The MC: The Mackinac Center Blog

(This article is the first in a three-part series discussing major changes made by the Michigan Legislature to energy regulation in the state. Those changes are now enrolled in statute as Public Acts 341 and 342 of 2016.)

After a marathon two-day, lame-duck session, the Michigan Legislature completed and enacted new electric utility legislation that has been the focus of debate for the past two years. Ironically, the original purpose of the proposed legislation — to accommodate sweeping new federal regulations ordered by the Obama administration — appears obsolete after Donald Trump won the presidential election on Nov. 8.

But pressure from the state’s major utilities, and two years of lobbying, helped push the Legislature to move ahead anyway, even though the President-elect has promised to rescind the Obama administration’s energy regulations as one of his first acts in office.

Stay Engaged

Receive our weekly emails!

The final wording of the new law appears to protect Michigan’s small electricity choice program — a win for electricity choice customers. However, the measure also continues a problematic “net metering program” that does help diversify electricity sources across the state, but does so by subsidizing household solar installations. The legislation also expanded a mandate that now requires utilities to get 15 percent of their power from renewable sources (up from 10 percent).

Throughout the debate, utilities focused on the need for system stability that was endangered by proposed Obama administration regulations. Heavy-handed federal regulation and tight market conditions made closure of several DTE and Consumer’s Energy coal generation plants seem unavoidable and these utilities warned that Michigan faced potential energy shortages.

The big commercial utilities responded by promoting plans to build new natural gas and renewable generation facilities (for which they receive a guaranteed profit). They also continued to advance conservation programs within their operating territories — for which the utilities benefit through a variety of state and federal programs.

However, while they warned about threats to system reliability, the big utilities simultaneously undercut that message by promising to “keep building renewables and … retire our coal fleet,” regardless of what happened in the regulatory realm. But replacing low-cost, reliable, easily dispatchable generation capacity like coal with unreliable, nondispatchable, and subsidy-dependent capacity like renewables actually diminishes energy system stability.

As debate on the new Michigan law entered its final phase, I advised using a wait and see approach — there was nothing to be gained from rushing through legislation devised to respond to the Obama administration’s regulatory plans. The legislation's proposed changes may become unnecessary and obsolete under a Trump administration. Plans to close coal generation plants in Michigan leave the state vulnerable to any future electricity shortages or price spikes; completely avoidable and self-inflicted wounds.

However, on the evening before the close of the lame-duck session, Governor Rick Snyder mounted a last-minute push, demanding the new law be passed. The Governor’s involvement forced a compromise between the state’s two major utilities and alternative energy suppliers, addressing concerns that Michigan’s small energy choice program was in danger of being killed off. That agreement was sufficient to reassure House Republicans and, the following afternoon, the main bill in the proposal passed easily in a 79-28 vote. The Senate followed up, approving the updated bills in a 33-4 vote. Gov. Snyder signed the bill — now Public Act 341 of 2016 — on December 21.

High Taxes on Cigarettes Increase Smuggling

New study looks at national rates

High taxes on cigarettes lead to high rates of smuggling, according to new research by the Mackinac Center for Public Policy and the Tax Foundation.

The update to previous research on cigarette taxes and smuggling was published in December and supported previous research finding that high taxes increase the rates by which people illegally move cigarettes across borders. According to Moody on the Market:

Stay Engaged

Receive our weekly emails!

The authors estimated total smuggling rates by comparing the published smoking rates of adults in 47 states to the legal paid sales of cigarettes in those states. The difference between the two is attributed to smuggling.

Michael LaFaive is the Director of the Morey Fiscal Policy Initiative at the Mackinac Center here in Michigan. He says, “It’s important for policymakers to understand that cigarette tax increases typically lead to increased rates of smuggling.” LaFaive is a study coauthor, and he adds, “Cigarette smuggling is often associated with increased violence and other crimes, and these factors should be considered when lawmakers debate cigarette tax increases.”

Michigan has seen its smuggling rate drop, LaFaive told WSJM.

We were ranked tenth in the nation overall for the amount of inbound smuggling that’s occurring in Michigan, but we’ve dropped to 12th, so our position is getting better, and I expect that to continue getting better as states raise taxes.

New Hampshire, because it is surrounded by states with high excise taxes, is the state that sees the most cigarettes smuggled out, according to a report by WIRX. New York’s high cigarette taxes have led it to be the state with the highest rate of goods smuggled in.

Read the article at Moody on the Market.

Read the report on WSJM.

Read the report on WIRX.

Read more about the study.

~~~~~

Related Articles:

High Cigarette Taxes Lead to More Smuggling

West Virginia Excise Tax Hike Proposal Invites Smugglers

Cigarette Taxes Bad for Pennsylvania Businesses

Cigarette Taxes and Smuggling: A 2016 Update

LaFaive in National Media

Reason Quotes LaFaive on Sin Taxes

The Herbert H. and Grace A. Dow Foundation is continuing its support of the Mackinac Center for Public Policy with a $500,000 grant for education policy.

The gift will be used to help provide scientific research and information needed to create policies that improve schooling in Michigan.

Mackinac Center President Joseph G. Lehman was quoted in the Midland Daily News as saying, “The Mackinac Center is honored to partner with the foundation to develop policies that bring expanded options and greater accountability to public education."

Stay Engaged

Receive our weekly emails!

Past support from the Foundation helped the Mackinac Center create the elementary/middle school and high school Context and Performance Report Cards to assess how well or poorly schools are doing. The reporting system, which the Center will encourage lawmakers to incorporate into its rubric, considers students’ socio-economic backgrounds and performance growth.

Read the full article in the Midland Daily News.

Learn more about the grant.

~~~~~

Related Articles:

The New York Times’ Comprehension Problem on Detroit Charters

Mackinac Center President’s Statement on Betsy DeVos Nomination

Mackinac Center Responds to State’s School Rankings

State Not Transparent with Effectiveness of Multi-Million-Dollar Program

Bad Santa: Trump Risks Cronyist Blowout with Carrier Incentives

Ballot-Selfie Ban Stands In Way of Free Speech

Court Rules in Favor of Mackinac Center Clients

Ruling says union and district violated right-to-work law

Four years after Michigan’s right-to-work law passed, teachers in the Taylor School District are finally free to choose whether or not they wish to be part of a union.

In Mid-December, the State of Michigan Court of Appeals ruled in favor of teachers Angela Steffke, Rebecca Metz and Nancy Rhatigan, who were represented by the Mackinac Center Legal Foundation. The trio sued the Taylor Federation of Teachers Local 1085, the Taylor School District Board of Education and the Taylor School District over a 10-year-long union security agreement that would have forced them to remain in the union into 2023.

“The 10-year union security clause prevented us from holding our union accountable,” Steffke, a special education teacher, was quoted as saying in DBusiness. “We’re grateful the court affirmed our rights as sovereign individuals within a union and we’re grateful to the Mackinac Center for helping us ensure our right to work.”

As explained by the Associated Press, “The side contract between the Taylor district and the union was signed just weeks before the right-to-work law took effect in 2013. The law says workers can't be forced to financially support a union to keep their job.”

Senior Attorney Derk Wilcox, who spoke with WJR’s Frank Beckmann after the ruling, said the court agreed with the Michigan Employment Relations Commission’s 2015 ruling that the union security agreement was an “excessive and unreasonable” attempt to circumvent Michigan’s right-to-work law.

Stay Engaged

Receive our weekly emails!

Read more on the ruling.

Read the full article in DBusiness.

Read the full article by the Associated Press.

~~~~~

Related Articles:

Court of Appeals Rules Union and District Violated Right-to-Work Law

Right-To-Work For Taylor Teachers Begins Today

Union Gave Teachers Pay Cut To Keep Compulsory Dues Coming

Michigan Appeals Court Denies Stay in Taylor Teacher Case

The New York Times’ Comprehension Problem on Detroit Charters

2016 Was Good For Michigan

Economy is growing and shows no signs of stopping

It looks like 2016 has been a good year for the state economy. The first official reports show that jobs, income and production are all up and tended to grow faster than national averages.

The data on the state’s current economic performance shows substantial growth, though much of it will not come out until after year-end.

The state added 70,900 jobs from the end of 2015 to November 2016, the most recent release showed. That is a 1.7 percent increase compared to a 1.4 percent increase for the nation. There are now more jobs in Michigan than when the 2007 recession began, though Michigan is still below its 2000 peak.

The jobs number is a net increase, and does not account for turnover from the job gains and losses that occur. For instance, in the first quarter of 2016, Michigan added 196,000 jobs and lost 179,000 jobs.

Stay Engaged

Receive our weekly emails!

More jobs were added in the “professional and business service” sector than in any other, growing by 25,900, or 4.0 percent. Many of those jobs are in architectural, accounting, engineering, and computer systems firms, which are on pace to increase the number of employees by 5 percent or more this year. There are now more jobs in this sector than in education and health industries, manufacturing and government, the three next largest industries by employment.

Income is growing as well. When considering wages, interest and all other forms of income, Michigan residents are up, on average, 3.8 percent in the first three quarters of 2016 — beating the 2.7 percent national average. Per capita income still trails the national average, but it is good to see it catching up.

Wages and salaries grew 5.4 percent in the first quarter of 2016 compared to the first quarter of 2015, 5.4 percent in the second quarter and 5.5 percent in the third quarter, beating U.S. averages.

Another way to measure the health of the economy is to look at the total value of the goods and services produced in Michigan. That grew as well in the first two quarters of the year. The growth was buoyed by real estate industries and professional and business services. And that’s especially good because Michigan produced less in durable goods (which includes cars and trucks) in the first two quarters of 2016 than in the first half of 2015.

A number of forecasts have predicted slower growth for Michigan going forward. But if this is happening, it has not shown up in the performance data yet.

Michigan’s economy is growing. Its gains have been bolstered by recent steps to improve the economy, such as lowering business taxes and implementing a right-to-work law. There are other ways to help the state keep advancing in 2017 and beyond.

~~~~~

Related Articles:

Michigan's Economy Best In Midwest, And It's Not Just Cars

Reasons to be Optimistic Abound in Michigan Economy

Michigan Stagnates on Economic Freedom Index

Mitch Albom's 'Single-Industry' Blunder

Michigan Economy No Longer Dependent on Auto Industry

Why Are Michigan House Republicans Continuing These Union Scams?

New Legislature should take up pension spiking, release time in 2017

Mackinac Center policy analyst Jarrett Skorup testified on union release time.

As the latest legislative session came to a close, Michigan House Republicans failed to put a stop to two union schemes that are ripping off taxpayers. It is bizarre that, despite having a huge majority, the GOP continues to allow unions to misspend tax dollars for the sole purpose of enriching their officials.

Earlier this year, the state Senate passed two bills ending these special union deals. Senate Bill 279 dealt with union pension spiking schemes, in which the state’s largest union teamed up with school districts to pretend its officials are still working for schools when they really are private employees of the union. This enables the union workers to artificially inflate their taxpayer-funded pensions. In at least one instance, this meant turning an approximately $8,000 annual pension into one worth over $100,000. Senate Bill 280 involved union release time, which makes taxpayers pay for the salaries of union officials who are released from their teaching duties to work full time on union business.

The bills made it through the Senate as well as a House committee but died on the floor.

These special deals are an affront to taxpayers, who are on the hook for the cost. The state should not allow the practice of taking money directly out of the classroom and putting it into the bank accounts of unions. It should also not do anything that contributes to Michigan’s $26.7 billion pension liability.

The Michigan Senate was right to pass these bills, and its members will be the same in 2017. The Michigan House will maintain its strong Republican majority with new incoming members. Both chambers should take up these issues early in the new year.

Editor’s Note: Jarrett Skorup testified in front of a House Committee on the union release time bill. That testimony is reprinted below.

When people are paid by taxpayers, they should be doing work for taxpayers. The money given from the state to local school districts is intended to be spent providing educational services to students, with the hope that these services provide benefits to taxpayers.

Stay Engaged

Receive our weekly emails!

But too often, that is not the case. In about 70 school districts across Michigan, taxpayers pay union officials for “release time” – an arrangement where the employee explicitly works for a private union, not for the district and not for taxpayers.

Michigan districts spend at least $3 million directly on salaries for these released union officials, and much more if you add in the costs of providing these people with health and pension benefits. Districts pay other costs for these “ghost teachers” as well, including the salaries of their replacements in the classroom.

Here’s one example of things that union officials who are on release time do: When the Legislature was considering right-to-work legislation in 2012, Maryanne Levine, the president of the Chippewa Valley School District local union, was protesting on the capitol lawn and comparing legislators to Adolf Hitler.

“We must close union offices, confiscate their money and put their leaders in prison. We must reduce workers’ salaries and take away their right to strike," Levine quoted Hitler as saying. "Those were the words of Adolf Hitler, May 2, 1933 … These are strong words, but that is exactly what they are doing and the path they seem to be taking (in Lansing)."

She was joined by many other teachers, though it was a school day. And I don’t have a problem with that. Everyone should have the right to protest and as long as they are properly using their days off, that’s fine.

But unlike most public and private sector workers, being there was easy for Levine — she is paid by taxpayers, but works full-time to advance the interests of her union. Protesting on the capitol lawn is just another day at the office for union officials released from their teaching duties.

Levine is an elementary school teacher who is released from her duties as a teacher to work for the union. That's the perk of being union president. According to the district, she make $145,000 in total compensation, with most of it being paid by the district. Chippewa Valley also pays six figures for the union vice president to spend half his time on union business.

Ms. Levine has every right to protest and make these comparisons. But she should do it on her own dime.

Several districts pay over $100,000 a year to provide union officials with this perk. These include Chippewa Valley, Grand Rapids, Lansing, Warren and Wayne-Westland.

Taylor Schools employs four people who spent a significant part of every day working for the local union rather than taxpayers. That district has run significant deficits in recent years.

The vast majority of districts, including most large districts, are able to operate without taxpayers picking up the tab for release time. Detroit, Dearborn, Troy, L’Anse Creuse, Forest Hills, Traverse City, to name just a few.

The purpose of a public education system is to educate students, not fund union operations. These arrangements are unfair to taxpayers and a misuse of public funds. They should be ended.

~~~~~

Related Articles:

Michigan Legislature Set to End Union Schemes

House Lawmakers Consider Key Bills

Senate Acts, House Dallies on Pension Spiking and Union Release Time Bills

Coverage of Steve Cook Pension Spiking in Detroit News

Skorup Quoted on Release Time

Legislature Reins In Judges’ Power to Deny Parole

A prisoner’s chances at parole can no longer be rejected by a random judge

This month saw the passage of an important criminal justice reform: the repeal of the “successor judge veto power.”

In Michigan, judges have the power to step in and deny parole to prisoners whose trials they adjudicated. Until now, this veto power also extended to a “successor judge” — the one who replaced the judge who handed out a prisoner’s original sentence.

Now, the veto power will be reserved only for the original sentencing judge. A successor judge is still allowed to weigh in on a parole case but will no longer be able to unilaterally prevent an offender she never met from being paroled.

The bill’s sponsor, Rep. Dave Pagel, R-Berrien Springs, told the Mackinac Center that the bill “will correct an unjust situation,” adding that it will “prevent successor judges from being put in the difficult position of passing judgment on an old case that they never heard.”

The bill does not fast-track offenders for parole; it merely removes a potentially unfair variable from an otherwise straightforward process. While the successor judge’s input will undoubtedly be influential in parole decision, offenders will have more reason to work toward earning a chance at release, knowing that the only people who can directly impact that chance are themselves and their sentencing judge.

Stay Engaged

Receive our weekly emails!

Groups from across the political spectrum have supported passing the new law, including Right on Crime and the Citizens Alliance for Prisons and Public Spending. CAPPS released a statement that included a quote from an anonymous prisoner describing how the law will affect his life: “For the first time in decades … I feel as if it’s in my hands to make or break my chances of parole. I have been working so hard to prepare,” he said. He added that the successor-judge veto had been a wild card that had made it difficult to remain positive.

~~~~~

Related Articles:

Some Proposals for Criminal Justice Reform in the Legislature

Senate Proposes Broad Criminal Justice Reforms

Finding Agreement in Criminal Justice Reform

Key Criminal Justice Bills Working Their Way Through the Legislature

October 2, 2015 MichiganVotes Weekly Roll Call Report

Plenty of Good Reasons to Oppose Business Subsidies

Giving taxpayer dollars to developers is ineffective

1001 Woodward Avenue is the site of Dan Gilbert's Quicken Loans in Detroit.

Dan Gilbert, a developer and owner of many private companies in Detroit, has been urging the Michigan House of Representatives to approve Senate-passed bills that would give some developers and business owners more taxpayer-funded subsidies.

Gilbert defended his position in the Detroit Free Press:

He noted that some critics oppose the incentives for ideological reasons, or say the government shouldn't try to pick winners and losers.

“That all to me is legitimate and I get that,” Gilbert said, “but there’s a lot more to this than, ‘Hey, rich guys are getting this and neighborhoods are not getting anything.’” That characterization he finds unfair, saying it ignores what he believes is his “mission” to help the city grow.

The city “functions as one organism that has to work together, and to me it’s driven by jobs,” Gilbert said. Neighborhood residents “benefit from the overall healthy city that will have more taxes to drive more services and to drive better education,” he said. “I’m going to just keep pounding on this stuff because it’s just so massive and critical.”

No ideology is required to oppose this: there are solid practical reasons why giving taxpayer dollars to business owners and developers is ineffective and is a waste of money. As a previous article here about the proposal explained, “The record shows they are much better at creating press releases about jobs than actual jobs. They also invite corruption, and they don’t justify their costs.”

Stay Engaged

Receive our weekly emails!

Gilbert is Detroit’s biggest cheerleader and has put his money where his mouth is when it comes creating wealth and employment in the city. But business subsidies are not a good idea in principle or in practice.

~~~~~

Related Articles:

Will Republicans Backtrack on Corporate Welfare Cuts?

Tilt from Tax Cutting to Corporate Welfare Renews Failed Approach to Economic Growth

How to Improve Economic Development Transparency

The Problem of Corporate Welfare

Cut Corporate Welfare to Help Balance State Budget

Michigan Crushes Korea in Corporate Welfare Handouts

Votes on Electric Regulations, Asset Forfeiture, School Restraint Rules, More

December 16, 2016 MichiganVotes weekly roll call report

This will be the last roll call report for 2016. Next week this email will feature an annual Missed Vote Report on how many and which votes individual lawmakers missed in 2016.

House Bill 4629, Repeal bond requirement to contest asset forfeiture: Passed 29 to 8 in the Senate

To repeal a requirement that a property owner whose property has been seized by police and is subject to civil forfeiture must provide a cash bond in order to contest the taking, and if the challenge is unsuccessful, must pay all the expenses of the proceedings. Under civil forfeiture laws, police can seize and keep any property that may be associated with a crime and keep the property or proceeds even if the owner is never convicted or even charged with a crime.

Stay Engaged

Receive our weekly emails!

Who Voted "Yes" and Who Voted "No"


House Bill 6075, Require underfunded local government pension disclosures: Passed 37 to 0 in the Senate

To require that if a local government’s pension system has less than 60 percent of the assets it should have to meet current and future benefit promises, it must disclose what steps are being taken to increase the funding level. The bill would also require more online disclosures by the state on these problems.

Who Voted "Yes" and Who Voted "No"


House Bill 5400, Expand scope of practice for nurses: Passed 36 to 1 in the Senate

To expand the scope of practice allowed for Advanced Practice Registered Nurses (including nurse-midwives, nurse practitioners, or clinical nurse specialists), so they can provide more medical services without being under the direct supervision of a physician, including prescribing drugs and making house calls or "doctor's rounds" in a hospital.

Who Voted "Yes" and Who Voted "No"


House Bill 5120, Require timely notifications of municipal water system problems: Passed 37 to 0 in the Senate

To require public water supply systems to notify users within 72 hours if the water does not comply with state standards, rather than the current 30 days.

Who Voted "Yes" and Who Voted "No"


House Bill 5413, Create statewide policy on seclusion and restraint in schools: Passed 37 to 0 in the Senate

To prescribe documentation and reporting provisions in the uniform policy on seclusion and restraint in public schools proposed by House Bills 5409 to 5418. This bill would require schools to notify parents immediately if their child is secluded or restrained, with a written report within a week or less. The full package has now been sent to the Governor for approval.

Who Voted "Yes" and Who Voted "No"


Senate Bill 437, Centrally plan statewide power grid, require more wind turbines: Passed 33 to 4 in the Senate

To re-write the state law regulating electric utility monopolies. The bill replaces the current market-driven process for new power plant capacity and site decision with a more centralized process inspired by Obama-era regulations expected to be repealed in 2017. The bill also increases from 10 percent to 15 percent the amount of power that utilities must get from renewable sources, which could mean hundreds of additional industrial wind turbine towers in many rural communities. The final version appears to leave in place a small amount of electricity provider competition available to some commercial customers. The bill largely reflects the preferences of the state's regulated electric utility monopolies (who lobbied intensively for it), which will have to build new power plants to replace shuttered coal plants, on which they are guaranteed to make a profit under rate setting rules.

Who Voted "Yes" and Who Voted "No"


Senate Bill 437, Centrally plan statewide power grid, require more wind turbines: Passed 79 to 28 in the House

The House vote on the bill described above.

Who Voted "Yes" and Who Voted "No"


Senate Bill 992, Regulate drones: Passed 103 to 5 in the House

To authorize the use of aerial drones for commercial purposes in Michigan, if the operator is authorized or licensed by the Federal Aviation Administration. Recreational use would also be permitted subject to federal rules. The bill would preempt local government restrictions on drone ownership or operation, but allow local regulations on use within their jurisdiction. It would also prohibit improper use of drones, including privacy violations, and authorize misdemeanor penalties. Finally, the bill creates a state commission to develop more detailed rules.

Who Voted "Yes" and Who Voted "No"


Senate Bill 289, Authorize sanctions for bad faith patent infringement claim: Passed 107 to 0 in the House

To authorize damage awards for the target of a patent infringement claim that is made in bad faith. Actual damages plus exemplary damages of triple the actual loss would be authorized, plus costs. If the target demonstrates a “reasonable likelihood” that the claim is made in bad faith then the court could order the claim seeker to post a bond equal to the target’s likely legal expenses.

Who Voted "Yes" and Who Voted "No"


Senate Bill 564, Criminalize selling aborted fetuses or body parts: Passed 69 to 37 in the House

To make it a crime for physician or a person associated with a physician to knowingly benefit financially from or receive compensation for transferring or selling an embryo, fetus or neonate, including organs, tissues, or cells, if this was obtained as the result of an elective abortion.

Who Voted "Yes" and Who Voted "No"


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.

~~~~~

Related Articles:

Elect Speaker of the House; Names of Senators

December 2, 2016 MichiganVotes Weekly Roll Call Report

Friday, November 11, 2016 MichiganVotes Weekly Roll Call Report

Friday, November 4, 2016 MichiganVotes Weekly Roll Call Report

Friday, October 28, 2016 MichiganVotes Weekly Roll Call Report

October 21, 2016 MichiganVotes Weekly Roll Call Report

Michigan Chips Away at Unjust Forfeiture Process

Citizens are no longer required to pay an upfront bond

People trying to get back property seized by the state will now have an easier time with recently passed legislation. State and local law enforcement agencies will no longer be able to require citizens pay a 10 percent bond to challenge a forfeiture case.

House Bill 4629, sponsored by Rep. Peter Lucido, R-Shelby Township, passed the Senate 29-8. It previously passed the House 100-7 and now heads to Gov. Snyder’s desk.

I described this process in an op-ed earlier this year in the Detroit Free Press:

Michigan is one of just a few states in the nation where police can not only take cash and cars from people who have done nothing wrong, but where the owners of this property actually have to pay to get it back.

Thanks to civil forfeiture, law enforcement agencies routinely take property from people without charging them with a crime, much less convicting them of one. Once a property has been seized, the owners then have to pay anywhere from $250 to $5,000 just to begin the procedure to win back what’s rightfully theirs.

Under Michigan law, if your property is seized and valued less than $50,000, you must post a bond worth 10% of the property’s value to start the process of having it returned to you. But if you fail to post that bond within 20 days of the property being seized, it is automatically forfeited to the state.

And if you pay the bond but fail to win the property back in court, you can be ordered to pay the expenses the government incurred during the forfeiture proceedings. These provisions unfairly tilt the scales of justice in favor of the government.

The new law — assuming the governor signs the bill — is a good step, but citizens and legislators need to keep the momentum going. Ten states now require a person to be convicted of a crime before his or her property is transferred to the government through asset forfeiture. Michigan should join them next year. Read more about how forfeiture in Michigan works at www.mackinac.org/forfeiture.