SOCC Set To Examine Elected Officials’ Pay

Required by the Michigan Constitution, the State Officers Compensation Commission (SOCC) will begin meeting in the next few weeks. The SOCC is a seven-person board constitutionally required to meet every two years to determine the salaries and expense allowances of the Attorney General, Secretary of State, Justices of the Michigan Supreme Court, members of the Legislature, the Lieutenant Governor and the Governor.

Given the State of Michigan’s current budget situation, increased compensation to our elected officials does not seem likely; however, any change the SOCC makes must be approved by the legislature and would affect those in office for 2017-18.

The last time SOCC met, two years ago, it approved a 3% pay increase for judges, and only for 2015. Under the requirements of SOCC, they are only responsible for setting the pay for the Michigan Supreme Court; however, under Michigan statute, the pay for all other judges is tied to the Supreme Court’s pay.

The Michigan Supreme Court has not taken a position regarding the SOCC process, but Michigan Chief Justice Robert Young testified in February before the Senate Judiciary Committee supporting Senate Bill 56, legislation that would make local judges’ pay increases subject to the same gradual pay increases as non-exclusively represented employees (NEREs).

Judges by law are limited from receiving more than 85 percent of a Supreme Court justice's salary, which is set by the SOCC. Back in 2002, voters approved changes to the SOCC, which now requires affirmative votes from both the House and Senate before any pay increase to the Supreme Court go into effect. The way the current process works, it is "politically impossible" for any judge to get a raise. As a result, it's been 14 years since any judge in Michigan has received a raise, making it the longest duration of any state in the country.

Leaders from the Legislature have suggested they are still looking into the issue; however, the presumption is that no recommendations will be made to SOCC this year.

posted by PAA Online , Friday, April 3, 2015 10:52 AM
LINK DIRECTLY TO THIS ARTICLE

Bills Prohibiting MEGA Credit Extensions Set for a Hearing

House Bills 4333 and 4334, introduced last month will see a hearing in the House Tax Policy Committee on the day state and federal income taxes are due. These two bills, sponsored by Representatives Lee Chatfield (R-Levering) and Gary Glenn (R-Midland) would prohibit MEGA tax credit extensions as currently allowed in the Michigan Economic Growth Authority Act.

Since MEGA credits were greatly expanded in 2008, the program has accumulated a projected taxpayer liability of $9.38 billion. The Legislature and Governor ended MEGA in 2011, but even with the program’s demise, state law still allows the existing credits to be increased and extended. This bill package would prevent this from happening in the future.

Under this legislation, credits that have already been awarded will not be touched; however, future administrations and legislatures will no longer be able to make amendments to the credits in a way that would extend these tax credits and create financial liabilities to future generations of Michigan taxpayers.

The $9.38 billion estimated liability is projected to be incurred over the next 17 years. For the coming fiscal year, the credits created a $325 million state budget shortfall that legislators are currently working to solve.

posted by PAA Online , 10:51 AM
LINK DIRECTLY TO THIS ARTICLE

Michigan Budget Watch – Pre-Spring Break Status

House, Senate Have Different Views from Governor on Budget

The Legislature began last week working on the 2015-16 fiscal year budgets as 15 departmental budget bills cleared Appropriations subcommittees. It became clear throughout the negotiations that Republican majorities in the House and Senate are moving in a much different direction than Governor Rick Snyder.

Community Health Budget

One of the more significant differences in spending priorities came from subcommittees in both the House and Senate that handle the Department of Community Health budget. Both subcommittees rejected Governor Snyder’s call to increase the tax on all health insurance claims, known as the Health Insurance Claims Assessment (HICA), from 0.75 percent to 1.3 percent and lift the cap on what the HICA can collect.

In the Governor’s budget recommendation he used the increase tax to replace $180.1 million in General Fund. Based on the legislative rejection of a HICA increase, the legislature will now have to find General Fund monies through savings or cuts from other programs.

Opposition to increasing HICA from 0.75 percent to 1.3 percent and removing the cap on what it can raise was expected from the Republican led legislature as business leader and many groups from around the state have publically voiced their opposition. Governor Snyder proposed the increase because the federal government is expected to disallow states from using a use tax on the state’s Medicaid HMOs, which currently raise money for Michigan’s Medicaid program.

As the legislature broke for their spring recess, it was unclear how the House and Senate will pay for putting much more General Fund into the Community Health budget; however, both Representative Al Pscholka (R-Stevensville), House Appropriations Chair, and Senator Dave Hildenbrand (R-Lowell), Senate Appropriations Chair, agreed that details of an agreement would emerge as the subcommittees continue to approve budget bills. As the process moves forward in both the House and Senate, some tough decisions will need to be made in order to find these General Fund reductions.

Besides the difference on HICA, legislative resistance has developed against Governor Snyder’s proposal to remove Medicaid pharmacy coverage from the HMOs, adult dental, rural hospitals, and the Graduate Medical Education program.

Negotiations have been taking place for some time between the Snyder administration and the Michigan Association of Health Plans, which represents the state’s Medicaid HMOs, about the pharmacy change; however, the health plans remain opposed the proposal.

The Michigan Association of Health Plans has offered an alternative to the administration that would meet the administration’s policy objective of going to one formulary and finding the same savings; however, it would keep the program with the health plans instead of the state.

Governor Snyder contends his change to the Medicaid Pharmacy program would produce $18.8 million in savings and create a streamlined system that gets rid of the current inefficiency and confusion. The appropriation subcommittees in both the House and Senate are asking the department and the health plans to work together to develop a consensus prescription drug formulary.

Another major difference between legislative plans is Governor Snyder’s proposal to discontinue funding for Graduate Medical Education (GME) out of the General Fund. The Governor has proposed increasing the tax on hospitals to replace $56 million in General Fund that had paid for the program. The House agreed to the change, but the Senate rejected it. The Senate will continue negotiations on this front and believes the GME has always been an important initiative to finance.

Some of the other DCH budget differences include:

· Hesitancy about Snyder’s call for $23 million in new spending ($7.9 million General Fund) for adult dental services, starting in the fourth quarter of the 2015-16 fiscal year. The House budget reduces the proposal to a $100 placeholder. The Senate subcommittee cuts two-thirds of the funding, delaying the start to September 1 instead of July 1 as the Governor proposed.

· Both the House and Senate subcommittees also restored $11 million that Snyder recommended cutting to hospitals that qualify for special rural hospital payments based on the amount of obstetrical and newborn care provided.

The Senate proposed budget for the Department of Community Health is about $135 million above the Governor’s General Fund recommendation. This number comes from the combination of the roughly $180 million from not increasing HICA, minus $40 million in additional savings by recognizing tobacco settlement revenue, plus another $5 million in net savings from a series of changes to the governor’s budget recommendation.

There is also some savings from various programs being delayed – among them, the expansion of Healthy Kids Dental to Kent, Oakland and Wayne Counties. By delaying the program until July 1, 2016, the Senate contends saving about $5.6 million General Fund, but then the Senate expands the program to all children (instead of those 0 through 8 as the Governor proposed) in those counties on July 1, 2016 at a cost of about $3.7 million, for a net savings of $1.9 million.

The Senate also proposed an increase of about $208 million in the Medicaid adult dental reimbursement portion of the budget, a reduction from the roughly $223.3 million the Governor has proposed.

Senate budget subcommittee highlights include:

· Restore the “Be the Match” bone marrow registry, an Alzheimer’s pilot program, and restoring room and board funding for hospices;

· Delay mental health Hawthorn project to July 1, 2016;

· Keep jail diversion funding at FY 2014-15 level and reduce Wayne State Psych DSH payment by $605,900; and

· Remove funding for new drug policy initiatives program

K-12 Budget

Differences have also emerged between Governor Snyder and the House on K-12 spending, where the House prefers to put money into the foundation grant for operations instead of allocating increases through categoricals.

A number of the categorical spending lines in the proposed 2015-16 School Aid Fund budget, including the Governor’s third grade reading initiative, would disappear under the House plan. The foundation allowance would see a substantial increase under the budget reported last week from the House Appropriations School Aid Subcommittee.

House Bill 4089, a $13.909 billion budget, is roughly a $50 million cut from the executive recommendation. Both the House and Governor’s budget proposals provide the same General Fund spending at $45.9 million. The big difference between the two is increasing funds toward the foundation allowance by $296.4 million, compared to the $22 million increase Governor Rick Snyder had proposed.

The House budget plan provides a foundation grant increase between $137 and $274 per student using the formula that provides twice the increase to the lower-spending districts, plus an extra $25 per student to those districts below the basic grant.

Another $14 million included in the School Aid Fund, covers the $5 per pupil added in 2013-14 and ensures all districts see at least a $25 per pupil increase for the coming fiscal year. The governor’s plan provides a $75 per student increase to all districts.

Additional funds for local districts in the House budget plan came from 15 different programs either being eliminated or the increased funding recommendations by the Governor not accepted. The House has moved those funds into the foundation allowance.

A few of the programs dropped under the House approved budget plan was the $75 million the Governor had proposed for distressed districts and $18.4 million for third grade reading. The budget also strikes the $100 million increase the Governor had proposed for at-risk programs and essentially designates the remaining $309 million for schools using multi-tiered systems of support.

During negotiations, the House Democrats tried unsuccessfully to pass amendments that would have restored the $50 million cut from the MPSERS cost offset, the $3.23 million state funding for math and science centers, $22 million for adult education and $1.2 million for bilingual education.

The budget did include some program increases, including $5 million for private schools to cover the costs of various state non-instructional mandates. Career and technical education programs would increase $16 million to $42.6 million and the $330,000 for teacher professional development in science, technology, engineering and mathematics (STEM), intended as one-time funding in the current year, would be retained in the House budget. The proposal also increases the First Robotics program to $3 million but expands the program to add elementary schools. Currently, $2 million is set aside and covers only grades 7-12.

In addition to the overall funding changes, the House subcommittee took on snow days by reducing the number but also allowing for more flexibility to local districts. The six days in current law would remain, but the supplemental days would be cut in half. In exchange for only three extra days, the bill would allow them to be used any time of year instead of being limited to after April 1. These potential changes would still have to be approved by the State Superintendent.

Community Colleges Budget

During negotiations last week on funding for Michigan’s Community Colleges, the House Appropriations Community Colleges Subcommittee passed a bill that would give the state’s community colleges a 2 percent increase in operations grants. This funding is more than the 1.4 percent Governor Rick Snyder recommended.

Further, Governor Snyder recommended the grant program which provides assistance to adult part-time students, be funded at $6 million. Under HB 4113, approved unanimously by the Subcommittee, this grant would decrease by $3.1 million.

Governor Snyder also recommended a revised performance funding formula for revenue allocation; however, the House proposal distributes the funds under the current formula.

In total, the House proposal for the community college budget is $392.6 million, about $1.2 million less than the Governor’s plan with most of the decrease coming from the General Fund.

The House subcommittee and the Governor did agree on many other budget items, including increasing funding for renaissance zone reimbursements by $1.6 million and a $17.2 million increase for the state’s share of Michigan Public School Employees’ Retirement System payments.

Higher Education

When it comes to funding higher education the House budget has decreased the Governor’s recommendation for the universities by $14.7 million and increased the cap on how much universities can raise tuition.

The increased cap allows Michigan's four-year universities to raise tuition rates by 4 percent from the 3.2 percent currently in law. Governor Snyder had proposed a tuition cap of 2.8 percent with a 2 percent increase in the base appropriations. The subcommittee approved HB 4103 with a 1 percent increase in university operations funding, which is estimated to be a nearly $13.7 million from the executive recommendation.

The House plan also reduces $700,000 from the Governor's recommended increase for AgBioResearch, enabling those funds to be redirected to the Department of Agriculture and Rural Development for fruit tree research

The House bill concurs with the Executive recommendation on the other items within the budget. In total, the House bill is $1.53 billion ($1.22 billion General Fund), a 0.7 percent increase from current year (0.9 percent General Fund). The Governor's recommendation and Senate budget bill total $1.54 billion ($1.24 billion General Fund).

In the other chamber, the Senate Appropriations Higher Education Subcommittee also met late last week and approved a budget unanimously. SB 123 mirrored Governor Snyder's recommendation which includes a 2 percent increase for university operations funded by the General Fund and maintains the increased ongoing appropriations from $2.45 million to $5.16 million for the Michigan Public School Employees Retirement System rate cap.

LARA Budget

In Governor Snyder’s recommendation for the Department of Licensing and Regulatory Affairs (LARA), a 50% fee increase was proposed for liquor licenses. If the House Appropriations Subcommittee on LARA gets its way, there will be no change in fees. The budget reported early last week presumes no change to the fees. In fact, half the fee increases, under Governor Snyder’s proposal, have been eliminated starting with the 2019-20 fiscal year.

The Michigan Liquor Control Commission (LCC) contends that it has been short of the needed revenues to run its various programs. Many House leaders agree with the LCC; however, the money collected from liquor fees goes to local law enforcement and other causes so the LCC would not see the increase. As an alternative, the budget would shift $1.5 million to the LCC from revenue generated by the liquor tax.

The other change difference between the Subcommittee and the Governor is the House cut $530,000 General Fund from the inspection of freestanding surgical outpatient facilities, given that the Subcommittee assumes an increase in fees on those facilities to help pay for those inspections.

Other than the two differences the budget sticks to Governor Snyder’s recommendation. It contains $539.3 million, a 0.6 percent decrease from the current year. Nearly all of the decrease is due to the state no longer having to make a payment to address workers’ compensation costs related to Delphi.

General Government Budget

Both Governor Snyder and the House General Government Appropriations Subcommittee agree that Detroit would see $5.8 million less in statutory revenue sharing from the State than it currently receives, under the general government budget approved Wednesday by a House Subcommittee.

The Governor, however, called for a $5.8 million reduction in revenue sharing, by eliminating the $5.8 million in funding added to the current year budget to bring a substantial number of townships back into the statutory revenue sharing system after years of receiving nothing.

The budget approved by the House General Government Subcommittee, would instead assure all those communities that received funding for the current year out of that $5.8 million would receive that funding for the upcoming fiscal year although the current year budget labeled the funding as one time only. Over 100 Michigan communities, nearly all townships, benefitted from that $5.8 million in the current year.

Many on the House Subcommittee believe Detroit has received a significant amount of financial help from the state and is improving. Because of this improvement, it makes sense to remove the $5.8 million and instead aid the many local governments that returned to statutory revenue sharing for the first time in years for the current fiscal year.

posted by PAA Online , 10:47 AM
LINK DIRECTLY TO THIS ARTICLE

PAAdvisory Briefs

Healthy Michigan Medicaid Expansion Reaches 600,000 Enrollees

Governor Rick Snyder announced this week that, since beginning to accept enrollees on April 1, 2014, the Healthy Michigan Medicaid program has been made available to more than 605,000 Michigan residents. Since the program began a little more than a year ago, more than 344,000 residents have undergone primary care visits, more than 35,000 recipients have also undergone mammograms and 17,000 have undergone colonoscopies. The program expansion was made available under the federal Affordable Care Act and was enacted by the Legislature in 2013.

EMU President Martin Stepping Down

Eastern Michigan University President Susan Martin announced Tuesday she is stepping down as President of the University. President Martin has served in this capacity for seven years, announcing this week she would leave the post on July 7 for a one-year sabbatical. She will then return to the university as a tenured professor of accounting and finance in the university’s College of Business. President Martin leaves the University in great standing as EMU has recently admitted its largest class of freshman and its overall academic standing has significantly improved. The Eastern Michigan University Board of Trustees will now begin a search for her replacement.

posted by PAA Online , 10:40 AM
LINK DIRECTLY TO THIS ARTICLE

This Week's Newsletter

Past Newsletters