same rate. The Medicaid expansion did not increase the amount of health care resources available to patients; it simply added additional patients who are less needy than the pre-expansion population. As a result any federal or state cuts to these programs may fall most heavily on those most in need.
What Michigan Can Do: Seek permission from the federal government to freeze enrollments from the less needy Medicaid expansion population. If the feds refuse, roll back eligibility to pre-ACA levels.
5. Increase the Supply of Health Care Providers
Problem: Long before Obamacare became law Michigan was already rationing health care in many ways, including restrictive scope of practice laws on midlevel providers like nurse practitioners, and using a “Certificate of Need” law that gives industry incumbents a say on whether new entrants will be allowed to compete against them.
What Michigan Can Do: Repeal the obsolete and damaging Certificate of Need law that benefits big industry players at the expense of patients and innovators. Eliminate scope-of-practice laws that benefit current providers but make care less affordable and accessible, and slam the door on innovative new ways of bringing health care services to people where they live, work and shop.
6. Protect Telemedicine and other Innovations
Problem: New services are exploding that give patients access to real doctors by video at a very reasonable cost, from the comfort of their own home. But around the country barriers are going up, including requirements for patients to go to a particular location for a video conference, or have a healthcare professional present during one, or get a physical exam before a prescription can be written. These burdens often have nothing to do with patient safety.
What Michigan Can Do: “Lawmakers should protect and empower healthcare innovators, especially when they offer consumers an affordable option to access timely care,” advises the Toolkit.
7. Safeguard Novel Medical Arrangements like Direct Primary Care
Problem: Direct Primary Care is an attractive alternative that lets families or employers enter flat-fee contracts with a doctor for basic services. By eliminating the insurance company middleman for checkups and a range of routine procedures, costs can be dramatically lower and access to your doctor greatly improved.
What Michigan Can Do: Good news: Our legislature already took a huge step by passing a law that excludes Direct Primary Care from the comprehensive and restrictive regulatory regime that governs health insurance. Not-so-good news: A Senate-passed proposal for a pilot program extending the same benefits to Medicaid recipients was crushed by status-quo interests in the House. We’ll get a do-over when the next Legislature takes up the state budget in the spring.
8. Expand Access to Volunteer Care
Problem: Many barriers stand between needy patients and health professionals willing to voluntarily provide free services.
What Michigan Can Do: Michigan could follow a model adopted in Florida, where doctors contract with the state to get protections from lawsuits in return for giving charity care to patients whose incomes are under 200 percent of the federal poverty level. Letting professionals meet continuing education mandates by providing volunteer care is another approach. Michigan should also facilitate charity groups that “parachute in” for large scale weekend clinics free to all comers, such as the Remote Area Medical organization.
9. Give State and School Employees Access to Free Market Health Options
The Problem: Health Savings Plans are popular in the private sector and are saving both workers and employers billions of dollars.
What Michigan Can Do: Nothing prohibits offering the same option to public employees. Legislation has been introduced to allow this in the past but did not advance. It should.
10. Protect Michigan Taxpayers from the ACA ‘Cadillac Tax’
The Problem: It starts in 2018, and every dollar paid to the “Cadillac Tax” is a dollar that won’t go to provide health care services. For family plans, 40 percent will be taken from of every dollar above an insurance premium price of $27,000. As healthcare costs continue to rise faster than inflation this tax will come down on more Michigan residents.
What Michigan Can Do: Our Legislature already passed a law in 2011 that capped state and school employee insurance benefit costs. But the protection has been watered down once, and is vulnerable to further erosion. One way to defend this law is to require that any Cadillac Tax on government employee insurance benefits be paid by the employees themselves, not taxpayers.
Michigan's credit rating could increase after pension reform
Lawmakers hear odd arguments when attempting to reform the state’s underfunded pension system. The latest argument is that converting Michigan’s school employee pension program to a defined-contribution system will tarnish the state’s credit rating. For evidence that this is unlikely, Michigan can look to its own history, which shows that offering new workers defined-contribution retirement benefits instead of defined-benefit pensions can improve a state’s credit rating.
Michigan closed its state employee defined-benefit system in 1997, meaning all employees hired after that date would receive 401(k)-style retirement benefits instead of defined-benefit pensions. In 1998 the state’s credit rating was upgraded. Credit ratings consider a lot of factors facing a government’s fiscal health, but improved pension funding was cited as one of the reasons for the upgrade.
Other examples exist. Oklahoma closed its state pension system recently. (And they did it without triggering the “transition costs” frequently raised in Michigan.) Its credit rating also improved following the change.
The financial risk of underfunded pensions is well-known to credit rating agencies. Earlier this year, the rater Moody’s alerted Michigan that resolving pension funding problems in school districts could be a factor that leads to an upgrade in a rating.
Putting control over retirement back in the hands of school employees would be better than our current system. It would phase out the ability of the state to generate additional debt by promising workers something, but not paying for it until later. And, contrary to what defenders of the system are implying, it would improve the state’s long-term financial prospects.
To learn more about how to fix Michigan’s pension problem, visit: www.mackinac.org/pension