Teachers wishing to opt out of union must use little-known P.O. box
Since the passing of right-to-work legislation in 2012, Michigan's largest teachers union, the Michigan Education Association (MEA), has gone to extraordinary lengths to keep unwilling members in the union, first by extending contracts, then by enforcing a scarcely-publicized "August Window." Members who fail to opt out of the union during the month of August have had their membership dues sent to collections, despite multiple authorities calling the August Window illegal.
The latest effort comes in the form of a small disclaimer at the bottom of MEA's Members Only page:
Effective June 3, 2015 -- For any resignations during August 2015 and any subsequent resignation timeframes, all resignations of MEA membership must be submitted in writing, signed and dated by the member, and mailed to MEA at P.O. Box 51, East Lansing , MI 48826.
This address change had to be sought out. Some members have contacted the Mackinac Center concerned about whether their resignation letters would be accepted if they sent them to a different post office box number.
The August Opt Out address change was also featured by the Washington Examiner on August 18, and on Vic McCarty's podcast on August 20. On September 1, the address change was featured on the Daily Caller and the Cato Institute Blog.
On August 21, Ingrid Jacques published an editorial in The Detroit News titled "MEA keeps trying to block right to work" in which she gave a brief history of MEA member-retention tactics from right-to-work through the address change. The full editorial is available at The Detroit News website.
Any MEA members who have already sent in resignation materials this month are encouraged to send a second letter to: MEA P.O. Box 51, East Lansing, MI 48826.
Those who wish to opt out may find information and materials to do so at AugustOptOut.org.
Key road funding votes of 2015
On August 18 and 19 the Michigan House and Senate met in an unsuccessful effort to negotiate the differences between road funding bills each has passed. In the end they appointed a House-Senate conference committee to craft a compromise.
This edition of the Roll Call Report repeats the latest key road funding votes by each body, which were taken in June and July.
House Bill 4615, Increase fuel tax - House version: Passed 58 to 51 in the House on June 10
To increase the current 15 cent per gallon diesel fuel tax to 19 cents per gallon, and index future diesel and gasoline taxes to inflation. Also, to tax natural gas and other “alternative fuels” burned by vehicles at an equivalent rate.
House Bill 4615, Increase fuel tax - Senate version: Passed 19 to 19 in the Senate on July 1 (Lt. Gov. broke the tie)
To increase the current gasoline and diesel fuel tax to 34 cents per gallon by Jan. 1, 2017, an increase of 15 cents and 19 cents, respectively, and index the higher rates to inflation. When combined with the 6 percent sales this would give Michigan the second highest gas tax in the nation.
House Bill 4605, Earmark some income tax to roads - House version: Passed 62 to 47 in the House on June 10
To earmark a portion of state income tax revenue to road funding, gradually increasing the amount to $717 million in 2019, which would then be indexed to inflation.
Senate Bill 414, Earmark some income tax to roads - Senate version: Passed 27 to 11 in the Senate on July 1
To earmark some income tax revenue to road repairs, gradually increasing the amount to $700 million, which would then be indexed to inflation. While the Senate has not identified spending cuts to offset this, estimates are that income tax receipts will increase more than $500 million annually by 2017.
House Bill 4609, Offset income tax roads earmark with EITC repeal: Passed 57 to 52 in the House on June 10
To eliminate the state earned income tax credit, which grants recipients an amount equal to 6 percent of the federal EITC, a refundable tax credit that sends checks to low income workers. Michigan state taxpayers contribute around $115 million annually for this program. This spending cut would offset some of the income tax revenue repurposed to road repairs.
House Bill 4607, Offset income tax roads earmark with corporate welfare cuts: Passed 60 to 49 in the House on June 10
To no longer spend $75 million annually on various direct and indirect subsidies granted to corporations and developers under the “21st Century Jobs Fund” rubric, and instead use this money on road repairs. This spending cut would offset some of the income tax revenue repurposed to road repairs. The House also passed House Bill 4608, which would halt an annual earmark of around $60 million in Indian casino revenue to government economic development programs and their adminisration.
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.
Incentives gone awry
In 2013, the Michigan Legislature passed a bill expanding Medicaid, a core component of the federal Affordable Care Act, aka Obamacare. Given Republican control of the state House, Senate and governor’s office, the move surprised many. Two years earlier, referring to another ACA provision (the insurance exchange), Chuck Moss, then the chairman of the House Appropriations Committee, said GOP lawmakers would “rather be caught sacrificing to Satan than voting for Obamacare.”
Lost in the hubbub surrounding the expansion bill was a section requiring hospitals that were contracted by the state to provide managed care services under Medicaid to offer “healthy behavior” incentives for new enrollees. The idea was to mimic the cost-saving incentives inherent in private Health Savings Account insurance plans, which use high deductibles and copays to encourage health care consumers to shop around and avoid paying excessive prices.
But the Obama administration had refused to permit states to impose any meaningful deductible or copay requirements on Medicaid beneficiaries, so Michigan policymakers sought other incentives. Since the state couldn’t use a stick, it would try a carrot.
Recent news reports have focused on one of these carrots, $50 Wal-Mart gift cards for Medicaid clients who, in essence, “follow the doctor’s orders.”
The law leaves the exact form of an incentive up to the discretion of the officials who negotiate the managed care contracts between the state and the hospitals that provide almost all Medicaid services in Michigan. While the state doesn’t itself purchase or give out any Wal-Mart gift cards, their cost is baked into the Medicaid managed care contracts.
Jennifer Smith, spokeswoman for the Michigan Department of Health and Human Services, explained that the hospitals must “provide a $50.00 gift card to … beneficiaries who earn less than 100 percent of the federal poverty level, have met with a primary care provider, and have agreed to address or maintain healthy behaviors.” She said, “We want to see the newly insured connecting with primary care providers and understanding how to use their benefits so they can take steps to improve their overall health and wellness.”
Enforcement and Nanny Statism
State Sen. Patrick Colbeck (R-Canton) was perhaps the most vocal critic of Medicaid expansion in the state Senate. Colbeck said about the gift cards, “This really is an incentive to expand participation in the program.”
He referred to the “double loss” this incentive incurs, one to the taxpayers who pay the bills and the other to the individuals who become dependent on a government welfare program. Colbeck is also concerned with the implications of the state involving itself so deeply in the personal affairs of private citizens.
In addition, he believes that what participants are really rewarded for is the information they give to the government rather than their medical lifestyle. He points to a provision of the expansion statute that requires clients to “demonstrate improved health outcomes or maintain healthy behaviors as identified in a health risk assessment. …” (emphasis added).
In other words, the state may not be incentivizing healthy behaviors as much as filling in the right answers on a form.
Longer Term Impacts on Freedom and Finances
The bill authorizing the expansion extended medical welfare to two new populations: able-bodied childless adults under 100 percent of the federal poverty level (FPL) and people between 100 and 138 percent of FPL. It also brought into the program many individuals who were already eligible for Medicaid but were not enrolled (the “woodwork effect.”)
Initially the federal government is paying for the expansion, but starting in 2020 Michigan taxpayers will be responsible for 10 percent of the cost. This was originally projected to be around $300 million annually, but could be much higher because enrollment has already far exceeded original estimates.
The Wal-Mart gift card incentives bring into focus three of the many concerns raised about the Obamacare Medicaid expansion: Increased dependency, deeper intrusions by the state into the deeply personal affairs of private citizens, and the potential for beneficiaries to “game” the system in ways that undermine its intentions.
See Also: Mackinac Center Medicaid Expansion Coverage
Doubling the corporate income tax will harm workers
A union-sponsored group called Citizens for Fair Taxes is organizing a signature-gathering petition campaign for a November 2016 ballot initiative that would nearly double the state’s main business tax. The new money would be earmarked to state and local road projects. The proposal would increase Michigan’s Corporate Income Tax from the current rate of 6 percent to 11 percent.
This would reportedly extract some $900 million more each year from Michigan enterprises, but the costs of nearly doubling the tax-based disincentive to invest and run a business in Michigan could be much higher.
A Lesson from Recent Past
The proposal, if enacted, would move Michigan from having a fairly competitive business tax rate to having the second-highest nationwide.
Michigan already has a wealth of experience with the consequences of being a state with a high business tax burden. In 2007, the widely reviled Single Business Tax was replaced by an equally damaging gross receipts tax called the Michigan Business Tax (MBT). That same year, the Legislature and Gov. Jennifer Granholm imposed a 21.99-percent surtax on the new tax.
Before a reform in 2011 that made the state business tax simpler, fairer and less burdensome, the Tax Foundation ranked Michigan 49th for corporate income taxes.
The high tax rate contributed to an unfriendly business climate, and in turn, Michigan’s “lost decade” of joblessness. Within two years of the MBT’s implementation, the 2008 financial crisis and recession hit, and the state unemployment rate shot up from 7 to 12 percent.
Once the MBT was replaced in 2012 by a simpler and lower Corporate Income Tax, Michigan has performed significantly better economically. The state’s unemployment rate is down to 5.3 percent.
If all that recent history isn’t enough to make Michigan voters wary of piling on businesses, they should know that a tax increase aimed at business owners and investors could wound working families most of all. That’s because the party targeted by a tax and the one paying it are not necessarily the same.
Business tax incidence — who pays matters
A review of the extensive research and evidence prepared for a U.S. Treasury publication supports the argument that the owners of and investors in businesses subject to the proposed 11-percent tax would not be the ones who pay. The authors concluded that “labor may actually bear a substantial burden from the corporate income tax.” A National Tax Journal article suggests that in an open economy, labor bears 40 percent of the cost. Other scholars offer evidence that as much as 70 percent of the burden can fall on labor.
This record contrasts sharply with the results imagined by organizers of the petition campaign.
Let's eliminate the corporate income tax instead
Harvard economist Greg Mankiw’s research found nearly 50 percent of all tax revenues lost from eliminating the federal corporate income tax would be regained from higher business productivity. He estimates that a reduction in corporate taxes spurs nearly three times more recovered revenue than an equivalent reduction in personal income taxes.
So if Michigan totally abolished the Corporate Income Tax tomorrow, about half the $1 billion of foregone revenue would make its way into the state’s coffers indirectly from the immense growth resulting from better incentives for businesses investment.
Boston University economist Laurence J. Kotlikoff writes that the elimination of the federal corporate income tax, combined with a “somewhat” higher personal income tax, would result in a surge of capital. The U.S. capital stock would increase by 23 percent, real wages (for skilled and unskilled workers) by 12 percent and output by 8 percent. Eliminating the state corporate income tax would yield similar effects.
The bulk of the economic literature shows that of all taxes, business taxes are the most economically damaging to state prosperity. William McBride, chief economist with the Tax Foundation, reviewed 26 studies about the effect of taxes on growth. He found that hikes in the corporate tax rate were more damaging than income, consumption, or property taxes.
Even left-leaning economists acknowledge the unexpected tax-incidence effects. Eliminating the corporate income tax even made it to the list of ideas on a public radio feature, “6 Policies Economists Love (And Politicians Hate).”
NPR’s Theo Francis gets it, saying: “Eliminate the corporate income tax. Completely. If companies reinvest the money into their businesses, that's good. Don't tax companies in an effort to tax rich people.”
Instead of increasing the corporate income tax rate, Michigan legislators should consider reducing or eliminating it altogether and joining the ranks of the six states that have managed to survive without it. As the Tax Foundation put it, “The lesson is simple; a state that raises sufficient revenue without one of the major taxes [corporate, personal, or sales] will, all things being equal, out-compete those states that levy every tax in the collector’s arsenal.”
The Mackinac Center has noted in the past the top ten states with the most economic growth do not have one of those major taxes. The Mackinac Center’s Michael LaFaive writes: “We found that since 2000 (and ending in 2009), these states enjoyed average real state GDP growth of 22.4 percent while those that have all three taxes grew only 13.4 percent. Maybe that’s just coincidence — taxes aren’t the only factor that contributes to state growth and decline — but I wouldn’t want to bet on it.”
By eliminating the corporate income tax, Michigan can become a leader by boosting state GDP and most importantly, the income of all of its citizens, rather than dragging workers’ incomes down.
Addressing the Proposal
Michigan has already been through a “Lost Decade,” thanks in part to an unfriendly business climate. Increasing the Corporate Income Tax wouldn’t help the state economy, and almost surely would harm it measurably.
Gov. Rick Snyder gave his reason to oppose the measure in a recent MLive op-ed:
“[Michigan’s] reformed tax climate, like our talent, ingenuity and the famous Michigan work ethic, is one of the factors that have brought companies from around the country and around the world to locate here.”
Snyder identifies how jobs have moved back to Michigan as a result of the rollback of policies such as the Michigan Business Tax and the implementation of simpler tax codes such as the current Corporate Income Tax.
Increasing the tax rate hurts corporations and consumers alike. There are many unintended consequences that would result were voters to approve the proposal in 2016. Reverting to yesterday’s failed policies will harm the workers and families of tomorrow.
Addressing overcriminalization and civil asset forfeiture
In an article published August 20, Bridge Magazine discussed recent collaborative efforts toward criminal justice reform in Michigan.
The Mackinac Center has been at the head of this movement, joined by such organizations as the ACLU of Michigan and Fix Forfeiture, advocating for civil asset forfeiture reform.
In May, Gov. Rick Snyder announced support for a number of reforms that would improve Michigan's overcriminalization problem, many of which came from a Mackinac Center study.
Reforms will save taxpayers money, improve judicial outcomes, and protect Michiganders' property rights. Michael Reitz was quoted for the article in Bridge:
Michael Reitz, executive vice president of the Mackinac Center, also called for “getting rid of unnecessary or duplicative criminal laws” as a start to criminal justice reform.
“This is the right time to be having this conversation,” Reitz said.
The full article is available at Bridge Magazine's website.
Bills move on to full Senate
The Senate Judiciary committee unanimously passed five bills that establish strong transparency requirements for property forfeited in Michigan.
The bills have are House Bill 4499, 4503, 4504, 4505, and 4506. They were supported by Senators Rick Jones, R-Grand Ledge, Tonya Schuitmaker, R-Lawton, Patrick Colbeck, R-Canton, Tory Rocca, R-Sterling Heights, and Steve Bieda, D-Warren.
The bills have already passed the State House and now head to the full Senate. If passed there, they would go to Gov. Snyder for his signature.
70 percent of schools contract out for some services
This summer, the Mackinac Center conducted its annual school privatization survey, finding that more than 70 percent of school districts in Michigan contract out for services such as food, transportation, and custodial work.
The findings have been publicized across the state. Michigan Radio wrote the following:
James Hohman of the Center says privatizing helps districts trim their payroll. Districts must pay about 25% of payroll into the state's severely underfunded pension plan.…
He says the state needs to stop overestimating the plans' returns — or move teachers into defined contribution plans like 401(k)s, "and until they do, it's just going to encourage more districts to contract out their support services."
The rest of the article is available on Michigan Radio's website.
On Sept. 15, the Columbus Dispatch ran an op-ed that focused on the results as they apply to districts in Ohio.
One bad outcome is not a reason to abandon privatization
For years the Mackinac Center for Public Policy has argued that — done right — governments could save money and improve services through privatization. That is, through selling assets or competitively contracting out services such as food, janitorial or busing services in conventional public school districts, governments can get better services with lower costs.
Unfortunately, the state signed a deal with Aramark Correctional Services for food services in state prisons that was troubled from the outset. The contract is now ending early after the two parties failed to reach an agreement on contractual amendments proposed by the company. There were problems reported from the beginning over shortages, unacceptable contact between Aramark employees and the prison population, and the smuggling of contraband goods (such as tobacco) into prisons.
The state and Aramark agreed to end the contract early and the state has turned to a different contractor rather than bring the work back in-house.
Failure in one instance does not mean the practice should be abandoned altogether. Nor does it mean that it should be abandoned in this specific instance. Should the United Parcel Service disappointment me I need not turn to the U.S. Postal Service; I can turn to Federal Express. That is what the state has effectively done by turning to Trinity Services Group of Florida to take over the prisons’ food service.
The state chose not to acquiesce to pressure from the Michigan-based American Federation of State, County and Municipal Employees Council 25 that once represented state prison food workers. The local wanted to bring the work back in-house. Michigan’s affirmation of privatization follows on the heels of a similar action in Ohio. There, the state rejected a union’s call to bring work back in house; instead, it extended a similar contract with Aramark.
In every transaction, there are two parties. The contractor has a responsibility to live up to its agreement, as does the government, which must closely monitor its demands.
The Aramark-Michigan situation is a good example of how privatization agreements are like marriages. Both parties share responsibility for making things work, and communication, trust and dispute resolution are critical to success. When one or both parties fall short in these areas — as appears to have been the case here — then it may make sense to either adjust the arrangement so that it fulfills the needs of both parties or end it entirely.
Not every instance of privatization is going to go well. Michigan and other states have experience with failed contracts. The state’s highway road maintenance experiment in the 1990s is a case in point. That contract ended among an array of complaints, though perhaps not all of them were fair. The occasional failure of participants to execute a contract well is no reason to turn away from privatization. Prisoners are both guarded and fed well by private sector providers around the country.
Perhaps the most puzzling thing about the Michigan food service contract is that Aramark does not seem to have vigorously defended itself, at least in public. It is a global corporate powerhouse with countless hours of experience providing food services in and out of prison systems.
It would be helpful to know why it was difficult for Aramark to ensure that its employees not fraternize with prisoners, for example. Why did the company seek to amend its contract to address billing and food menus? Such information could be useful to improve the situation moving forward, but Aramark has been strangely — though perhaps strategically — quiet.
At the end of the day it takes two to have a contracting tango. Perhaps both partners in this dance were burdened with two left feet, but it is hard to know from the public pronouncements. What is known is that done right, contracting can save money and improve services. This one contract should not serve as an excuse to forgo the benefits of privatization.
Michael LaFaive is director of the Morey Fiscal Policy Initiative with the Mackinac Center for Public Policy
Leonard Gilroy is director of government reform at the Reason Foundation.
Celebrating National Employee Freedom Week
(Editor’s note: A version of this article appeared on the Illinois Policy Institute Blog.)
National Employee Freedom Week started on August 16th and celebrates the freedom of choice employees have when it comes to union representation.
The Mackinac Center joined over 99 organizations in 42 states in what is called “a national effort to inform union employees about the freedoms they have to opt out of union membership and let them make the decision that's best for them.”
The week is sponsored by the Nevada Policy Research Institute and the Association of American Educators and was created to inform union members of the varying options available to them. According to NEFW polling, one in five Michigan union-member households did not know about these rights.
Worker Rights in Union Membership
Across the country workers have the ability to decide if they want to be a member of a union. If they are at a unionized worksite they can choose to stay in their union or resign their membership.
The NEFW website provides information and a generic form to help employees with the process of opting out of union membership, should they so choose. The Mackinac Center offers similar services: www.MIworkerfreedom.org for all Michigan workers and www.AugustOptOut.org for public school teachers.
Unfortunately, even with the help of these pro-worker organizations, unionized employee freedom varies depending on where they live, and almost no union worker has the freedom to represent themselves.
Rights in Forced Unionism States
In forced unionism states, unions can get workers fired for refusing to pay them. However these workers still have some rights.
Employees without worker freedom protections can become “agency fee payers.” Fee payers still pay a majority of their dues to a union but can resign their membership and receive a refund from the portion of their dues that goes directly to politics. However, they still must support what is known as internal union communication, which could be very political. Examples include union internal magazines and emails which contain messages of support for specific candidates or causes.
The ability to become a fee payer is rooted in two Supreme Court decisions: Communications Workers v. Beck for private sector employees and Abood v. Detroit Department of Education for public sector workers. These cases establish that employees have a first amendment right not to associate with union politics with which they disagree.
In June 2015 the U.S. Supreme Court agreed to hear the case Friedrichs v. California Teachers Association. This could give public employees the right to refrain from providing any support to government unions. The rational of the plaintiffs in Friedrichs is that all government union actions are inherently political, and any money going to these organizations is forced speech.
However, the Supreme Court has not rendered a decision in Friedrichs, and it will only apply to government employees. Currently, the only way all workers can fully stop supporting a union is if their state has a right-to-work law.
Rights in Right-to-Work States
In the 25 states, including Michigan, workers can fully opt-out of supporting a union they disagree with. Unlike the force unionism states, unions cannot require these workers to pay them on pain of being terminated from their jobs.
Workers and unions in right-to-work states can still negotiate over pay, hours, working conditions, and almost anything they can negotiate for in forced unionism states. Collective bargaining is almost exactly the same in right-to-work states as it is in forced unionism states.
Fully Free — Workers Choice
Even with right-to-work, workers are still not fully free. While they are not required to pay a union they must still accept union representation. Workers are unable to negotiate for their own working conditions and must operate under the terms established by the union collective bargaining agreement.
In almost all cases where a union organizes a company, they are given a monopoly over representation called “exclusive representation.” This means that they represent and negotiate for all employees at the job, whether the workers want it or not.
In order to be fully free workers should have the option to represent and bargain for themselves. A new concept called “Worker’s Choice” could allow workers to say “no thanks” to unwanted representation and allow unions to say “goodbye” to workers who do not want to associate with them.
Since this is a relatively new concept, no workers have this right yet. But thanks to projects like NEFW workers across the country are being better informed of their rights. Workers need to have the right to decide whether or not they want to support and associate with a union. NEFW is a great time to get information on making an informed decision.
New total up from 66 percent in 2014
There are more Michigan public schools contracting out food, custodial or transportation services than ever, according to the Mackinac Center’s latest survey of school districts. This year, 70.8 percent of school districts use private-sector vendors to clean buildings, get kids to school, or cook and serve school meals. This is up from 66.6 percent the previous year.
Getting more of the private sector involved in a supporting role in school districts is a long-term trend. In 2001, only 31 percent of districts contracted out these services and it took a decade before more than half of districts contracted out.
Our survey was performed between May 18, 2015, and August 4, 2015, and received responses from every Michigan school district for whether it used private-sector vendors to provide food, custodial or transportation services.
The biggest change has been in custodial services. Our 2003 survey found only 34 districts contracted out this service. In 2015, 283 of Michigan’s 542 districts contracted out these services.
School food services are highly-regulated enterprises and the federal government subsidizes meals for many children. There are a few companies that have specialized in helping districts provide this service. In 2003, 27.3 percent of districts contracted out these services. This proportion increased to 42.8 percent in 2015.
But it is not exclusively large firms that offer their services to districts. For instance, the Dalwhinnie Bakery and Deli on Beaver Island provides food services to students at the Beaver Island Community School.
There is a growing number of school districts that use private-sector contractors to bus students to and from schools. There were 18 districts that began new transportation contracts between the 2014 survey and the 2015 survey and now 144 of Michigan’s 542 districts (26.6 percent) contract out this service.
In addition to specialized knowledge and experience of vendors, there are other considerations regarding the contracting of services such as increased economies of scale in purchasing and tested management techniques that can help districts save money. Unfortunately, the underfunding of the school pension system weighs the cost-benefit calculations in favor of private-sector provision of services.
Schools are required to send between 28 and 33 percent of payroll to Lansing to cover the costs of retirement benefits. The bulk of these payments goes to paying down unfunded liabilities in the system. When a district contracts out employees, their retirement benefits tend to cost between 5 and 7 percent of payroll, resulting in substantial savings from contracting out, regardless of any other changes.
The growth of private-sector vendors providing their services to school districts allows school officials to spend more of their resources on educating students. Our survey shows that contracting out for support services has continued to increase over time.