The following article appeared in the Sept. 13, 2002, edition of the MIRS Newsletter.
At this writing, three questions were assured of appearing on the Michigan ballot in November. Ultimately, a third, the proposal by the Coalition for a Healthy Michigan had been cleared to appear on the ballot as Proposal 02-04. Look for a more detailed look at that proposal in future editions of A Deeper Look.
$1 Billion Sewer Bonding
From the Mackinac Center for Public Policy's www.mirchiganvotes.org web site comes this description: The measure proposes that the state borrow $1 billion by selling general obligation bonds (backed by the full faith and credit of the state) for local sewer projects. Of the bond proceeds, 90 percent would go into the existing State Water Pollution Control Revolving Fund (also known as the state revolving fund or SRF), which would subsidize local sewer treatment projects, and projects to separate sanitary and storm water sewers. At least two percent of available SRF funds would be allocated annually for projects to reduce non-point-source water pollution.
The legislation authorizing the bond sale also changes the criteria used for prioritizing loans from the SRF to advantage projects that upgrade or replace failing private septic systems. It also requires that all local SRF loan applications show that feasible alternatives offering “volume reduction opportunities” had been evaluated in developing the project plan.
The remaining 10 percent of the bond proceeds would go to a new Strategic Water Quality Initiatives Fund to subsidize local projects reducing the amount of groundwater or storm water entering sewer systems, or upgrade or replace failing (private) on-site septic systems. All subsidies would be through low interest loans to local units of government. Not more than 10 percent of the state bonds could be sold in any one year, and initial payments could not begin until Oct. 1, 2003.
The nonpartisan House Legislative Analysis Section reports that the $1 billion bond issue would double the amount of outstanding general obligation bonds, pledging the full faith and credit of the state. The nonpartisan Senate Fiscal Agency reports that once all the bonds are issued, debt service would require $80 million per year from the state general fund (assuming 5 percent interest). Total interest costs would be $605 million, bringing the total cost of the bonds to $1.605 billion. This amounts to $160 for every man, woman and child in the state over the life of the bonds.
Doubling the state's general obligation debt is of dubious economic merit at best, particularly in light of the fact that between 1979 and 1998, Michigan's outstanding bond debt increased a whopping 550 percent. (Per capita bond debt increased 61 percent.) A bond issue of this magnitude invites profligacy. Absent funding constraints, there would be little or no budgetary discipline that would otherwise necessitate spending priorities. Meanwhile, the state could not possibly maintain adequate oversight of the multitude of infrastructure projects that would result. (Nor should the state assume new debt for project costs inflated by “prevailing wage” dictates.)
Diane KATZ, director of science, environment and technology policy at the Mackinac Center for Public Policy, points out that there's no question that storm and sewerage infrastructure requires updating in some areas. But this proposal, she has argued, would essentially reward local governments for ignoring core responsibilities, and further shift local functions to Lansing. Moreover, the environmental consequences of sewerage overflows have been greatly exaggerated. Beach closings are inconvenient, to be sure, but there does not appear to be lasting damage from intermittent spills. For example, The Detroit News reported that a 2001 analysis at one popular beach along Lake St. Clair, using sophisticated genetic fingerprinting, showed that 69 percent of the bacteria were from bird droppings and other animal waste.
To the extent that sewerage overflows are considered an environmental hazard, the state and locals should adjust their spending accordingly. Sewer projects aren't sexy, but they are more important than hundreds of millions of dollars in discriminatory subsidies to selective businesses, or tens of millions of dollars for taxpayer-subsidized bike trails and marinas.
Local governments complain that they lack the tax revenue to maintain infrastructure, which is indeed very costly. But an unsigned check from the state would reduce the pressure on local officials to adopt the very policies that stimulate growth and add tax revenues.
The overflow issue also exposes locals' disregard of environmental law. Of the 315 so-called escalated enforcement cases (court cases) between 1991 and August 2002, some 137, or 43 percent, involved government entities such as municipally or county run water and sewerage systems, including Birmingham, Bloomfield Township and Bloomfield Hills, Southfield, Bingham Farms, Orchard Lake, and Farmington Hills.
Almost every election year, Michigan voters face initiative or referenda questions. No one argues that it would be wise to offer voters two boxes, one that says “Vote YES on all questions” and another one that says “Vote NO on all questions.” Moreover, no one claims that we've been deprived of our rights because we have to examine ballot questions one by one and vote yes or no on each.
The fact is that the Legislature's ban on straight-party voting is not the deathknell of democracy. The majority of states—at least 33—do not permit straight-party voting and somehow those states have not become Third World satrapies. No one in Michigan will be denied the right or the opportunity to vote. Anyone who wants to vote only for candidates of one party or the other will still be able to do so.
There is real merit in removing the straight-party option if it prompts voters to be more thoughtful because they have to look at individual names on the ballot and think about the choices in front of them before they vote. If the prospect of thinking and choosing keeps some people at home on Election Day, then it seems to me the problem here is not with the ballot. It's with an electorate that doesn't take its responsibilities in a free society seriously.
Many straight-ticket voters ignore important items on the ballot such as nonpartisan races or those referenda and initiative questions. If the ban encourages them to cast a more complete ballot, then surely the cause of democracy is served. The right to vote is precious enough to be worth the effort of a thoughtful casting of votes race by race, issue by issue, candidate by candidate.
Binding Arbitration for State Employees
The third proposed amendment to the state Constitution stipulates that when state officials are unable to reach an agreement with unions representing state employees, the terms of the new agreement are to be settled by binding arbitration. This amendment would be a disservice to both taxpayers and state employees.
Currently, state employees are under the jurisdiction of a four-member Civil Service Commission (CSC) appointed by the Governor. Generally, the Commission establishes classifications, sets salaries, and determines working conditions. But CSC rules allow for collective bargaining, and 44,000 state employees are currently represented by unions that bargain with the state. When the parties are unable to agree on contract terms, the disagreements are referred to the Employee Relations Board, which holds hearings and develops a recommended settlement. If that fails to resolve the dispute, the matter is referred to the CSC for a final decision. All contracts are reviewed by the CSC before taking effect to ensure they comply with CSC rules. Rarely do these rules affect wages or benefits negotiated by the state and the unions.
Paul Kersey, labor policy research associate at the Mackinac Center, argues that this arrangement has worked well for state employees, who, by and large, are paid salaries above those paid to comparable workers in the private sector and in other states. The state government has no problem recruiting or retaining employees. And the system has worked smoothly from an administrative point of view as well. Contracts are nearly always in place on time. This is a valuable feature of the CSC's system: State employees don't need to wait to receive their raises or new benefits, and the Legislature knows what the cost of state workers will be before lawmakers determine the state budget.
The one exception is the state troopers who, under a prior amendment to the state Constitution, are subject to the same sort of “outside” binding arbitration that this proposal would apply to all state employees. Their contract is now three years overdue. When that outside arbitration panel finally makes its ruling, the state is likely to be forced into shelling out $20,000,000 in back pay to troopers who would probably have preferred to have received their raises when they earned them.
Delays, as Kersey argues in a Mackinac Center commentary, are common in the arbitration process. Since 1969, local police and firefighters, who are prohibited from striking, have their terms of employment settled by a neutral arbitration panel if union and local officials are unable to settle on a contract. A review of arbitration rulings handed down since January 2000 (available online through the Michigan State University Library at http://turf.lib.msu.edu/awards) shows that only 4 out of 35 decisions came within a year of the date the contract was to take effect. The average ruling came down over 22 months late.
And while the proposal is very specific about union rights, this ballot proposal is oddly silent on the topics of the powers of state officials—and union responsibilities. Under this amendment, union officials would be allowed to call for binding arbitration after 30 days of bargaining. State officials would not have this right. Under this amendment, state officials would be required to bargain in “good faith,” making a genuine effort to reach a contract, but this requirement does not apply to union officials. Finally, binding arbitration was originally extended to local police and firefighters because they were prohibited from striking, but this proposal does not contain a strike prohibition and is not clear on whether either the CSC or the Legislature could pass one. While the courts would probably allow a strike ban, state officials and taxpayers may have to deal with state employee strikes while they wait for a final ruling from the courts.
If this proposal passes, Michigan would abandon a system that works well for all involved, replacing it with a binding arbitration procedure that produces nothing but delays and, at the same time, turning the state Treasury over to unelected and unaccountable arbitrators who could adversely effect the state budget and the people's taxes. The amendment's one-sided wording opens the door for litigation and possibly even public-sector strikes. By attempting to replace a working system with an arbitration law that has been a source of headaches for all involved, supporters of this proposal are engaging in little more than public policy vandalism.