The MC: The Mackinac Center Blog

Time for Labor Unions to Collect their Own Dues

The on-going SEIU dues skim must end

Editor's Note: This piece was originally published by The Hill on February 7, 2017.

Pam Harris, an Illinois mom who made history as the lead plaintiff in a landmark U.S. Supreme Court case, has a simple message for President Donald Trump and Health and Human Services Secretary nominee Tom Price.

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“End the dues skim once and for all.”

Harris, who receives a modest monthly Medicaid stipend to care for her disabled son Josh at home, faced an attempt by the Service Employees International Union in 2009 to unionize private caregivers like her.

While she was able to beat back the Big Labor’s campaign to turn homes into union workplaces and then win right-to-work privileges for providers nationwide in her 2014 legal case, the work isn’t done.

Labor organizations — primarily the SEIU — still siphon an estimated $200 million in Medicaid funds from more than 500,000 care providers in several states, enlisting government as a payments processor.

The Trump administration and its congressional partners need to act decisively to end this scheme. In doing so, they can redirect precious dollars back to where they were originally intended to go and away from thinly veiled political machines.

How this came about in the first place is a notorious story — some would say a devious act — in labor creativity.

Facing a long decline in private sector unionism, SEIU sought to regain ground by organizing home help workers. These people were private contractors who could be labeled as government workers, though only for collective bargaining purposes, because they received money through a government-administered aid program.

SEIU entrapped workers any way it could, using executive orders in Illinois, a ballot initiative in Washington, legislation in Minnesota and administrative action in Michigan. Once in place, the union directly skimmed a portion of the Medicaid reimbursement for its own purposes, including legislative and political interests, lavish executive compensation and even Christmas parties.

The scheme didn’t go unchallenged. Bob and Pat Haynes, Michigan parents of two disabled children, decided to stand up to SEIU. The Legislature banned the practice but not before SEIU collected $34 million from tens of thousands of caregivers. After care providers in Michigan were given a choice, the membership of SEIU Healthcare Michigan dropped by 80 percent.

Pam Harris joined the fight and with help from the National Right to Work Legal Foundation, took her challenge all the way to the U.S. Supreme Court. But her legal victory didn’t end the scheme decisively; it only gave caregivers the option to get out.

Many have exercised that option, but others remain in the dark about their rights because unions often impose labor neutrality clauses on state administrators, forbidding them to tell caregivers what they can do. So it’s often up to informal parent networks and nonprofit groups to spread the word.

SEIU has worked hard to hold its ill-gotten gains. In Washington state, SEIU put up nearly $2 million for a ballot measure so nonprofit advocates, like those from the Freedom Foundation, couldn’t contact caregivers about their rights, under the guise of protecting seniors from identity theft. The initiative passed with 70 percent of the vote.

What should be done?

The dues skim operates in government programs run by the Centers for Medicare and Medicaid Services within the Department of Health and Human Services.

Once confirmed, Price should initiate a rule-making process to prohibit public agencies from spending federal funds to collect so-called dues or fees on behalf of labor organizations. Unions would no longer have the convenience of a government-collected dues deduction. Much like every other organization out there, they’d have to sell and administer the benefits of membership on their own time and dime.

Congress can augment this action by attaching an appropriations rider that prohibits Medicaid funds from being skimmed into union bank accounts.

If the experiences in Illinois, Michigan and other states are any guide, caregivers just want to take care of their clients and family members. No union – SEIU or otherwise – should be able to use the tools of government to put a hand in the cookie jar.


Related Articles:

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Public School Union Members Protest Their Own Union

Washington Examiner Quotes Vernuccio

State Pension Funds Move To Risky Investments

Lack of payoff on investments is biggest driver of underfunding

The state’s pension fund lost $10 million by investing in a private development deal in Ann Arbor. A diversified pension system ought to make room for some risky investments, but system investors have doubled down on chasing high returns. explains what happened:

The Michigan Department of Treasury confirmed this week the State of Michigan Retirement Systems lost about half its original $20 million investment in the failed Broadway Village project with the recent sale of the property to a new development team that is planning an entirely new project now.

About a decade ago, the SMRS, which manages pensions for hundreds of thousands of public school employees, state workers, state police and judges, made a $20 million equity investment to become a limited partner in a $172 million redevelopment project on Broadway Street, in the area of Ann Arbor known as Lower Town, north of downtown across the Huron River.

The project, officially known as Broadway Village at Lower Town, stalled soon after the developer finished demolishing the collection of shops that stood on the site, and the property, more than six acres, has sat vacant for several years now, surrounded by a chain-link fence, waiting for new investors to come along. It's been a sore point for residents who miss what used to be there.

"As the real estate market has improved, the general partner recently sold the property, resulting in a loss of approximately half the initial SMRS investment," Ron Leix, a spokesman for the treasury department, confirmed this week.

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In 1997, only 6.4 percent of state investments were in real estate deals like this. It’s grown to over 10 percent today. Other high-risk investments in private equity deals have increased from 6.6 percent of total investments to 15.2 percent.

Further back in 1987, the state was partner to none of these type of investments. It was fully invested in traditional securities like stocks and bonds, with half of the book value of its investments in lower-risk, short-term investments, such as government and corporate bonds.

And just to note, when the school pension plan began 100 years ago, it invested exclusively in government bonds, mostly with local schools districts.

The increasing risk to state investments is not even including the rare times when pension funds get pledged towards political deals.

The failure to achieve the assumed investment returns has been the largest driver of the unfunded liabilities that have made government workers Michigan’s largest creditors. And as returns have been harder to come by, investment managers have shifted to riskier strategies. While this may generate higher returns, it is also likely to generate more of the losses that were seen in Ann Arbor.

Read more about state pension underfunding at


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Testimony: When Will Michigan Families Get Some Tax Relief Too?

Spending interests get theirs, corporate welfare recipients rolling in taxpayer dollars

(Editor's note: The following is testimony presented to the Michigan House Tax Policy Committee by the Mackinac Center's Senior Legislative Analyst Jack McHugh on Feb. 15, 2017)

In 2007, Michigan’s Legislature approved a “temporary” income tax hike, from 3.9 percent to 4.35 percent. The rate was trimmed 0.1 percent in 2012 and made permanent.

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Since 2007 this higher tax hike has transferred $6.3 billion additional dollars from Michigan families to Lansing than would have been taken otherwise.

Last year, that tax hike deprived Michigan families of $771 million they had earned.

That tax hike will take an extra $771 million or more this year too, and every year until it’s rolled back or more.

What did the state do with that extra $771 million?

It’s a big number but still might have been swallowed by the $1 billion in secret corporate welfare checks this state wrote to special interests last year under MEGA subsidy deals approved in 2009. More income tax dollars were transferred under deals approved by Republicans. Now there are hearings on yet another $1.8 billion for a handful of big developers.

Media pundits, progressives, the Michigan League for Public Policy, “Bernistas” and other voices on the left exhibit horror at the idea of a modest tax cut that lets families keep a bit more of what they earn. Why then are they so quiet when it comes to transferring more money to politically favored special interests?

Isn’t it the turn of regular hardworking Michigan families and small businesses to get a better deal from Lansing too?

This state can afford it. Despite “tax cut fever” rhetoric, Lansing has hardly been on a rigorous spending “diet.” Annual appropriations have increased from $25.2 billion in 2010-11 to $31.0 billion this year. That’s $5.8 billion more to spend each year, and growing at a faster pace.

Looking at just the state’s two largest funds, the May 2016 revenue estimating conference projected general fund and school aid fund revenue of $22.5 billion this year. The January 2017 consensus upped that to $23.3 billion next year. That’s a $764.8 million increase.

The question may be not whether Lansing can afford to give back, but who you will give back to.

That 2007 tax hike damaged the state in other ways: It may have contributed to 49,000 former Michigan residents having left and taken their incomes permanently to some other state. That’s what the Mackinac Center’s Michael LaFaive and Ball State University scholar Michael Hicks found when they looked at emigration levels associated with income tax hikes.

For every 10 percent increase in personal taxes, they found an additional 4,900 people leave this state every year. And that’s even controlling for other reasons people move out of state, like more hours of sunshine.

Finally, Michigan’s big business tax and labor reforms have made it more economically competitive, but we’re lagging in vital tax burden metrics.

The most recent Tax Foundation report shows Michigan ranked 25th in state tax burdens.

Perhaps more immediately painful, 31 other states celebrated their own “Tax Freedom Days” before Michigan last year. Even Indiana and Ohio beat us out.

The economy won’t expand forever, and no one wants another generation having to watch their children leave the state for jobs. Michigan can’t afford not to make itself more competitive in relative tax burdens. Especially when competing against warm states like Florida and Texas that also have no income tax.

William McBride, the Tax Foundation’s chief economist, summed up the consensus of many empirical studies by academic economists on the relationship between taxes and economic growth:

“While there are a variety of methods and data sources, the results consistently point to significant negative effects of taxes on economic growth even after controlling for various other factors such as government spending, business cycle conditions, and monetary policy.”

Thank you.

Why Michigan Licensing Laws Are So Destructive

Everything you need to know about occupational regulations in the Great Lakes State

The state of Michigan licenses about 160 occupations while cities, like Detroit, require even more. Occupational licensing is the fees, educational coursework, training and exams that governments mandate before someone can legally perform certain jobs. Mackinac Center policy analyst Jarrett Skorup speaks about why licensing laws in the Great Lakes State are so destructive to consumers and the economy.  

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Happy Valentine’s Day from the Mackinac Center! You don't require a conviction to take possession of my heart, Valentine. (Read more here).

Unlike the MEDC and its corporate welfare, I can't keep it a secret any longer: I want you to be my Valentine. (Read more here).

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If you love someone, set them free like a Michigan public employee leaving their union. (Read more here).

My love for you is as deep as the underfunded liabilities in our state's pension system. (Read more here).

We appreciate our supporters. We don’t need any flowers or chocolates, but if you want to show your appreciation, you can do so at


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Congress May Protect Private Pensions from State Bureaucrats

Recent regulations allow states to create and manage retirement for private employees

If you think states mismanage the pensions of their own employees, just wait until they get their hands on the retirement savings of private sector workers. Thankfully, Congress may undo an Obama-era regulation that could have removed safeguards for private pensions and forced some employers into government-run retirement accounts.

Two Republican members of the U.S. House, Tim Walberg of Michigan and Francis Rooney of Florida, have introduced bills to kill the idea through the seldom-used Congressional Review Act. Walberg chairs the House Subcommittee on Health, Employment, Labor, and Pensions.

The regulation, published August 2016 and amended in December, allows states and localities to “design and operate payroll deduction savings programs for private-sector employees, including programs that use automatic enrollment, without causing the states or private-sector employers to have established employee pension benefit plans under” federal law. The federal law in question, widely known as ERISA, gives pensioners a number of protections.

“Hardworking Americans could be forced into government-run plans with fewer protections and less control over their hard-earned savings,” Rooney noted in a press release. “Employers will face a confusing patchwork of rules, and many small businesses may forgo offering retirement plans altogether.”

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States such as California, Connecticut, Illinois, Maryland, and Oregon already, in the words of the regulation, “require certain employers that do not offer workplace savings arrangements to automatically deduct a specified amount of wages from their employees' paychecks unless the employee affirmatively chooses not to participate in the program.” In these states, employers “are also required to remit the payroll deductions to state-administered IRAs established for the employees.”

In short, the regulation would allow state and local governments to set up pension plans outside the scope of federal laws that impose a fiduciary duty on plans and require them to invest solely for the benefit of their participants. By bypassing federal protections that apply to existing plans, the Obama-era rule could lead to giant unregulated (by federal standards) funds for state governments, which could play politics with the retirement security of private sector employees. Even worse, many workers would be automatically signed up for these programs unless they affirmatively opt out.

Why is all this worrisome? Just look at one state where politicians are trying to get their hands on private sector pensions without the constraints of ERISA. I first noted this in a 2009 Competitive Enterprise Institute study titled “Your Retirement or Our Political Agenda: How Politicized Investment Strategies Threaten Workers’ Pensions.”

In 2000, then-California State Treasurer Philip Angelides launched his ‘Double Bottom Line’ initiative to adopt certain social and tobacco-free investment policies — including using the pension funds in CalPERS and CalSTRS for local economic investments. The divestment of tobacco was a costly mistake. CalSTRS revealed that its tobacco investment ban lost the plan $1 billion in gains, and in 2008 conceded that they ‘could no longer justify’ avoiding tobacco stocks.

California’s billion-dollar mistake was possible because the state pension fund for public employees was not subject to ERISA, letting Angelides make political statements with public employees’ retirement savings instead of investing solely for their benefit.

The political temptation goes beyond selecting investments, however. Public pension funds use their money to pressure companies and the government to advance political agendas. Again from the study:

In June 2009, 41 signatories representing some of the nation’s largest public pension funds and others with approximately $1.4 trillion in assets wrote to the Securities and Exchange Commission, asking the agency 'to improve disclosure of climate change-related risks, and material environmental, social and governance risks, in securities filings.’

These signatories included then-California State Treasurer Bill Lockyer, who served on the governing boards of the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS). They wrote: “Pension funds protect workers’ retirement benefits, and they need to ensure their portfolios reflect the risks and benefits related to climate change.”

According to Andrew Biggs of the American Enterprise Institute, state and local government pensions are already underfunded by over $5 trillion. Some states now want access to private sector retirement money. To add insult to injury, they want the ability to automatically enroll private employees into these accounts without safeguards against using that money for politics.

Repealing the regulation will protect workers and stop state and local governments that wish to use money they control but do not own from dipping their hands into private sector retirement accounts.


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The Cost of High Cigarette Taxes

Research reveals unintended consequences of tax

Cigarette tax increases are often justified on the belief that they will force people to quit smoking, but new research from the Mackinac Center for Public Policy and the Tax Foundation suggests that many smokers aren’t kicking the habit. Instead, they are turning to the black market for cheaper smokes.

“Excessive tax rates on cigarettes approach de facto prohibition in some states, inducing black and gray market movement of tobacco products into high-tax states from low-tax states or foreign sources,” Tax Foundation economists Scott Drenkard and Joseph Henchman told the Washington Examiner.

Drenkard co-authored the new study — Cigarette Taxes and Smuggling: A 2016 Update — with Mackinac Center for Public Policy’s Michael LaFaive and Ohio State University Senior Lecturer Todd Nesbit. To determine smuggling rates across the country, the authors compared the legal paid sales of cigarettes in 47 states with the reported smoking rates. The difference between the two is attributed to smuggling, either casual or commercial.

Fox News noted that New York’s high cigarette tax rate makes it a hotbed for smuggling:

… A resident of New York City pays $6.85 in taxes for each pack on top of the actual cost of the smokes.

Even though states in the northeast tend to impose higher cigarette tax rates than the rest of the country — see a map of rates here — New Yorkers can still save quite a bit of money by going across state lines to buy cigarettes.

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As pointed out by the Boston Globe, New York is the highest importer of illegally purchased cigarettes, with over 55 percent of the cigarettes consumed there having been purchased across state lines. New Hampshire, on the other hand, is the largest exporter of cigarettes, likely due to its relatively low tax rate compared to its surrounding states, NH 1 News Network detailed.

“Most people aren’t quitting,” LaFaive, director of the Morey Fiscal Policy Initiative at the Center, was quoted as saying in Minnesota’s City Pages. “They’re just acquiring their tobacco elsewhere.”

Smuggling can come at a high cost to the public, the New York Post explained:

… Besides the tax losses, the smuggling activity has uncovered evidence of violence against residents and police officers; financing of a terrorist organization; cigarette truck hijackings and counterfeiting of tax stamps; property damage; and the counterfeiting of name-brand cigarettes that are replaced with inferior products, including smokes from China.

“What lawmakers and others don’t seem to realize is that all of this activity undermines health goals,” Nesbit and LaFaive said in an op-ed for Indiana’s Kokomo Tribune.

Indiana is one state currently considering a tax increase that researchers explained would lead residents to purchase cheaper cigarettes from surrounding states like Michigan. Currently, Indiana is a net exporter of cigarettes due to its relatively low tax rate.

While the goal of improving public health by lowering smoking rates is commendable, those who hope to achieve this end by way of tax hikes must consider this updated study and similar findings from dozens of other researchers.

“Few politicians realize when they vote for higher excise taxes that doing so may dramatically increase cigarette-related crime, such as smuggling,” the authors were quoted as saying in Watchdog. “Policymakers should take these realities into consideration when contemplating how much to tax cigarettes.”

Read more:

Cigarette Taxes and Smuggling: A 2016 Update

Fox News: Study Finds Cigarette Smuggling Prevalent in States with High Tax Rates

New York Post: Why New York’s High Tobacco Taxes Cost the State Billions

Kokomo Tribune: Cigarette Tax Hike Will Lead To Smuggling Reversal

Boston Globe: After Massachusetts Raised its Cigarette Tax, Smuggling Exploded, Study Finds

Washington Examiner: Cigarette Smuggling Surges As Taxes Near Prohibitive Levels

Crain’s New York: New York is Tops in Cigarette Smuggling

City Pages: Think Tanks Say Minnesota’s Addicted to Smuggling Cigarettes

AZ Central: Arizona Has the 12th-Highest Cigarette Tax in the Nation; Why That Might Be a Bad Thing

Phoenix Business Journal: Arizona is One of the Worst States For Cigarette Smuggling

AZ Wishesh: Arizona Is One of the Most Cigarette Smuggled States

NH 1 News Network: Cigarette Smuggling Highest from New Hampshire

The Salt Lake Tribune: Contraband Cigarettes Among Utah Smokers’ Favorite Brands

Watchdog: Study Finds Cigarette Smuggling Prevalent in States With High Tax Rates


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Kentucky, Missouri Set Off Wave of Labor Reform

2017 poised to be big year for worker freedom

If the first weeks of 2017 are any indication, this could be a banner year for labor reform in the United States.

Days into January, Kentucky became the 27th right-to-work state, sparking what could be a wave of labor reforms giving workers across the country more freedom. F. Vincent Vernuccio, director of labor policy at the Mackinac Center for Public Policy, told The Huffington Post that Missouri and New Hampshire were next in line:

“We may see up to 29 [states] before the spring,” Vernuccio said. “You’re definitely seeing a snowball effect, and more and more states are looking to give workers freedom.”

On Feb. 6, Missouri indeed followed suit, but the Show-Me State may not stop with right-to-work. Its Legislature is currently considering a package of additional bills that “would make Missouri the gold standard for labor law,” Vernuccio and Chantal Lovell, Mackinac’s media relations manager, explained in an op-ed for The Washington Times.

State Sen. Bob Onder’s Senate Bill 210, the Government Union Reform Act, is the keystone of the package and would give government union members more information on their union’s finances. It would also defend taxpayers against paying for public employees to moonlight as union officials and ensure the secret ballot in union elections. Most significantly, it would protect government union members’ voting rights by allowing them to re-elect or recertify their union every two years.

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With SB 210, Missouri Gov. Eric Greitens “could be the next Scott Walker and help usher in a new era of labor reform in the county,” Vernuccio was quoted as saying by NBC.

In reviewing pending legislation, lawmakers should consider the positive benefits enjoyed by workers, businesses and the economy as a whole in right-to-work states. Vernuccio and Lovell explained the impact in an op-ed for the Columbia Daily Tribune:

Over the past 15 years, right-to-work states have enjoyed higher wages, more personal income growth, faster job creation, larger population increases and lower unemployment rates.

Vernuccio told the Alton Daily News that while unions may claim right-to-work lowers wages, the opposite is true when the cost of living is considered.

"When you factor in cost of living, workers make about 4 percent more in right-to-work states than they are in forced unionism states,” Vernuccio said.

Since Indiana passed right-to-work legislation, wages have grown 14 percent, or $102 per week.

Perhaps the positive economic gains experienced in right-to-work states explains why unions have struggled to oust lawmakers who vote in favor of worker freedom. Vernuccio told The Wall Street Journal, “The union’s bark is a lot worse than its bite when it comes to the election afterward.”

In Michigan, no Republican lawmaker who voted for right-to-work lost in the following general election, and those who’ve supported worker freedom in other states have seen similar success.

“The world changed in November of 2016, and advocates of labor reform and for worker freedom are emboldened,” Vernuccio told The Daily Signal. “While you’ve seen the fire of worker freedom spreading brightly across the country, it’s now raging thanks to the November election.”

Read more:

The Washington Times: Missouri Models Wisconsin on Labor Reform

NBC: National Labor Expert: Right-to-Work Just the Beginning for Missouri

The Wall Street Journal: Kentucky House Passes Bill on Right-to-Work

The Huffington Post: Kentucky Republicans Poised To Pass Right-to-Work Law, Delivering Blow To Unions

Columbia Daily Tribune: Missouri Should Follow Neighbors to Freedom and Prosperity

Alton Daily News: Illinois Surrounded by Right-to-Work States

Labor Reform in the States: A Visual Timeline

The Daily Signal: Election Ushers in Batch of States Preparing for Right-to-Work Laws


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Labor Reform Not a Death Knell for Legislators After All

During school hours, in front of students, Vassar Public Schools held an event which explicitly advocated for a school millage request. A panel that featured a private citizen and a group of administrators was videotaped and put up on the district’s Facebook page.

The high school brought in the host of the local Cass River Radio Podcast for a 45-minute discussion with the district’s superintendent, high school principal, alternative education principal, community family liaison and technology director. During the talk, the panel did the following:

  • Directed students to the pro-bond website and Facebook page.
  • Said there are “neat things going on with this bond.”
  • Noted that the tax increase “will cost you about what a Big Mac meal a month costs.”
  • Talked about the potential for a school shooting if the bond isn’t approved.
  • Said “this is only a positive thing, in my opinion.”

Tisha Jones, a reporter for ThumbNet, broke the story. Jones notes:

Though the Podcast was done by a private member of the community, which is allowed under campaign finance law, bringing it into the school and promoting the yes2Vassar website may have constituted a campaign violation according to the Michigan Bureau of Elections website. According to the website’s Campaign Finance page, “Section 57 of the Michigan Campaign Finance Act (MCFA) stipulates a public body or person acting for a public body must not use or authorize the use of public funds or resources to make a contribution or expenditure to further the nomination or election of a candidate or the qualification, passage or defeat of a ballot question. The inclusion of Section 57 in the MCFA does not restrict the constitutionally protected right to associate or to engage in political speech. It is intended to prevent those who control public resources from using those resources to influence the outcome of an election. It is up to the people and not public bodies to decide elections.”

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Reporting from Jones also noted a get-together during the school day at the local library in which school staff were provided with food paid for by the construction company which would benefit from dollars raised through the bond. The staff worked on assignments on how to pass the bond.

Jones also notes that Vassar residents have a significantly higher millage rate than citizens in surrounding communities. They pay a total of 37.8 mills compared to people in Frankenmuth (32.9 mills), Vassar Township (22.7 mills), Juniata Township (26.2 mills), Tuscola Township (24 mills) and Denmark Township (25.9 mills).

I was quoted for the story:

In my view, this is a clear example of a public entity politicking with taxpayer money. While government entities are allowed to provide information about tax requests, they are not allowed to 'express advocacy' one way or the other on the issue. Vassar Schools hosted an event during the school day with public funds which directed people to websites advocating for a 'Vote Yes' position and used only positive language to present strictly the perceived benefits of the bond, rather than a fair presentation of the issues. Sadly, this is just one of many examples of school districts across Michigan that do the same.


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February 10, 2017 MichiganVotes weekly roll call report

Senate Bill 40, Expand state subsidies for particular companies on state line: Passed 24 to 13 in the Senate

To let particular businesses that are near the state line, and that have been selected by political appointees on a state 'economic development' program board, to each collect up to $10 million in state business subsidies for hiring people who do not live in Michigan.

Who Voted "Yes" and Who Voted "No"

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Senate Bill 35, Regulate the “millionaire party” business: Passed 34 to 3 in the Senate

To establish regulations for charitable “millionaire party” gambling events that include casino games, in a manner that accommodates charities contracting out their operation to a “charitable gaming service” that provides the service for multiple charities at a single location, one after another. The bill would establish a licensing regime covering both the charities and the service companies. This would recognize and accommodate an evolved system where a person can gamble at a particular location on most days, with the proceeds going to a different charitable organization at different hours.

Who Voted "Yes" and Who Voted "No"

Senate Bill 36, Authorize parents putting special needs child fingerprints in state database: Passed 37 to 0 in the Senate

To allow the parents of a child or youth with special health care needs to have the child’s fingerprints and photo submitted to a statewide registration system.

Who Voted "Yes" and Who Voted "No"

SOURCE:, 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


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