Republicans Announce Deal On Tax Reform

Governor Rick Snyder’s hope to have the fiscal year (FY) 2012 budget negotiations wrapped-up by May 31^st took a significant step towards reality this week when the Governor, Senate Majority Leader Randy Richardville (R-Monroe) and House Speaker Jase Bolger (R-Marshall) announced their agreement on major tax reform. A press release from the Governor’s office is available here.

Although the agreement is in principle only at this point, and the legislative leaders still have to obtain the necessary votes from their respective caucuses, the deal went a long way to soften the most controversial portion of the Governor’s original proposal – the elimination of state income tax exemption on pensions. The agreement calls for a three-tiered, gradual implementation of pension taxation, most significantly maintaining the status-quo for those individuals born prior to 1946. Other portions of the individual income tax-side of the Governor’s proposal are maintained in the agreement such as the elimination of most credits, including the Earned Income Tax Credit (EITC).

The new structure leaves a significant hole in estimated revenue generated as it would raise approximately $300 million, $600 million less than the Governor’s original proposal. To address the difference, the leaders announced their agreement to an additional $150 million in further budget cuts, a delay in the 0.1-percent decrease in the individual income tax rate (from 4.35-perecent to 4.25-percent) to January of 2013, additional technical changes and a significant reduction in the number of taxpayers eligible to claim the Homestead Property Tax Credit.

The same level of detail was not released in regard to the business tax portion of the deal; however, it appears the Governor’s 6-percent corporate income tax (CIT) proposal would remain largely unchanged – eliminating the Michigan Business Tax (MBT) and taxing only C-corporations, with “flow-through entities” such as partnerships, S-corporations and LLCs taxed only at the individual income tax level.

Although target revenue numbers have clearly been agreed to, along with a significant portion of the overall tax structure, conversations appear to be ongoing regarding the transition of credits from the MBT to the CIT. An earlier-discussed plan to allow businesses to remain paying the MBT in order to keep their certified credits is reportedly the objective.

posted by PAA Online , Friday, April 15, 2011 10:49 AM
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House Falls Short In Attempt To Override “Live-In” Benefits

Three House Democrats joined all 63 House Republicans in voting for Senate Concurrent Resolution (SCR) 9 on Thursday – but the 66 total “yes” vote was 8 short of the required supermajority of 74 that is required to overturn the Civil Service Commission’s (CSC) December decision to expand state employees’ health care benefits to unrelated roommates.

The three House Democrats were Representatives Charles Brunner (D-Bay City), Richard LeBlanc (D-Westland) and Tim Melton (D-Auburn Hills). Three additional Democratic members of the House did not vote on the issue – Representatives Roy Schmidt (D-Grand Rapids), Kate Segal (D-Battle Creek) and Woodrow Stanley (D-Flint).

SCR 9 was introduced in February by Senator Mark Jansen (R-Gaines Township) as a direct legislative means to overturn the CSC’s decision. However, the initiative has a deadline of April 18^th so Thursday’s vote very likely marks the end of the road for Republicans in this pursuit.

House Speaker Jase Bolger (R-Marshall) has alluded to other potential pursuits, including a ballot proposal to either eliminate or limit the authority of the CSC constitutionally.

posted by PAA Online , 10:49 AM
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4,500 Flock To Capitol For Latest Protest

The Capitol lawn – and most of downtown Lansing – was again occupied by an estimated 4,500 labor representatives, protesting the budget proposal and other initiatives of Governor Rick Snyder and fellow Republicans. Charter buses unloaded many of the participants, representing organizations such as the Michigan Nurses Association, Michigan Education Association, UAW, and United Steel Workers.

The protestors chanted throughout the day while some, such as Lansing Mayor Virg Bernero and State Employee Retirement Association boss Mary Pollack, took to the stage to denounce the Republican agenda. Hot topics included the Governor’s proposed elimination of the individual income tax exemption for pensions and Republican’s perceived attacks on collective bargaining rights.

Activists were also present throughout the day seeking volunteers for an effort to recall Governor Snyder as well as assist in President Barack Obama’s 2012 re-election efforts.

posted by PAA Online , 10:48 AM
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80/20 Legislation Moves

Senate Reforms, Restructuring and Reinventing Committee Chair Senator Mark Jansen’s (R-Gaines Township) plan to require all public employees to pay 20-percent of their health care costs took one step Wednesday as the panel approved Senate Bill (SB) 7 and Senate Joint Resolution (SJR) C. The plan would affect all state and local government employees, including school districts and the state’s 15 public universities. SJR C would require a two-thirds vote in both legislative chambers and approval on a statewide ballot by the people as the Constitution provides autonomy to the public universities.

The reform would go into effect January 1^st of 2012, impacting a portion of the FY 2012 budget. There is some discussion of moving the date to 2013, as well as discussion about moving to a required 25-percent employee contribution. The chairman noted that there are many steps remaining in the legislative process allowing for further debate by all legislators.

Estimates point to a potential $600 million plus savings from the plan, not including the savings from municipalities which are not yet available. The measures now move to the Senate floor for action, expected as early as later this month.

posted by PAA Online , 10:47 AM
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PAAdvisory Briefs

Stabenow Grows War Chest

US Senator Debbie Stabenow (D-Lansing) will report better than $3 million cash-on-hand in campaign funds to the Federal Election Commission, with more than two-thirds of the resources contributed by individuals. In related news, Dr. Rob Steele has confirmed that he is strongly considering challenging the incumbent Senator Stabenow. Steele won 40-percent of the vote in Michigan’s 15^th Congressional District last fall in his run to un-seat longtime incumbent US Representative John Dingell (D-Dearborn).

Arthurhultz Arrested, Charged

Former Senator Majority Floor Leader Phil Arthurhultz (R-Whitehall) was charged with six felonies in Ingham County Court this week – all related to sexual indecency and minors. Arthurhultz represented Muskegon County in the State Senate for 16 years until 1994. He faces up to 37 years in prison and thousands in fines.

Bean to Retire

Longtime House Fiscal Agency (HFA) Director Mitch Bean has reportedly filed the required paperwork and will be retiring once the current budget debate is completed. Bean has been HFA Director since 1999 when he was named to replace ousted former Director James Haag.

Ross to Leave OFIR

Michigan Office of Financial and Insurance Regulation (OFIR) Commissioner Ken Ross is leaving his position effective April 15^th. The Granholm appointee was praised by Governor Rick Snyder for his service to the state. Ross had previously held other positions at OFIR, including Chief of Staff, was Vice President of the Michigan Credit Union League and a former Assistant Attorney General. The Governor is expected to name Kevin Clinton a former CEO of a medical malpractice underwriter as Ross’ replacement.

Corrections Closings Have Potential for Significant Layoffs

Michigan Department of Corrections Chief Financial Officer Barry Wickman told the Senate Appropriations Corrections Subcommittee that the closure of two state prisons, Florence Crane prison and the Muskegon Correctional Facility, could result in as many as 100 layoffs. The panel also moved the fiscal year 2012 budget of roughly $1.9 billion – below the Governor’s $2 billion spending recommendation.

posted by PAA Online , 10:46 AM
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