Policy & Politics

Approved by Board of Directors, April 25, 2012

The Michigan Chamber of Commerce supports retaining Michigan’s Emergency Manager Law, Public Act 4 of 2011. Repeal of this important reform, through ballot initiative, legislative or legal action, would severely hinder state government’s effort to improve the fiscal health of local governments and public schools.

Background

Some of Michigan’s local units of government and public schools have been in serious fiscal distress for several years. It has been well documented by both the Michigan Department of Treasury – which tracks key indicators of local government and school fiscal health – as well as the Citizens Research Council that possible “Financial Emergencies” in numerous local governments and schools exist.

Indeed, Michigan has already had “Emergency Managers” installed in seven Michigan communities under Public Act 72 of 1990: Hamtramck (in 2000); Highland Park (in 2001); Flint (in 2002); the Village of Three Oaks (in 2008); Ecorse (in 2009); Pontiac (in 2009); and Benton Harbor (in 2010). A financial manager was appointed for the Detroit Public School District in 2009 (and most recently Muskegon Heights School District requested an Emergency Manager). Yet, the looming fiscal crisis for more local governments and schools proved that the pre-2011 statutes were insufficient to address current challenges.

Upon taking office in 2011, Governor Snyder called for revisions to Local Government Fiscal Accountability Act of 1990 in order to strengthen the existing law and allow for earlier intervention and more meaningful reform to return any local government or school district to fiscal health. Michigan has a number of statutes aimed at preventing local governments from falling into a financial crisis (Uniform Budgeting and Accounting Act, the Emergency Municipal Loan Act, the Fiscal Stabilization Act, the Revised Municipal Finance Act, and the Home Rule Cities Act). Yet, none specifically provide for a mechanism to deal with one of government’s largest cost-drivers; collective bargaining agreements, which burden public employers with overly generous employee compensation and benefit costs that are unsustainable or unaffordable going forward.

In response, the Legislature passed a package of bills to update the current “emergency manager” laws. The goal of the current law is to improve the early detection system and provide a framework for a Consent Agreement with the local government or school. The main bill (PA 4) does expand the authority of a Gubernatorial-appointed Emergency Manager; however, only in the event that one is appointed. This is the worst-case-scenario, and brought on only if all other options fail.

Highlights of the current law:

• New criteria to trigger a preliminary review which could include: a request by the governing body; a creditor owed more than $10,000; electors; failure to make pension deposits or pay wages, and failure to make a bond payment.
• If necessary, a process of “Preliminary Review” overseen by an appointed Review Team.
• If necessary, a process and framework for a Consent Agreement.
• Governor declares Receivership and appoints an Emergency Manager with broad authority
  including the ability to abrogate collective bargaining agreements, sell assets, and transfer
  local government functions.

Under the guise of “Standing up for Democracy” opponents of the PA 4 reforms have attempted to gather enough signatures to qualify for a ballot proposal that would ask voters to repeal PA 4. Led by a front group called Michigan Forward and primarily funded by the AFSCME (American Federation of State, County and Municipal Employees) union, this opposition campaign is solely focused on repeal of the Act; they have put forward no alternative to the reforms contained in PA 4. In other words – whether or not a local government or school district has been horribly mismanaged and falls into insolvency is not their concern. The rhetoric is primarily focused on the possibility that if an Emergency Manager is installed, local elected officials may be removed from decision making. Their coalition has dismissed, or ignored, the fact that the Michigan Constitution currently grants the Governor authority to remove or suspend a local official if warranted. Rather, it is clear that maintaining the status quo as it relates to unsustainable wages and benefits, and union control of local government is their priority, regardless of the consequences.

Proponents submitted 226,637 signatures to the Secretary of State. However, they chose to not submit their original petition language to the Board of Canvassers for review as to form (this step is not currently required by law, but is highly advised). On April 9, the “Citizens for Fiscal Responsibility”, led by Bob LaBrant, filed a legal challenge to the petition language citing a number of technical concerns including illegal font size, and lack of relevant corresponding references to the prior Act, effective date, and tie-barred bills.

If the petition language and gathered signatures are certified as valid, voters will be asked whether they want to maintain Public Act 4, in which case the Michigan Chamber supports a Yes vote on the November 6 ballot in order to maintain this important fiscal accountability reform measure. Repeal of this important reform measure threatens the ability of state authorities to pursue early intervention of local governments and schools who are on the brink of insolvency.

To provide further background on Public Act 4 of 2011, we have attached a Citizens Research Council memorandum summarizing The Local Government and School District Fiscal Accountability Act.

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Approved by Board of Directors, April 25, 2012

The Michigan Chamber of Commerce is strongly opposed to the ballot proposal which seeks to amend the Michigan Constitution to create a new right to collective bargaining; retroactively repeal dozens of cost-saving reform laws; and prohibit lawmakers from passing right-to-work legislation.

Background

On February 28, 2012, a ballot question committee was filed with the Secretary of State entitled “Protect our Jobs”. The initiative petition would enshrine collective bargaining rights into Article I, Section 28 and Article XI, Section 5 of the Michigan Constitution. This divisive union attack on government efficiency and fiscal responsibility would permanently establish the right of all public and private employees to collectively bargain and impair the enactment and enforcement of new and existing state labor and employment laws contrary to the proposal, including right-to-work legislation.

The 432-word constitutional amendment would effectively shield unionized workers from the numerous reform measures Governor Rick Snyder and the Legislature adopted this legislative session - or may consider in the future. Although proponents of the constitutional amendment have refused to enumerate what current or future laws the amendment would affect, it is clear the language would significantly hamstring, if not nullify, legislative efforts to improve government efficiency and control spending at the state and local level.

A legal analysis of the constitutional amendment by Bodman, PLC and others suggests that, although it would not automatically abrogate existing state labor or employment laws, it would operate to diminish the enforceability of such laws which conflict with collective bargaining right and encourage future challenges to laws that do so. Recent and pending laws and reform proposals that could be pre-empted by the constitutional amendment include: future right-to-work legislation; efforts to repeal the prevailing wage law; limitations on public employer spending on health insurance costs (MCL 15.561-15.569); pension reforms that moved state employees from defined benefit to defined contribution pension plans (MCL 38.1-38.69); emergency manager powers (MCL 141.1501-141.1531); the prohibition of payroll deductions for union dues for public school employees (MCL 423.210); local government consolidations relating to collective bargaining (MCL 423.215); changes to the Teacher Tenure Act (MCL 38.71-38.191); and laws prohibiting the unionization of graduate student research assistants (MCL 423.210).

Groups supporting the constitutional amendment include: We Are The People - Michigan, Teamsters, the Michigan branch of the American Federation of Teachers, Michigan AFL-CIO, Michigan UAW, National Education Association, Michigan Education Association, Progress Michigan, Michigan Democratic Party, Michigan Nurses Association, American Federation of State, County and Municipal Employees (AFSCME), Michigan State Utility Workers Council, What About the Children?, Lecturers' Employee Organization and others. This coalition shares two common goals: First, stifle efforts to improve Michigan’s economic status through enactment of meaningful legislative reforms and, second, increase voter turn-out among traditionally liberal factions of the electorate.

To successfully place the question on the ballot in November, proponents will need to gather signatures equaling 10 percent of the total vote cast for governor in the 2010 election, or 322,609 signatures. The signatures need to be turned in by Monday, July 9, 2012 in order to qualify the proposal for the November 6, 2102 statewide ballot. The State Board of Canvassers will have until September 7, 2012 to certify sufficiency of the signatures submitted, 60 days before the general election. Teamster President James Hoffa touted the constitutional amendment petition in a column of the international union’s website, saying: "They'll sign because they've seen CEOs arbitrarily move plants to Mexico or China when their workers don't have the protection of a union contract. They'll sign because they know workers who don't belong to a union have absolutely no say when the CEO slashes wages or benefits. And they'll sign because CEOs can unilaterally fire non-union American workers just to make the quarterly earnings statement look better."

We fully expect proponents of this proposal, mainly in-state and national labor unions, to spend millions to see this question certified for the ballot and approved by the voters. However, we will not have a clear financial report of contributions and expenditures until 35 days after the qualification or non-qualification of the proposal by the State Board of Canvassers, most likely in late September or early October.

We are currently exploring the legal sufficiency of the proposal. A legal analysis by Dykema Gossett PLLC, suggests the proposed amendment may be faulty because it attempts to repeal all existing laws in conflict with the rights provided in the proposal in a blanket fashion via constitutional amendment, an argument could be made that such action should have been made through the referendum and initiative process to ensure that the public is better informed of the full effect of the proposal.

If this proposed Board policy is adopted, the Michigan Chamber will, in tandem with a legal challenge, work with others in the business community to vigorously oppose this constitutional amendment. An aggressive campaign to defeat this ballot proposal would include activities such as: an early voter information campaign, public opinion surveys and focus groups, opposition research, coalition building and paid media. Placing a competing or alternative proposal on the ballot is not recommended because it could cost millions of dollars to put another amendment on the ballot and defend that proposal, drawing financial resources away from this ballot question and other key races.

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Approved by Board of Directors, April 25, 2012

The Michigan Chamber of Commerce is opposed to the proposed Constitutional Amendment to require utilities to obtain at least 25% of their electricity from renewable
energy sources by 2025. The proper way to develop a Renewable Portfolio Standard (RPS) or broader energy policy is through the legislative process, not by amending the State Constitution.

Background

In January of 2012, a group called “Michigan Energy, Michigan Jobs," filed with the Secretary of State to circulate petitions for a proposed constitutional amendment that would require 25% of each electricity providers annual retail sales in Michigan to be derived from the generation or purchase of electricity produced from renewable energy resources. Facilities used for satisfying this standard shall be located within Michigan. Further, if adopted the proposal would limit rate increases to one percent a year for costs related to meeting the 25% mandate.

Very little is known about the out-of-state interest group that is pushing this constitutional amendment. Sources indicate that the driving force is a venture capitalist that is located in California. To date, the proponents have been very clandestine about their motives and strategy and have disclosed relatively little to the general public. One item that has been disclosed is a group of supporters who have been trotted out for press conferences or comments to the media regarding this issue. This group includes: International Union of Operating Engineers Local 324, Michigan Nurses Association, Sheet Metal Workers International Association Locals 7, 80, and 292, SEIU State Council, Communication Workers of America District 4, American Federation of Teachers Michigan, United Steel Workers District 2, Amalgamated Transit Union, United Food and Commercial Workers Local876 and 951, Astraeus Wind, Blue Green Alliance, and Energetx Composites.

From conversations with proponents, it is clear that one of the strategies to push for passage of the ballot proposal will include marketing the idea that jobs will be created if the amendment is adopted. To date, we have seen no evidence that this proposal will generate significant job creation for Michigan workers. Opponents of the proposal are currently working on economic analysis to illustrate the false nature of the claim.

In 2008, elected officials in a bi-partisan manner established a Michigan RPS of 10% to be achieved by 2015. The 10% renewable portfolio standard was not discussed separate from the rest of the energy policy. The RPS was generated as part of overall state energy policy because every piece of the policy is connected and changing one can create problems with other parts. As opposed to the proposed constitutional amendment, this standard was determined after significant legislative debate, extensive hearings and full inclusion of opinions by all interested parties. Unfortunately, during this election season those seeking quick financial opportunities are willing to clutter the Constitution instead of pursuing a more thoughtful approach that focuses on the legislative process open to all stakeholders.

Simply mandating a higher number will not increase Michigan’s progress in creating renewable energy. Allowing a small group of people with an agenda to force energy policy change through a ballot initiative will only create more challenges to the pursuit of expanding our renewable energy infrastructure. Passage of the 2008 energy law demonstrated that there was bipartisan agreement at that time on the direction the state needed to head regarding energy policy and a renewable portfolio standard.

The Michigan Chamber’s Energy and Environment Committee voted unanimously to recommend this policy proposal to the Board of Directors. Chamber staff is currently gathering information relating to implementation of Michigan’s 2008 energy law from both supporters and opponents of the current policy. The legislature is not expected to make energy policy a priority before recessing for the summer and few session days are planned between the August primary and November general election. Governor Snyder plans to deliver a special message on energy policy later in 2012. Given this situation, the Chamber’s Energy and Environment Committee will begin a more comprehensive review of state and federal energy policy this fall.

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Downloads: 

Official_Policy_25per_of_electricity_from_renewable_energy_sources_by_2025-4-25-12.pdf

Approved by Board of Directors, April 25, 2012

The Michigan Chamber of Commerce is opposed to the ballot proposal which seeks to amend the Michigan Constitution to provide collective bargaining rights to home health care workers.

Background

During the Granholm Administration, the Michigan Department of Community Health (MDCH) and the Tri-County Aging Consortium in 2004 entered into an agreement under the Urban Cooperation Act, Public Act 7 of 1967, to create the Michigan Quality Community Care Council (MQC3). The MQC3 was formally established to coordinate and give the elderly and disabled (and their families) a registry of potential home health care workers from which to choose. In reality, the MQC3 was a scheme to establish themselves as the sham “employer” of these home health care workers, even though it never did any of the work that an actual employer has to do (hire, supervise or pay wages). The MQC3 was used as a tool to organize1 and extract nearly $30 million in union dues from over 56,000 home health care workers, including relative caregivers, who were receiving state subsidies via Medicaid for their services.

Earlier this year, the Legislature passed, and Governor Snyder signed, a bill (Senate Bill 1018;Public Act 76 of 2012) to put an end to this “union skim” of Medicaid dollars. The legislation is similar to an Executive Order signed by Governor Rick Snyder in 2011 to end a similar practice involving the forced unionization of over 70,000 home-based daycare owners who accepted state subsidy checks on behalf of low-income parents needing childcare. This practice amounted to a $3.7 million annual “union skim” for Child Care Providers Together Michigan, a subsidiary of the United Auto Workers and the American Federation of State, County and Municipal Employees.

In March of 2012, SEIU Healthcare Michigan gained clearance from the Board of State Canvassers to begin circulating petitions to amend the Michigan Constitution to create a MQC3 successor, the “Michigan Quality Home Care Council”, and guarantee home health care workers, including relative caregivers, the right to collectively bargain and perpetuate the unions’ skimming of Medicaid dollars.

To successfully place the question on the ballot in November, proponents will need to gather signatures equaling 10 percent of the total vote cast for governor in the 2010 election, or 322,609 signatures. The signatures need to be turned in by Monday, July 9, 2012 in order to qualify the proposal for the November 6, 2102 statewide ballot. The State Board of Canvassers will have until September 7, 2012 to certify sufficiency of the signatures submitted, 60 days before the general election.

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Approved by Board of Directors, September 12, 2012

The Michigan Chamber of Commerce supports meaningful efforts to limit tax increases and control government spending. The Michigan Chamber opposes the proposal for the November 6, 2012 general election ballot to impose a constitutional 2/3 majority vote requirement to increase taxes.

Background

The Michigan Chamber has a strong track record of involvement in the tax limitation movement; both on day-to-day legislative efforts, as well as a long history of support for well-crafted constitutional tax limits. The “Headlee Amendment” limit and the 1994 “Proposal A” each provided targeted property tax limitations, among other things, yet still with enough clarity and flexibility to allow revenue increases if necessary.

Over a dozen other states across the country have constitutional tax limitations, generally by a 2/3 or 3/5 majority vote. Many of these have a much broader application than Michigan’s current tax limits on property taxes, requiring the higher vote threshold for any tax increase.

Led by a group called “Michigan Alliance for Prosperity,” paid petition circulators garnered enough signatures to place a Constitutional amendment for a proposal to require a 2/3 majority vote to increase taxes on the November 6, 2012 ballot. The petition specifically calls for:

"A Proposal to amend the Michigan Constitution by adding a Section 26a to Article IX: No new additional taxes shall be imposed by the state government, nor shall it expand the base of taxation, nor shall it increase the rate of taxation unless (a) by the vote of two-thirds of all the elected members of each branch of the Legislature; or (b) by a statewide vote of Michigan electors at a November election.

This section shall in no way be construed to limit or modify tax limitations otherwise created in this constitution."

The language provided in bold above would be directly added to the Michigan Constitution.

Clearly, the concept behind this current effort to curtail tax increases is laudable. It should not be easy for governmental units to raise taxes on citizens.

Unfortunately, the practical implications of this proposed amendment could prove extremely problematic when considering more comprehensive policy legislation. The most obvious recent example is the repeal of the Michigan Business Tax (MBT), which was replaced with a Corporate Income Tax. This was a multi-faceted effort, which included broadening the business tax base by eliminating targeted tax credits, as well as broadening the individual tax base by eliminating exemptions and deductions. This legislative effort was an important policy change for the state, but would have been almost impossible to achieve based upon language in this proposal, and Michigan’s job providers could still be saddled with the MBT.

Other examples of serious public policy decisions, which would become even more difficult to resolve, are such things as increased transportation investment, and on the opposite side of the spectrum, circumstances where the state can simply no longer afford generous tax credits, as was the case with film incentives. Any effort to modify this type of tax policy would be seriously hampered if this proposal were to pass.

Furthermore, while the language crafted by proponents is certainly succinct, it is nonetheless poorly drafted, leaving room for interpretation by bureaucrats. For example, there is no clear distinction about whether the amendment applies to local government taxes.

As public policy, “super-majority” vote requirements raise important questions over the legitimate use of power by concentrating decisions that affect many, into the hands of a minority, by encouraging potential abuse through “vote swapping” on difficult issues, and by encouraging special interest carve-outs to mandate automatic spending for a few…at the expense of many.

Finally, proponents often site both tax limitations and the need to curtail spending when promoting this type of amendment. Notably, California has this type of constitutional limitation, yet is still considered a very high-tax state and has proved to be totally incapable of controlling spending.

To be fair to proponents, Chamber staff met with staff from Michigan Alliance for Prosperity (MAP) as well as Oakland County Sheriff Mike Bouchard – who is an honorary Chair of MAP and proponent of the proposal. Proponents expressed a desire for the Michigan Chamber to Support, or remain Neutral towards, the proposal. Their main arguments to Chamber staff were the following:

• A 2/3 requirement would force real spending reductions (the Chamber committee has expressed concerns that the very plausible alternative is that special interest groups will instead simply elevate attempts to seek constitutionally-mandated spending increases.) 
• A 2/3 requirement would necessitate strong leadership and negotiation to garner the votes necessary for tax increases (the heightened potential for vote-swapping and “logrolling” is very concerning to an issue, and policy-oriented, organization).
• Had a 2/3 requirement been in place, we would never have gotten the MBT in the first place (this therefore means we would have very likely not been able to get rid of the SBT etc…). 
• That the Chamber can still accomplish two of our key objectives (an increase in transportation investment, and personal property tax reform) in the Nov/Dec Lame Duck session if the 2/3 vote requirement passes (Chamber staff continues to push for legislative action on these unfinished legislative priorities, but the practical reality is we don’t know if the November 2012 election will result in a long or short Lame Duck session that is productive or unproductive.)

The Michigan Chamber Tax Policy Committee voted overwhelmingly to recommend opposition to this ballot proposal.

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The Michigan Chamber supports efforts to improve the economic competitiveness of Michigan’s agriculture industry by advocating policy modifications premised upon the following principles:

Animal Care

Support farmers in their ability to properly maintain and care for farm animals.

• Support efforts to have experts at the Michigan Department of Agriculture, Michigan State University, and agriculture industry leaders help establish best scientific and economic practices for the proper care of animals.
• Oppose ballot initiatives from out-of-state groups that eliminate or restrict science-based, modern farm practices related to animal care.

Improving the Regulatory Burden

• Support keeping the Michigan Department of Agriculture as an independent state agency. The Department of Agriculture provides a brand for farmers that is trusted and respected by the industry, particularly in the area of food safety and animal husbandry.
• Support transferring all regulatory functions currently being run by the Department of Environmental Quality (DEQ) that affect agriculture to the Department of Agriculture. Recent decisions by the DEQ related to agriculture have had a negative effect on the growth of agriculture in the state. The Michigan Department of Agriculture is better suited to handle the regulation of agriculture and agri-business. 
• Oppose efforts to establish additional limitations on the use of water resources. The Legislature approved scientifically-based ground water legislation in 2008. Some environmental groups are now calling for further restrictions on water use, including expanding the public trust doctrine to limit a person’s right to use water.

Taxation of Agricultural Operations

• Support clarification of the unitary filing provisions of the Michigan Business Tax to ensure that agricultural operations are properly classified as agriculture.
•  Support clarifying provisions of personal and real property tax laws to ensure that all temporary agricultural structures, which are moveable and not permanently attached or anchored to the ground, be exempt from property taxes.

Labor

• Support immigration reform at the federal level that focuses on streamlining and improving the immigration process for people who play by the rules and want to become American citizens or work in the United States on a temporary basis, including those in agriculture and tourism.
• Oppose efforts to make employers the immigration ‘police’ or undertake investigations that are the proper role of law enforcement agencies.

Local Zoning

• Oppose efforts by local units of government to establish local zoning ordinances that prohibit or discourage the creation of roadside stands, farm markets, or other agri-tourism destinations.
• Oppose efforts by local units of government to put barriers on farmers in their ability to install renewable energy devices such as wind, solar, and bio-mass.

Background

Michigan agriculture remains one of the state’s leading industries, providing over $71.3 billion in economic activity annually and supporting over one million jobs. Despite the economic downturn, the agricultural economy has continued to expand in Michigan helping to diversify our state’s overall economy. Michigan is second only to California in terms of the most diverse number of crops grown in the U.S. Michigan leads the nation in the production of 19 different commodities, including tart cherries, blueberries, and flowering hanging baskets (geraniums/impatiens). In terms of cash receipts, milk, corn, and nursery products are the top commodities in Michigan.

Many issues that the agriculture industry faces are similar to those faced by others in the general business community. Michigan’s heavy tax burden and unfriendly regulatory environment are negatively affecting the economic competitiveness of the agriculture industry and must be addressed.

An issue of immediate concern to the agriculture industry is the threat of a ballot proposal to regulate on-farm practices related to animal care. Animal rights groups, such as the Humane Society of the United States (HSUS), have sponsored, funded and conducted ballot proposals across the country to try and discourage the production of meat. The group was first successful in the state of Florida in passing a ballot initiative, and has recently had an initiative approved in California. HSUS is now targeting Midwest states, including Michigan, for a similar ballot initiative.

The Michigan Chamber of Commerce believes governments should have the following objectives:

• To focus on priorities by determining, through comprehensive analysis, the appropriate role of government and identifying opportunities where the private sector can assist in the achievement of those functions necessary to fulfill government responsibilities.
• To provide the level and quality of services that citizens require in the most cost efficient manner possible.

The Michigan Chamber of Commerce supports public policies that promote fair competition and prevent unfair competition by government. Such policies are critical especially when governments seek to compete in traditional private sector markets. The Michigan Chamber believes that “Fair Play” legislation is now needed in Michigan, in part, to address the emergence of local units of government competing against telecommunications businesses. The Michigan Chamber supports the following “Fair Play” policy:

• A government-funded business activity must be subject to the same regulation as private sector competitors providing the same service(s). Fair Play promotes vigorous competition.
• A government-funded business activity enjoys substantial unfair advantages over private sector competitors through access to financial subsidies such as tax exemptions (including income, property, gross receipts and excise taxes), and tax exempt bond financing. Government funded business activities must be subject to the same tax rules and regulations as private sector competitors.
• A government must not use its sovereign powers, such as control of rights-of-ways or powers of condemnation, to advantage its business activities over private sector competitors. In addition, a government must not delegate its sovereign powers to a competitive non-government funded business activity.
• A government-funded business activity should have no greater ability to allocate costs among other services/departments/agencies than private sector providers.
• Government-funded business activity must impute to its cost of providing service the cost of taxes and fees consistent with the obligations of private competitors. A government-funded business activity should also impute to its cost of providing services a cost of capital consistent with the cost of capital available to private firms.
• One competitor in a business market should not be able to regulate another competitor. In other words, a government-funded business activity should not be regulated by the same government entity that funds it.

The Michigan Chamber supports comprehensive corrections reform based on the following principles: 

• Reduction of crime rates and recidivism;
• Appropriated dollars should be spent in the most effective and efficient manner possible and all cost-saving options must be considered;
• Annual costs must be brought into line with national and regional averages; and
• Policy and programmatic changes should be data-driven and based on results.

Background

Job providers in Michigan have a vested interest in making sure that Michigan’s costly correctional system is effective and efficiently run. As members of society, employers expect safe streets not only to protect their employees and property, but to ensure safe neighborhoods, schools and homes. A correctional system should provide citizens with the confidence that justice is being served, but also that their tax dollars are being used in the most effective way possible. Having individuals who are rehabilitated and employable after leaving incarceration is good for employers and society, in general. 

Michigan’s current Department of Corrections’ (MDOC) total budget accounts for over 20 percent of Michigan’s total General Fund/General Purpose budget. For historical comparison, the budget has grown significantly from $1.7 billion in 2000 to over $2 billion in 2007 and the number of prisoners has gone from almost 48,000 to 50,200 in that same period (see attached document). Michigan’s costs per prisoner is $31,000 per year, ranking it one of the highest in the nation and the highest among neighboring states Ohio, Indiana, Illinois, and Wisconsin.*

At the same time, according to the Justice Center, a national, non-partisan organization (operating under the umbrella of the Council of State Governments), Michigan’s violent crime rate is higher than the national average, and highest in the Midwest (see attached). Furthermore, while Michigan has a low prison admission rate, Michigan’s overall incarceration rate is high due to a higher-than-average length of stay for prisoners. In addition, while recidivism is somewhat difficult to quantify (due to lack of uniform definitions across the states), according to the MDOC, the rate of supervised offenders (felony probation and parole) going back to prison rate is nearly 60%. This data appears to suggest middle and “back end” problems related to re-entry, parole and probation.

The Michigan Chamber of Commerce continues to be a strong advocate for high standards of student achievement and accountability in K-12 education. We believe the recent decision by the State Superintendent of Public Instruction to delay implementation of the state's accreditation system was not in the best interest of students, parents or Michigan's job providers. The current accreditation system, in place since 1995, is based on seven different measures of school operations and student performance. This fair and reasonable system could and should have become operational in the spring of 2001 as originally planned.

We are also concerned that the State Board of Education effort now underway to put in place a new system that uses multiple measures to evaluate school buildings may be yet another attempt by some educators to delay and avoid accountability. Shifting the focus of the state's accreditation system away from a clear emphasis on quantifiable measures of student achievement and school operations to a multitude of more subjective factors is not acceptable.

Background

"A successful education system assists schools struggling to improve, rewards exemplary schools, and penalizes schools that persistently fail to educate their students." - Business Roundtable's Nine Essential Components for a Successful Education System.

Over the past decade, the Chamber has worked with the Michigan Department of Education in improving the system of accountability and accreditation.  Chamber action was guided by the Nine Essential Components for a Successful Education System, work with the Michigan Business Leaders for Education Excellence and the findings of Gap Analysis I, II and III. Using research from these documents, the Chamber adopted a policy in support of Action Steps for Education Quality in 1998. This policy included specific steps that we believe can improve Michigan's public schools and respond to a recognizable gap on the issue of school accountability.

In Gap Analysis III, we identified the following as a gap:

• Despite the statewide effort aimed at improving the quality of education for all students, several districts continue to fare poorly on state assessments and other measures of student, school, and district progress. Additionally, the lack of concrete sanctions for those districts provides no incentive for improvement.

In the most recent Gap Analysis Study, participants agreed that the status quo is not acceptable for failing schools. Some schools fail to provide a high quality education for their students that persistently score low on MEAP test and other measures. Such schools should be held accountable for failing to make progress toward achieving higher standards. State and local school officials must be ready to reward and support schools that take effective initiative and help those struggling to meet new standards.

Most study participants saw a role for the state in facilitating the process of school improvement. The state can provide focused technical assistance and other resources to the district without eroding public trust, a likely outcome of a state takeover. The state Department of Education's creation of a field services unit is a positive sign that this sort of help is available to struggling districts. Furthermore, the Plan for Expanded Technical Assistance and Intervention for Low Performing Schools would provide a clear direction and method for helping schools. 

The Michigan Legislature directed the Department of Education to develop the current system. The initiative was backed by the Governor and major education groups. It is aligned with previous activities around efforts to raise academic standards, improve assessment as well as school accountability. Despite establishing a low standard in academic performance for accreditation, the Michigan Chamber supported the effort. The Department worked with school districts for four years in bringing about this new accountability system and were scheduled to release the data in the spring of 2001. Unfortunately, the new State Superintendent of Public Instruction decided to stop the release of this report and to redesign the accreditation system because he viewed it as "flawed."

The Michigan Chamber of Commerce filed a Freedom of Information Request to obtain the data contained within the report. The Department complied with the request. A review of the document found that close to one third of the four thousand school buildings in Michigan would not have received accreditation status because of poor performance in academic subject areas, low participation in the assessment program or the lack of a school improvement plan which outlines school district efforts to increase attendance, reduce drop out rates and raise academic achievement.

The Superintendent of Public Instruction has established a new committee and given them the responsibility to redesign the accreditation system and put this new system in place by the end of the 2001 - 2002 school year.

The Michigan Chamber of Commerce supports repeal of Michigan's higher education Tuition Tax Credit Law, provided that any re-directed funding for higher education base appropriations is used for tuition relief and incorporates the following principles and commitments:

• that education for a productive workforce is one of the many key elements, including a solid public infrastructure, a competitive tax climate, and a fair regulatory environment, to maintaining a competitive business climate.
• that state universities focus on maintaining an ongoing and concerted effort to control costs and seek further operating efficiencies.
• that while offering the highest quality education should be a top priority, state universities should strive to make higher education affordable. 

Background

As of the summer legislative recess, the Michigan Legislature had not completed three remaining budget bills, one of which was the Higher Education Budget. Declining revenues have placed restrictions on most areas of the state budget. For fiscal year 2001-02, the higher education budget was only increased 1.5 percent, and while funding in the last decade has significantly increased and outpaced inflation, undergraduate tuition increased over 80 percent. Subsequent to the legislative recess and the budget bills left unfinished, Michigan's public universities announced tuition hikes between 6.9 and 19 percent.

Two of the leading candidates for Governor, Dick Posthumus and James Blanchard, have both called for restraint in tuition increases.

The Presidents Council has recommended the alternative solution of repealing the generally unused Tuition Tax Credit Law and using these set-aside funds to boost base appropriations for higher education, coupled with a commitment to lower the tuition increases. The subsequent appropriation increase could net an extra $27 million. Repeal of the tax credit would also apply to independent colleges and community colleges. The Association of Independent Colleges and the Michigan Community Colleges Association support repeal of the tax credit. Governor Engler and some legislators also support the proposal.

In response to a request from state universities, the Michigan Chamber of Commerce supports efforts to repeal Michigan's higher education Tuition Tax Credit Law to offset the financial commitment, made by 14 of the 15 presidents and chancellors of Michigan's public universities, to reduce tuition increases.

The Michigan Chamber of Commerce has been a strong advocate for higher standards, stronger assessment strategies and a quality accountability system for Michigan schools. The Chamber reaffirms support for the implementation of an assessment system in Michigan schools that is aligned to rigorous standards and provides useful data. The data should be useful in helping schools identify specific areas that need technical assistance and improvement. The Michigan Chamber of Commerce supports the effort to create an assessment system that annually measurers student performance in grades 3 through 8 mathematics, English language arts and science. Additionally, we support a high school assessment that meets the following characteristics:

• Provide one criterion for high school graduation
• Provide one criterion for college admission
• Provide a system for identifying students eligible for awards or scholarships for high achievement
• Provide one criterion for employers to use in hiring decisions
• Provide an opportunity for college credit/placement options
• Provide a comprehensive measure of cumulative achievement for student and school accountability
• Help schools meet the requirements of the federal law, “No Child Left Behind”

Background

Over the past decade, the Michigan Chamber has worked with the Michigan Legislature, Department of Education and other policy makers to raise academic standards and expectations. Chamber action has been guided by the Nine Essential Components for a Successful Education System, work with the Michigan Business Leaders for Education Excellence (MBLEE) and the findings of the four Gap Analysis studies conducted by MBLEE. Using research from these documents, the Michigan Chamber adopted a policy in support of Action Steps for Education Quality in 1998. This policy included specific steps that we believe can improve Michigan’s public schools and respond to a recognizable gap on the issue of school accountability. Three of those principles are as follows:

Standards – A successful system expects high academic standards that prepare students for success in school, in the workplace, and in life.

Performance and assessment – A successful system focuses on results, measuring and reporting student and system performance so that students, teachers, parents and the public can understand and act on the information.

School Accountability – A successful system assists schools struggling to improve, rewards exemplary schools, and penalizes schools that persistently fail to educate their students.

The federal “No Child Left Behind Act of 2001”, requires State Departments of Education to use data in identifying schools failing to make progress toward achieving higher standards. State and local school officials must be ready to work with and support schools that take effective initiative and help those struggling to meet new standards.The Michigan Chamber of Commerce believes that information is power; testing and gathering independent data are the ways to get information into the hands of parents, educators and taxpayers.

• Under the federal No Child Left Behind Act, every state must set clear and high standards for what students in each grade should know and be able to do in the core academic subjects of reading, math and science.
• States will measure each student’s progress toward those standards with tests aligned with those higher standards.
• Testing is not new to education. Good teachers and excellent schools and districts have always used tests to provide objective and up-to-date information on how their students are performing.

Testing allows teachers, parents and principals to follow each child’s progress.

• Every student should make substantial academic progress every year in every class. Good instruction will help meet this goal.
• Annual testing tells parents and teachers how much progress students have made toward meeting the academic standards.
• Annual tests show principals exactly how much progress students at each grade level have made so that principals and teachers can make good decisions about teacher training and curriculum.
• Accountability systems gather specific, objective data through tests aligned to standards and use that data to identify strengths and weaknesses in the system.

The federal No Child Left Behind Act will test every child in grades 3 through 8 and give parents report cards for every school – highlighting success and shining a light on failure.

• The law requires that all schools be held accountable for making sure that every student learns.
• Test scores will be broken out by economic background, race and ethnicity, English proficiency and disability. That way parents and teachers will know the academic achievement of each group of students and can work to ensure that no child will be left behind.
• Testing tells parents, communities, educators and school boards which schools are doing well. If a school takes a challenging population and achieves great results, testing will show that. If a school is allowing certain groups to fall behind year after year, testing will expose that, too.

The Michigan Chamber of Commerce continues to be a strong advocate for efficiency, accountability and effectiveness in state government departments and agencies. The Chamber supports efforts to restructure the leadership and general supervision of public education for the State of Michigan.

To this end, the Chamber supports an amendment to Article 8, Section 3 of the Michigan Constitution to eliminate the eight-member elected State Board of Education (SBOE) and to provide that the governor shall appoint a State Superintendent of Public Instruction with advice and consent of the Senate.

The Michigan Chamber also supports an amendment to Article 8, Sections 5 and 6 of the Michigan Constitution to include appointment by the Governor of all statewide elected governing boards for educational institutions in Michigan. This change would bring consistency to the appointment of governing boards of all of Michigan’s public colleges and universities; reduce the size and cost of elections; and reduce the partisan nature of these governing boards.

Background

At issue is how to best organize government and create opportunity for greater efficiency and accountability in Michigan’s public education system. The citizens of Michigan recognize the value of a quality education system and consistently rate it as a top priority.

The changes proposed would provide for greater accountability for quality results. The Governor would have appointive authority for members of the SBOE (Alternative A) or appointment of the Superintendent of Public Instruction (Alternative B). Realigning the governance structure for Michigan’s system of public education would create a consistent model of operations, which is found in other state departments that report directly to the Governor. It would also allow the Governor to appoint talented and experienced leaders who might not otherwise run for public office.

In most other departments and divisions of state government, the system of gubernatorial appointments with the advice and consent of the Senate has provided a high level of bi-partisanship, cooperation and accountability. Currently, only three public universities (Michigan, Michigan State and Wayne State) have governing board members elected on a statewide partisan ballot for eight-year terms. Governing boards at the other 12 public universities are appointed by the Governor for eight-year terms, with advice and consent of the Senate. This appointive process has generally served the universities, students and taxpayers well.

The Michigan Chamber reaffirms support for a state budget process focused on outcomes where each year there is debate in Lansing over setting the price and the priorities of government, along with the funding for each priority.

The K-16 Coalition’s plan to automatically increase annual state government spending on K-12 school districts, community colleges and state universities by the rate of inflation--regardless of outcomes or changing needs--would remove a large sum of public money from annual review and budgetary control, thus severely limiting the ability of the Legislature and Governor to set priorities. Therefore, the Michigan Chamber is strongly opposed to the K-16 proposal.

Background

The question of how to adequately fund education is an important part of the debate over the state budget. It is the responsibility of the Governor and the Legislature to ensure that available public money is allocated every year among many crucial and compelling needs. We know from experience that even in good times, responsible state government budgeting demands frequent reassessment of needs and resources and a good deal of compromise, hallmarks of the appropriations process. To achieve sound fiscal policy, decisions must be made in a framework of flexibility and open discussion. The Governor and Legislature need to actively evaluate, reassess, debate and balance governmental spending practices in light of budgetary circumstances and priorities.

In 1994, the Legislature, with encouragement and support from the Michigan Chamber, submitted Proposal A to the voters, a proposed constitutional amendment to provide for property tax relief and school finance reform. In addition to significantly reducing property taxes for school operating purposes, Proposal A raised the rate of the Sales and Use Tax from four percent to six percent to substantially increase funding for K-12 school districts. The new method of school finance established by Proposal A shifted the burden of funding from uneven local property taxes to statewide sales tax revenue, resulting in a dramatic increase in per pupil funding for school districts that were spending below the statewide average.

In July 2005, the nonpartisan and independent Michigan Senate Fiscal Agency (SFA) published an Issue Paper entitled, “The Michigan Economy and State Budget FY 1994-95 To FY 2003-04, Ten Years of Significant Changes.” This detailed and comprehensive SFA report is available over the Internet at www.senate.michigan.gov/sfa.

The introduction of the SFA report accurately and very succinctly summarizes recent trends relating to Michigan’s economy and the state budget: “Over the past ten years, the State of Michigan budget has undergone significant changes. The combination of major changes in the performance of the Michigan economy coupled with significant changes in tax policy resulted in two distinct phases of the state budget over the period fiscal year (FY) 1994-95 through FY 2003-04. The first six years of this period were marked by a growing state economy, surging tax collections, and robust growth in state appropriations. The last four years of this period were marked by a slumping state economy, falling tax collections, and restraint in the growth of state appropriations.”

In reviewing Michigan’s appropriations over the past 10 years, the SFA report provides a wealth of information about government spending patterns, including two findings especially relevant to consideration of the K-16 proposal:

1. “Over the FY 1994-95 through the FY 2003-04 period, adjusted gross appropriations increased by 42.1% while Michigan personal income increased by 42.0% and the Detroit Consumer Price Index increased by 24.8%,” and
2. “The growth in the largest appropriation program areas of K-12 education and human services support was relatively similar to the overall appropriation growth. Appropriations for K-12 education increased by 42.9% and appropriations for human services programs increased by 49.7%. Large program areas that had significantly less growth than the overall budget included higher education programs, up 18.1% and revenue sharing programs, up 11.6%. These two budget programs were significantly affected by appropriation reductions in the last several years of the 10-year period that were necessary to ensure a balanced State budget.”

A recent analysis of public school funding since Proposal A, prepared for the Michigan Chamber by the Anderson Economic Group, resulted in similar findings: from FY 1994-2003, K-12 enrollment increased 5%, while during the same period GDP price inflation increased by 17%; K-12 school operating revenue jumped up by 54%; and K-12 school infrastructure revenue skyrocketed by 196%.

Although over the past 10 years state spending on K-12 education has increased 18.1% more that the rate of inflation, many local educators feel strongly that the restraint in growth over the past four years has been harmful to public schools. In higher education, community college and university officials have been even more outspoken about the need for additional state funding. In response to this situation, 11 education organizations came together in 2004 to form the “K-16 Coalition” to lobby for a major increase in state funding for K-12 school districts, community colleges and state universities. Despite the involvement of associations representing school boards, school administrators, and university presidents, it has become obvious over the past few months that the Michigan Education Association (MEA) is the driving force behind the K-16 coalition.

At the urging of the K-16 coalition, legislation was introduced early in 2005 in the State House and Michigan Senate to establish a minimum funding level for education. In brief, the appropriations bills (House Bill 4582 and Senate Bill 246) would amend the School Aid Act to provide that the total amount spent on K-12 education, community colleges, and state universities would automatically increase each year by the rate of inflation or five percent, whichever is less. The bills also increase the level of state funding for public school employee pensions and guarantee a minimum level of funding for school districts with declining enrollment. As introduced, the bills would be retroactive to 2002 and both bills require that any year the school aid fund does not have enough revenue to meet the increased spending commitment, the amount necessary to meet the shortfall would be automatically withdrawn from the State’s General Fund, thus triggering potentially large budget cuts to other areas such as State Police, Medicaid, or prisons.

The Michigan Senate Fiscal Agency has estimated that in FY 2005-06 the total cost of Senate Bill 246 (as introduced) would be $1.9 billion. Of this amount, $1.2 billion is the retroactive funding. It is also important to note that the legislation to carry out the K-16 plan contains no cost saving reform measures and fails to even mention the words “education quality” or “student achievement.”

Soon after Senate Bill 246 and House Bill 4582 were introduced, spokesmen for the MEA indicated to the news media that, if the Legislature did not soon act favorably on the bills, supporters would launch a petition drive to force action on their proposal. Early in August 2005, the MEA sent a message to its members announcing that the K-16 coalition was launching a statewide petition drive and asking each union member to “circulate petitions to force the Legislature to vote on the proposal.” The petition drive is a statutory initiative, not a proposed amendment to the State Constitution, which means that the Legislature could be required to vote on this proposal sometime this fall or winter.

In response to questions raised by Senate Bill 246 and House Bill 4582, the K-16 Coalition modified their proposal and now describes the purpose of the petition’s education funding guarantee as follows:

• To provide annual education funding increases equal to inflation for K-12 schools, community colleges and universities.
• To reduce the per-pupil gap between the lowest spending and highest spending districts from $1,300 to $1,000 between 2007 and 2012.
• To cap retirement costs for districts at the current 14.87 percent of payroll.
• To fund school districts with declining enrollment based on the student enrollment average of the three prior fiscal years.

The revised K-16 proposal now being circulated across the state in petition form, still fails to mention education quality or student achievement and contains no cost-saving reform measures. While members of the K-16 coalition have refused to answer questions about how much the plan would cost or how to pay for it, Chamber staff has learned from a member of the State House that the non-partisan and independent House Fiscal Agency has estimated that the funding guarantee in its present form would cost approximately $1.1 billion above the FY 2005-06 Executive budget recommendation for spending on education. For comparison purposes, it is interesting to note that the current Single Business Tax generates about $1.1 billion per year.

In September 2002, the Chamber’s board of directors approved a policy statement in opposition to a proposed amendment (Proposal 4 of 2002) to the State Constitution that would have earmarked tobacco settlement revenue for health care related programs and projects. At that time, the Board took a strong position that additional earmarking of funds restricts the ability of the Legislature to make necessary decisions about the proper allocation of the state’s financial resources in response to changes in the economy and the various needs of Michigan’s citizens. It is interesting to note the many of the same individuals and groups from the education community that now support the K-16 proposal were very vocal in their opposition to Proposal 4. While early public opinion polling showed a majority of voters favored Proposal 4, it was defeated in November 2002 by a vote of 66% “No” to 34% “Yes.” The K-16 proposal is similar to Proposal 4 of 2002 whereby an interest group attempts to bypass the appropriations process involving the executive and legislative branches of state government and lessens accountability.

On August 26, 2005 the Michigan Townships Association (MTA) announced that its Board of Directors took action to oppose the K-16 proposal “due to concerns about budget pressures the school funding guarantee would place on all other areas of the budget; jeopardizing revenue sharing, PILT (payment in lieu of taxes) funding, fire protection grants and many state programs relevant to townships.”

The Michigan Chamber of Commerce supports revisions to the Local Government Fiscal Responsibility Act, Public Act 72 of 1990, to deal with the threat of insolvency for some Michigan municipalities and school districts.

The state should avoid the creation of a “bailout option.” If direct state assistance, such as loans or cash payments, were required, the consequences should be similar to those faced by corporations that file for bankruptcy protection. The alternative – allowing a “bailout option” without such consequences – would signal to those in charge of school districts and municipalities that they can postpone or avoid the management changes that are necessary, and simply await a bailout.

Remedial legislation needs to address three fundamental categories:

I. Prevention of insolvency

P.A. 72 needs to provide for an advance prevention mechanism that could identify financially distressed governmental units before they face a crisis insolvency situation.

Recommendation:

Provide a more thorough review of comprehensive annual financial reports (CAFRs) for fiscal conditions that could eventually “trigger” imposition of P.A. 72. This should include the requirement to calculate and submit to the State Treasurer (municipalities) or State Superintendent of Public Instruction (school districts) a “fiscal health score” based upon at least five key areas:

— General Fund Balance
— General fund tax revenue on downward trend
— Other general fund revenue on downward trend
— Capital expenditures as a percent of general fund budget
— Ratio of pension benefits and required contributions to current pay and benefits

The State would be required to intervene early whenever a local governmental unit’s “fiscal health score” exceeded a certain score.

II. Reforms in Governmental Units under P.A. 72

Recommendations:

The Emergency Financial Manager (EFM) should become an employee of the Michigan Department of Treasury. Costs would be borne by the state (not the insolvent local unit); this would provide the EFM with access to the legal staff of the attorney general and make the issue of indemnification moot (currently the EFM can be sued personally in harassing lawsuits filed by affected persons).

EFM should have the authority to replace mayor/city council or superintendent/school board. EFMs have been periodically harassed by elected mayor and council members who remain on site. EFM must be able to temporarily waive charter and ordinance provisions, and be able to submit charter revisions to the voters.

EFM should have legal authority to set aside bargaining unit contracts and should not be thwarted in the ability to contract out services to the private sector or other governmental units prevented by current contracts.

III. Post-Act 72 Reforms

Recommendations:

Require the EFM to submit a plan to achieve and maintain financial stability to the Treasury Department (municipality) or Education Department (school district) for approval.

If the EFM determines that consolidation is the only solution to achieve financial stability, the EFM will have the authority to negotiate with other units of government to achieve consolidation.

Upon achieving fiscal stability (elimination of deficits, providing positive cash flow, eliminating the underlying “triggers” that caused Act 72 to be imposed)—short of consolidation—an elected council, mayor, or school board would be reinstituted with full powers and the EFM exits.

Background

Two issues working in tandem are causing several local governments’ fiscal distress. These are limitations on the principal sources of property taxes (Headlee/Proposal A) and the unlimited increases in healthcare (both for active and retired employees) and pension costs. Retirees healthcare is particularly insidious as it allows current public officials to award employee benefits that will be paid a generation down the road. These have significant capabilities for impacting the fiscal health of a local governmental unit. Presently, healthcare costs continue to rise annually by 10 – 15% with property tax limitation tied largely to the annual CPI increases of less that 3%.

The powers of the state to declare a financial emergency, and take desired action to address that emergency, are codified in Public Act 72 of 1990. This Act applies to local units of government including school districts. P.A. 72 of 1990 replaced the older P.A. 101 of 1988, which did not apply to school districts.

The superintendent of public instruction is responsible for monitoring and reviewing the financial state of the school districts. The state treasurer does the same for municipalities. If either the state treasurer or state superintendent of public instruction determines that the unit has a serious financial problem the state officer shall notify the governor.

A review team will then be appointed, and will report its findings back to the governor. If the governor then determines that a school district or municipality is in financial emergency, the governor will appoint, with the consent of the Senate, an emergency financial manager for the unit of government. The emergency financial manager will take over all fiscal matters of the unit, and develop a written financial plan, providing for the operations of the district or municipality (unit) within the resources available, and the payment in full, of debt. In order to accomplish these tasks, he or she is given significant authority.

With control over all fiscal matters, the emergency financial manager is given significant authority in order to restore financial stability to the local governmental unit. He or she may examine the books and records, including payroll of the unit; enter into contracts on behalf of the unit, including labor agreements; receive and disburse federal, state or local funds; adopt or amend budgets; and make recommendations to the governor, state board and legislature concerning the unit’s financial situation. The emergency financial manager can also reduce expenditures in the unit’s budget; borrow money; approve or disapprove of the issuance of obligations of the unit; and sell district assets to meet current obligations.

The emergency financial manager may also order one or more millage elections, and can even authorize the unit to proceed under Chapter 9 of the United States Code, which governs the “adjustment of debt of a municipality.” However, the emergency financial manager’s powers are not always clearly defined in law as to the ability to repeal or expunge burdensome contracts.

When Ecorse became the first Michigan city to be placed under receivership, Louis Schimmel was appointed the emergency financial manager, and served in that role from 1986-1990. He replaced the elected mayor and city council members, privatized nearly all of the city’s services, including the Department of Public Works, renegotiated labor contracts, and sold city buildings so that they would be on the city’s property tax roll. By 1991, the city was operating with a surplus and paying back emergency loans to the State of Michigan.

In the early 2000s, the cities of Hamtramck and Highland Park also faced financial crises similar to that experienced by Ecorse. In both cases, the state took over the cities, appointing emergency financial managers to balance budgets. Louis Schimmel was the emergency financial manager in Hamtramck, and Ramona Pearson was the emergency financial manager for Highland Park.

In both cities, services were cut and outsourced, employees laid off, and the city councils were left with little power. Both cities avoided being dissolved, and entered into receivership.

In 1982, the Kalkaska school district announced that it would run out of funds before the end of the school year. The claim arose after voters refused to approve a millage increase that was intended to increase funding for teachers’ pay. At least two independent researchers attribute the “shutdown” plan to the teacher’s union in the State of Michigan.

Indeed, the school district held a widely-publicized shutdown in March of 1993, 10 weeks before the end of the school year. So orderly was the shutdown, that the district ensured that it had funds in the bank before “shutting down” for the fiscal year. The state appointed a review committee, which reported back after the shutdown had already occurred.

The Inkster school district also faced insolvency. The district subsequently hired Edison Schools to manage much of its operations. However, the district and Edison ended up in acrimonious debate about the terms of the contract and payment for services.

By the time a local governmental unit becomes insolvent, there are almost always warning signs, and those signs present opportunities for organizational changes that could prevent an insolvency. Such changes are, in most cases, painful and typically involve termination of some employees, closing under-utilized facilities, cutting the pay and benefits of poorly performing workers, laying off workers, outsourcing non-core activities and reassigning or terminating under-performing managers. Of course, rather than restructure their operations, those in charge of an insolvent organization would probably prefer a bailout by other parties.

Public sector managers should face negative consequences if their governmental unit becomes insolvent. Furthermore, the incentives to avoid insolvency should be shared by employees, especially those in a position to make demands on the unit for money; taxpayers and their representatives in state and local government; and major vendors.

In addition, once a governmental unit becomes insolvent, it should face strong incentives – including compulsion by law – to solve structural problems and deal fairly with the claims of other parties.

Approved by Board of Directors
April 30, 2013 

The Michigan Chamber supports the current regulatory framework to allow oil and gas exploration in Michigan associated with shale resources and hydraulic fracturing. The process of hydraulic fracturing is proven safe and protective of human health and the environment as demonstrated over 50 years and 12,000 wells drilled using this technique in Michigan. The Chamber opposes any attempt to ban the use of hydraulic fracturing for development of shale resources including a potential ballot initiative.

Background

On February 15, 2013, the State Board of Canvassers approved petition language for a potential legislative initiative that would ban the use of hydraulic fracturing in Michigan. The current ballot proposal is being pushed by the same group of environmentalists that attempted to put this issue on the ballot last election cycle but failed to collect the needed signatures. They are off to an early start this cycle and we expect they will be able to acquire the needed signatures to place this issue before the voters in November 2014. We do not yet know all of the organizations involved; however, we do know that the Sierra Club and Clean Water Action are actively circulating the petitions. The official name of the ballot question committee is the Committee to Ban Fracking in Michigan. In the committee’s kick off press release, their intentions were made clear: “The language in our current law favoring the fossil fuel industry makes it inevitable that Michigan contributes mercilessly to global climate change and serious pollution of the Great Lakes – 20% of the world's fresh water. It is urgent that we move to alternative forms of energy to protect future generations.”

The proposal in Michigan is one of many attempts by environmental groups across the country to ban hydraulic fracturing. With the war against coal well underway in Washington, DC, the next target of environmental extremists is affordable natural gas. Since natural gas burns relatively clean and is viewed by many to be environmentally friendly, environmental groups have decided to focus on the extraction process to try to scare people away from natural gas. Several movies and documentaries have been made in an attempt to make people think that hydraulic fracturing is causing extensive water contamination across the country, but there is no scientific evidence to support these assertions. The Environmental Protection Agency and many state health agencies have looked into several of these claims and found them to be baseless.
 
In Michigan, hydraulic fracturing has been used for over 50 years without a single negative impact on human health or the environment. With over 12,000 wells drilled using this technique, it has clearly been proven safe. Horizontal drilling is a relatively new technique that allows for hydraulic fracturing that has a much smaller impact on the environment than the old technique, which required many more wells to be drilled to access the natural gas and oil. Horizontal drilling is just as safe and doesn’t change how hydraulic fracturing is done.

Michigan has long been the model for state regulations for hydraulic fracturing. We consistently update our regulations to keep pace with technological advances. The State of Michigan’s geologist, Hal Fitch, has said on numerous occasions that as long as Michigan regulations are followed we should have no concerns about the use of hydraulic fracturing.

Our state is uniquely positioned to benefit from continued responsible exploration for natural gas since we have a substantial amount of shale gas waiting to be recovered and the ability to store a larger amount than other states. We also have the potential to create many new jobs and lower our energy costs.

The Michigan Chamber’s Energy and Environment committee voted unanimously to recommend this policy proposal for approval by the Board of Directors.

The Michigan Chamber of Commerce supports the recommendations from the Michigan Environmental Science Board outlining new protections for the Departments of Environmental Quality (DEQ) and Natural Resources (DNR) pertaining to directional drilling for oil and gas underneath the Great Lakes, and urges the DEQ and DNR Commission to proceed with environmentally safe oil and gas drilling.  Furthermore, the Michigan Chamber does not support offshore drilling in the Great Lakes.

Background

Directional drilling for oil and gas under the Michigan portion of the Great Lakes has been practiced safely for more than 20 years under the administrations of Governors  Milliken, Blanchard, and Engler. Also, Canada has been drilling for natural gas under Lake Erie for nearly 90 years with more than 2,200 wells since 1913. 

In August 1997, Governor Engler asked the Michigan Environmental Science Board to evaluate the issue of directional drilling underneath the Great Lakes. The Science Board convened a team of independent experts including scientists from the University of Michigan, Michigan State University and Western Michigan University to look at the potential risks of contamination to Great Lakes waters, the potential impacts to shoreline areas, and the overall adequacy of state regulations. The blue-ribbon panel concluded directional drilling poses virtually no risk to the Great Lakes. However, the Science Board did issue 17 recommendations to address the environmental, social, and aesthetic impacts on shoreline areas. These recommendations include an adequate set-back from the lake; an outright ban on locating wells in unique environmental areas; a process that includes local input on land use issues to assure that any new development is consistent with existing land uses; and allowing wells only where existing infrastructure of pipelines and roads already exists.

Directional drilling is a method of drilling for oil and gas that leaves a small environmental footprint in order to protect wetlands, lakes, rivers, streams, unique recreational areas, shorelines, and other sensitive areas. Because of the environmental sensitivity and value of these areas, it is necessary to eliminate even the possibility of contamination. Under directional drilling, the temporary drilling platform and the long-term pumping station are located thousands of feet from the area needing protection. The drilling itself is done at an angle. The actual oil and gas resources are separated from the sensitive resource by thousands of feet of impermeable rock.

Michigan is the 10th largest producer for natural gas and the 18th for oil in the United States. Oil and natural gas production contributes over $600 million per year to Michigan's economy. Production involves over 268 companies and individuals and is estimated to employ nearly 10,000.  Nearly 4,000 crude and natural gas wells have been directionally drilled in Michigan. No incident has ever been reported regarding environmental damage to the Great Lakes from these wells.  Michigan oil and gas companies have also contributed over $500 million to the state's Natural Resources Trust Fund to fund the acquisition and the development of over 1,200 outdoor recreational projects. Oil production has declined since the mid-1980s, and natural gas production has nearly doubled over the same period. While resource pockets are dispersed, Michigan's oil and gas production is concentrated in the northwest portion of the lower peninsula, particularly Grand Traverse, Kalkaska, and Manistee Counties.

Opponents of the Michigan Environmental Science Board's recommendations believe the benefits from additional oil and natural gas production are not worth the environmental risk. They believe the reserves of oil and natural gas are so paltry that we would be better off focusing on fuel-efficient technologies, electric vehicles, and conservation to meet our future energy demands. The Michigan Legislature rejected an effort to ban directional drilling for another year. At the federal level, Congressman Bart Stupak (D-Menominee) introduced House Resolution 1302 to prohibit drilling under the Lakes. While a version of the measure banning the U.S. Army Corps of Engineers from issuing permits passed the U.S. House, federal action in not likely. In addition, the State of Michigan's permitting process covers the on-shore facilities used in directional drilling. Lt. Governor Dick Posthumus also shares the view that potential costs outweigh the economic benefits from production. 

The Michigan Chamber's Environmental Quality Committee heard presentations from advocates and opponents of directional drilling. After a careful review, the Environmental Quality Committee agrees with the Michigan Environmental Science Board.

The long history of directional drilling under the Great Lakes - and bodies of water such as inland lakes, rivers, and wetlands - demonstrates conclusively that direction drilling is a safe way to protect unique natural resources. With virtually no risk of environmental contamination and the additional beneficial development guidelines from the Science Board, opponents stand on an almost entirely NIMBY argument or that the amount of oil and gas supplies under the lakes would make little difference to consumers.

In response, no one can be certain how much oil and natural gas exists under the Great Lakes, but Michigan should not be insulated from the national energy picture and any amount of potential production is significant. For example, two existing wells in Lake Huron alone produce enough natural gas to heat almost 4,000 homes for the entire year. Overall, the Environmental Quality Committee believes Michigan's tourism, natural resource and recreational based industries will benefit from responsible resource exploration and production. 

The Michigan Chamber reaffirms its support for a comprehensive land use policy of both urban investment and a market incentive approach to growth management that protects Michigan's natural resources.

As the year 2000 legislative session begins, we encourage the Michigan Legislature to enact two promising land use initiatives that are consistent with Michigan Chamber policy:

Brownfield Redevelopment Financing Amendments - These changes are intended to improve the administrative and financial functions of Brownfield Redevelopment Authorities and expand the availability of tax incentives for business to help clean up contaminated sites and rehabilitate distressed areas.

A Model Land Preservation Plat - This proposed legislation would create market incentives to streamline the approval process for developments, while preserving environmentally sensitive land and open space. It would create options to expedite the approval process and award bonus density to those developments that are environmentally sound.

Background

The Michigan Legislature continues to consider land use legislation. The chair of a House Republican work group on land use issues hopes to have legislation introduced before the Legislature leaves for summer break and approved before the end of 2000. This land use work group panel is looking at a broad range of topics related to land use: suburban sprawl, urban redevelopment, incentives to use existing infrastructure, coordinated planning, preserving farm land, and proposals for dealing with mobile home expansion. Among the potential legislative changes are:

• Expand "eligible activities" to include infrastructure improvements, demolition (that is not a response activity), lead or asbestos abatement, and/or administrative and operating activities of an authority;
• Provide for the "eligible property" to include property in a distressed area that is functionally obsolete or blighted; or commercial, industrial, or residential property that is incurably functionally obsolete;
• Extend the eligible tax years and increase the cap for the Single Business Tax (SBT) credit; and
• Increase the number of SBT credit projects per taxpayer while including site improvements as an "eligible investment."

The Michigan Chamber is involved with a working group to draft model legislation to create an optional platting process with incentives for land preservation measures. This group included representatives from Michigan Association of Realtors, Michigan Farm Bureau, Michigan Association of Home Builders, Detroit Renaissance, Michigan United Conservation Club, Michigan Environmental Council, Public Sector Consultants, Southeast Michigan Council of Governments, Tilton and Associates, and local government officials. The following summarizes the proposed legislation.

To qualify a plat as a "land preservation plat," the proprietor must first prepare a site inventory map identifying such features as endangered species habitat, steep slopes, woodlots, farmland, and dunes, whether regulated or not. To warrant the incentives, the subdivision must then include measures to protect these features under three basic options:

The plat may also qualify by using a minimum number (6 of 10) of land preservation options within the platted area. For example, the easements would create buffers of 450 feet from farmland, 80 feet from water courses, and 50 feet from wetlands, lakes, and ponds; development may be restricted to protect viewsheds, or prohibit development of woodlots, steep slopes, farmland, shorelands, and unregulated dunes, or open space.  The last item -- open space -- is included with the understanding that many areas in Michigan simply lack features worthy of preservation. They include not only the conservation easement available by a minimum acreage, but also such measures as roads with paved surfaces no wider than 24 feet, use of existing public sewer and water systems, prohibition of impervious surface greater than 50%, or development of mixed uses.

Under this method, a plat may qualify as a land preservation plat by the dedication of a conservation easement creating 50% open space within the plat.  That acreage can be within the plat, or outside the plat in areas identified by a county inventory of natural features. Preservation of these areas is by conservation easement.

In the alternative, a conservation easement preserving farmland equal to that same acreage, identified on a county inventory within the same county, would also qualify for the incentives. This would be accomplished by trading acreage within the county and preserving features identified in a county inventory with a conservation easement.

The incentives offered to the developer are two-fold. First, the plat receives an expedited review before a county plat board and concurrent review by all approving authorities.  This streamlines a burdensome process saving time and money. Second, the residential development density may be four units per acre, so long as the land is zoned for residential use. Density is stated as a straight formula. Over the last few years, despite the education efforts of planners, many local governments have still required larger and larger lot sizes for single-family homes. This has increased the unnecessary use of land and dramatically increased the cost of home ownership. 

Land use subjects are wide ranging and diverse. The regulatory impact is real to all sectors of the Michigan business community and overall economic competitiveness, particularly natural resource based industries like tourism, mining, forestry, and resource based manufacturing.

Recognizing the emergence of quality of life and environmental issues and their interdependent relationship with the economic health and continued growth of Michigan's vibrant economy, the Michigan Chamber has been strongly advocating for the business community to play a leadership role in the policy debate on these issues. We continue to support legislation to address concerns about "urban sprawl" by encouraging urban revitalization and incentives for local units of government to streamline the planning process, cooperate on regional planning, and to provide shared services that reduce cost and improve quality. In evaluating legislative initiatives; however, the Michigan Chamber steadfastly defends private property rights and rejects proposals to impose new taxes or create additional layers of government.

The Michigan Chamber of Commerce supports policy initiatives encouraging the good stewardship of Michigan's environment and natural resources including conservation, recycling, litter control, and solid waste management. Such approaches should be based upon sound science with a supporting cost/benefit analysis.

The Michigan Chamber urges policymakers to consider comprehensive recycling solutions focused on keeping Michigan beautiful. These policy alternatives could include:

• Developing a comprehensive statewide strategy of recycling and litter control measures - education programs, curb side recycling, redemption centers, roadside litter control, and recreational and park recycling programs that could achieve cost effective results;
• Conducting a cost/benefit analysis of a comprehensive statewide residential recycling program versus proposed legislation expanding the bottle deposit law;
• Jointly conducting an objective litter study and solid waste analysis with the participation of State Government, the business community, and the Michigan United Conservation Clubs (MUCC);
• Supporting legislation to strengthen penalties for littering and provide for more vigorous enforcement; 
• Improving the public health, food safety and convenience of the container handling system; and
• Evaluating the effectiveness of tax incentives to cover the cost of a comprehensive recycling program to spur investment, and cover some of the expenses in new material handling systems.

Michigan is one of ten states with a bottle-deposit law. The original bottle deposit system was created 23 years ago with a voter approved ballot initiative in November of 1976. In 1989, after the system had been in place for 11 years, the law was revised by the Michigan Legislature to expand the 10-cent deposit to wine coolers and mixed spirits. In addition, the Legislature allowed 25 percent of the unclaimed deposits to go to distributors to cover their costs and the remaining 75 percent was directed to funding environmental programs. Since the change, over $81 million from unclaimed deposits have been directed towards improving the environment.

However, overall recycling rates in Michigan have dropped. In a recent study released by the Michigan Recycling Coalition, the state's 17.6 percent recycling rate is far less than states like Wisconsin and Minnesota. Those states established a comprehensive recycling system over a decade ago. Michigan is well below the Great Lakes states' average of 26 percent. The study found the reasons for Michigan's low recycling rate varied, including the lack of curbside programs, low landfill fees, and declining markets for recycled materials.  It is also clear that the most profitable recycled material, aluminum, is diverted from the waste stream by the current bottle deposit program.

Currently, House Bill 4096 and Senate Bill 233 are before the Michigan Legislature to expand Michigan's bottle deposit system to include bottle and cans from water, tea, juices and sport drinks. As introduced, this would include nearly all beverage containers one gallon-size or less. Steel cans, orange juice plastic jugs, apple juice plastic jars, and tomato juice containers are examples of commodities which would be subject to the 10-cent deposit. It is also possible for groups like the Michigan United Conservation Clubs (MUCC) to once again collect enough signatures to put a ballot question relating to expansion of the deposit law before voters.

Proponents of expansion of the deposit law contend with the now widespread consumption of drinks like water, tea, and sport drinks, the amount of litter is again increasing. The most recent Lake Michigan Beach Federation beach cleanup found that plastic beverage bottles and metal beverage cans left on Michigan beaches doubled over the previous year and the number of glass bottles found increased by 27 percent.

Opponents argue that expansion of the bottle deposit law has significant economic costs with little or no evidence of environmental gain. To date, the only rationale being offered by proponents for expanding Michigan's bottle bill is based on assumptions - i.e. consumers are drinking more non-carbonated beverages. Therefore, because these containers are not subject to a deposit, consumers are excessively littering and land filling them. Opponents believe expansion sounds simple, but it presents a whole set of complex issues that may harm the current system and bring unreasonable additional costs on job providers. 

Specifically, they cite the increased cost to consumers who would have to pay higher prices for daily staples - water and juices. While prices will increase, the additional costs on employers are significant, ranging from $15,000-$20,000 for each reverse vending machine, increased labor and sanitation requirements, space, and supplies. Grocers express concern about maintaining food safety, while having to process dirty bottles, essentially garbage, in the same store.

The Michigan Chamber's Environmental Quality Committee would support a program that meets our environmental objectives as well as the needs of businesses and consumers. Because of the economic uncertainty and lack of scientific evidence showing a demonstrated need for expansion, we believe a bottle bill expansion is not merited at this time. However, the Michigan Chamber would support a litter study and a comprehensive solid waste analysis, including the percentage of these new containers that are already being recycled through curbside and other voluntary recycling efforts. If these studies and surveys demonstrate that the empty containers of a particular beverage not covered by the current bottle deposit system present a substantial problem, then all parties should discuss the best method for addressing the problem in the most cost effective and efficient manner. At the present time, we believe the most environmental benefits can be attained through a renewed effort on comprehensive recycling and strengthening litter control statutes.

The Michigan Chamber of Commerce supports the establishment of a permanent repository for high-level nuclear waste at Yucca Mountain, Nevada as recommended by the U.S. Department of Energy and the U.S. Nuclear Regulatory Commission (NRC).

Background

Over the past four decades, nuclear power has become a significant source for the nation's electricity production. Michigan has three active plants, accounting for about 18 percent of the state's electricity generation: Donald C. Cook Facility in Bridgman (American Electric Power), Palisades in South Haven (Consumers Energy) and Fermi-2 in Monroe (Detroit Edison). Consumers Energy also has one plant at Big Rock Point near Charlevoix in the process of decommissioning.

Since the earliest days of nuclear power, one great dilemma associated with nuclear technology is how to deal with the waste materials produced. Storing 40,000 tons of used nuclear fuel in 131 different storage sites across 39 states creates many health and safety concerns for local communities. High-level radioactive waste material demands exceptional care in all facets of its storage, transportation and disposal. In Michigan, all four nuclear facilities are using spent fuel pools, or large reinforced containers filled with water to store used fuel assemblies and to absorb heat from used rods. Two locations are also using self-contained dry cask storage units for already cooled fuel assemblies.

Even before September 11, 2001, there was a growing sense of urgency with respect to the need for consolidating spent nuclear fuel and defense material at an underground repository. The issue is more than safety, it is security.

In 1982, Congress passed the Nuclear Waste Policy Act. The legislation requires the U.S. Department of Energy to build a permanent storage facility for high-level nuclear waste. The act includes a specific timetable to identify a suitable location and develop the site for holding nuclear waste. The costs for development are to be paid from a fee assessed on all nuclear energy produced. In accordance with the federal act, Michigan electric customers have already paid $420 million and continue to contribute to the federal fund for a waste facility's construction.

The safest and most secure option to store used nuclear fuel is in one permanent central and desolate location as opposed to many temporary sites in populated regions. After more than twenty years of research, the U.S. Department of Energy released a favorable site evaluation report for spent fuel storage at Yucca Mountain, Nevada in August 2001. The site was recommended to President George W. Bush, who approved the Yucca Mountain site in February 2002. Nevada has sixty days to oppose the development of a nuclear waste storage facility in that state. On April 8, 2002, Nevada's Governor Kenny Guinn officially opposed President Bush's site recommendation. Congress now has the ability to override Nevada's objections with a simple majority vote.

After 20 years and nearly $7 billion of scientific investigation, there is adequate evidence that Yucca Mountain is a suitable site for a permanent repository subject to the NRC licensing.

Currently, no other storage sites are being considered. If approved, Yucca Mountain site will be operational in 2010 at the earliest. If not approved, the temporary storage sites currently used across the nation, including the four plant locations in Michigan, will become de facto permanent storage sites.

The Michigan Chamber of Commerce supports the proposed amendment to the Michigan Constitution of 1963 sponsored by the state legislature under Senate Joint Resolution T that will be on the August 6, 2002 statewide primary ballot for voter approval.

The proposed amendment would amend the state Constitution to increase the funding available for conservation purposes from the Michigan Natural Resources Trust Fund.

Background

Since its creation in 1976, the Michigan Natural Resources Trust Fund (originally known as the Michigan Land Trust) has been the principal source of state funding for conservation and outdoor recreation projects.

Revenue for the trust fund is derived from the sale of oil, gas and mineral leases and royalties from oil, gas and mineral extractions on state-owned land.  According to the state Constitution (Article 9, Section 35), the interest and earnings of the trust fund are to be expended for “the acquisition of land or rights in land for recreational uses or protection of the land because of its environmental importance or its scenic beauty, (or) for the development of public recreational facilities...”

The trust fund is a critically important tool for conservation in Michigan and has played a major role in key Nature Conservancy projects, including a recent grant to acquire more than 6,000 acres of high priority conservation land at the tip of Michigan’s Keweenaw Peninsula. State trust funds have gained about 5 to 7 percent each year, and can do better under proper management.

Senate Joint Resolution T would enhance and preserve the state’s ability to protect Michigan’s unique natural places by amending the Constitution to make the following changes:

• Raise the overall cap on the trust fund from $400 million to $500 million.   
• Allow for prudently investing the trust fund balance to achieve higher earnings. Revenue available for expenditures could be increased substantially by giving the state Treasurer additional investment flexibility.
• Remove the $200 million oil and gas appropriation threshold. The Constitution currently stipulates that when the trust fund’s balance exceeds $200 million, as it is projected to do next year, only interest and earnings will be available for grant making.

Since its inception 25 years ago, the Natural Resource Trust Fund has spent $537 million on over 1,200 state and local recreational projects. These expenditures are important to maintaining the state’s vibrant tourism economy. Tourism accounts for 350,000 jobs and nearly $12 billion in economic activity each year. The expenditures from the trust fund on recreational uses and the protection of land also enhance Michigan’s overall quality of life - an increasingly important factor in business and personal location decisions.

In addition to the Natural Resources Trust Fund, the proposed constitutional amendment would allow the state treasurer to invest the funds from other trust funds including: the Non‑Game Fish and Wildlife Fund, Michigan Civilian Conservation Corps Fund, the Game Fish Protection Trust Fund, and the state Veteran’s and Children’s Protection Trust Funds.

The Michigan Chamber of Commerce supports the Great Lakes Water Quality bond initiative as approved by the state legislature and appearing before the voters in the November 5, 2002 general election.

Background

The proposal will authorize the state to issue $1 billion in general obligation bonds to update and repair the state’s sewer infrastructure. The proposal should help to improve water quality throughout the state. However, the financing of the program will be costly to the taxpayers of Michigan. If approved by the voters, efforts need to be taken to ensure that this proposal will provide a maximum return on investment.

Sewage entering into the waterways is one of the greatest threats to the overall environmental and economic viability of Michigan’s lakes and rivers. Raw sewage containing toxic chemicals, human waste, pesticides and detergents can pose both human and environmental threats. Recent beach closures and fish advisories have highlighted this problem.

Combined sewer overflows and failing septic systems have been major culprits of allowing sewage to enter into our waterways. Combined sewers typically work well under normal conditions, but during periods of high rains or heavy snowmelt, the systems overflow, often flooding basements and entering into Michigan’s waterways. Septic systems that are not installed properly or exceed their life cycle pose a direct risk to surface and ground waters.

In 1988, Michigan established the State Revolving Loan Fund (SRF) to allow the state to receive federal Clean Water Act dollars designed to reduce sewage related water pollution. The SRF provides loans to local governments at lower than market rates for capital projects to update and improve sewer infrastructure. Projects that can be funded through this program include wastewater treatment plant upgrades, combined sewer overflow abatement, construction of new sewers to reduce existing pollution, and non-point source pollution measures.

Since its inception in 1988, the SRF has been capitalized with over $750 million in federal funds and over $150 million in state match funds. This has allowed the state to make over $1 billion in loans for 184 projects statewide. Currently, the SRF loans approximately $165 million annually. As Michigan’s sewage infrastructure continues to age, it is creating a growing list of communities needing dollars to upgrade their wastewater systems. According to a recent study by Public Sector Consultants, an additional $125 million annually is needed to meet the current and near future needs.

HB 4625 and its companion bills, if approved by the voters, would authorize the state to issue $1 billion in general obligation bonds to update and repair sewer systems. The bills would specifically:

• Allow the state to appropriate up to $100 million annually to finance sewage treatment works projects, storm water projects and non-point source projects.
• Authorize 90% of the funds to be deposited into the SRF to provide low-interest loans to communities to upgrade failing sewer systems.
• Authorize 10% of the funds to be deposited into the newly created Strategic Water Quality Fund designed to address growing water quality concerns, including the upgrade or replacement of failing on-site septic systems. 

The Great Lakes and its surrounding water bodies play a crucial role in Michigan’s continued economic viability. The lakes drive a significant portion of our region’s economy. The $15 million tourism industry, for example, depends on water related activities including fishing, swimming and boating. As a result, the business community has a direct interest in maintaining the overall quality of the Great Lakes watershed and the resources dependent on them.

Fiscal Implications

According to estimates by the Senate Fiscal Agency, the bonds will cost $1.6 billion to pay off over a 30-year period. The debt payment would start at $8 million a year and increase to $80 million by the tenth year. The debt service would be paid directly out of the state’s General Fund. According to a written response from the bill sponsor of HB 4625, there have been no direct plans established to pay for this debt. All future proposed plans to finance the debt need to be properly evaluated.

To date the State Revolving Loan Fund has been financed by a 5 to 1 federal match. That means that for every $1 the state contributes, the federal government contributes $5. At this point, the federal government has not made a commitment to match our proposed $1 billion for sewer improvements.  In fact, given the uncertain budget situation in Washington, it is unlikely that match dollars will be provided. The lack of commitment from Washington may weaken the overall power of the bond.

Finally, the United States Senate Environment and Public Works Committee recently approved a measure mandating that all projects funded through State Revolving Loan Funds be required to pay “prevailing wages” in perpetuity. This proposed change is now headed to the full Senate. Additional requirements imposed by Washington - now or in the future - could dramatically increase the cost of sewer improvement projects, which could further weaken the buying power of the $1 billion sewer bond proposal. Efforts need to be undertaken to prevent Washington from damaging Michigan’s state revolving loan program.

EQ Committee Recommendation

The Chamber’s Environmental Quality Committee is recommending to the Board of Directors that Proposal 2-02 be supported. A majority of the committee members believe that this is an important measure that needs to be supported in order to help protect the water quality within the state of Michigan.

In June, the EQ committee heard a presentation by two members of Representative Bruce Patterson’s staff (the sponsor of the initiative) on the proposal. The committee members then each received a ballot with the proposed policy statement. Eleven members responded in support of the proposal, and three members suggested the Chamber remain neutral. Those suggesting the Chamber remain neutral had concerns about the cost and implementation of the program.

The Michigan Chamber of Commerce continues to support the goal of the Charter Annex of helping to protect, conserve, restore and improve the Great Lakes Basin for future generations.  The Chamber also believes that control of the Great Lakes should remain within the Great Lakes Basin. The current draft of the Annex contains some provisions the Chamber supports and other provisions we must oppose due to major concerns related to Michigan’s ability to utilize and manage water resources and its impact relating to retaining and attracting job providers.  Provided below are a list of major elements from the Annex and the position of the Michigan Chamber:

The Chamber Supports:

• Strict regulation of diversions of water to areas outside of the Great Lakes Basin.

Section 8.2 of the Compact provides an appropriate mechanism to regulate diversions. However, our support is predicated on the definition of diversion of water being a removal of water from the larger Great Lakes Basin and not from an individual lake basin to another lake basin as is the current definition.  This provision puts a unique and unfair burden on Michigan and the state’s ability to utilize and manage water resources. 

• An enhanced water reporting mechanism from all sectors, including public and private sources.

The Michigan Chamber urges that the reporting requirements imposed by Section 7.2 of the Compact be consistent with the existing state statutes.  In addition, reporting requirements imposed by the Great Lakes Basin Water Resources Council (herein referred to as the Regional Council) should not require additional paperwork or duplicative requirements.  The Regional Council should receive the reporting data directly from the individual states and not directly from an individual entity or organization other than the state. 

The Chamber Opposes:

•Language in the Annex authorizing the Regional Council to regulate Consumptive Uses and Withdrawals.

The Michigan Chamber believes that the Annex should provide broad latitude to the individual jurisdictions to regulate consumptive uses and withdrawals where necessary. Regulation of water withdrawals by the individual jurisdictions should be based on the four principles of the Annex to protect, conserve, restore, and improve the Great Lakes Basin. 

The Michigan Chamber has the following specific concerns related to withdrawals in the current draft:

A) Individual states should not have the ability to reject in-basin uses of water in jurisdictions outside of their own. 

Under the current draft, three states can band together to block an economic development project in another state.  The review of the Regional Council for 5 million gallon consumptive uses outlined by section 8.3 of the Compact, is wholly inappropriate and should be removed. In particular, such a requirement could endanger future food processing plants, chemical products, and electric power generation to name a few.   The combination of an uncertain decision-making process and time delays imposed by a Regional Council would make the Great Lakes region less desirable for job providers.

B) The Annex should not require individual states to regulate all withdrawals above 100,000 gallons per day.

The Michigan Chamber believes that Section 9.3 of the Compact should be stricken.  The Michigan Chamber could support language that would allow the individual jurisdictions to establish water use requirements based on the level of risk to the water resource. Such characteristics of risk may be associated with the type of aquatic system from which water is withdrawn, the location of withdrawal and/or time associated with water use.

C) The Annex must not impose new regulation on existing uses.

The Annex clearly states within its purpose in Directive #3 and Directive #6 that the management measures envisioned within the document are to apply to new or increased existing water withdrawals and water withdrawal capacity. The Annex Agreement reaches far beyond the scope by requiring existing users to meet “environmentally sound and economically feasible water conservation measures.” Further, the Compact language is silent in Section 9.3 as to the applicability of jurisdictional water management to new or increased withdrawals or to all withdrawals. 

D) There should not be a “reasonable use” test for the use of water.
 
Language contained in the Agreement that requires governments to determine what quantity of water use is “reasonable” establishes broad, boundless, new, and dictatorial authority and should be removed.  Under no circumstance should an authority be able to determine what water will be used for what purpose and in what quantities.  This condition is wholly unacceptable and represents a fundamental shift in riparian water rights throughout the basin. This provision of the Annex as written is in direct conflict with the language in Section 5.2, Section 2 that states: “Nothing contained in this Compact shall be construed as affecting or intending to affect or in any way to interfere with the law of the respective Signatory Parties relating to common law water rights.”

 
• Creation of new duplicative layers of unaccountable regional government.

The Michigan Chamber acknowledges that it may be appropriate to create a small professional staff to provide timely, accurate data and information to the Great Lakes Governors on issues relating to the Diversion of Great Lakes water.  However, the Chamber has numerous concerns with the structure of the Regional Council as proposed by the Compact:

A) The Regional Council should not be allowed to establish direct fees on users.

Language contained in section 3.6 of the Compact which allows the Regional Council to assess fees to water users should be modified or removed. Article IX Section 2 of the Michigan Constitution is clear “The power of taxation shall never be surrendered, suspended or contracted away”. The language as proposed in Section 3.6 of the compact violates the Michigan Constitution and constitutes an abridgement of state sovereignty. A preferred method would be to allow the Regional Body or Council to charge fees back to the individual states.  The states could then each determine how to pay for the services of the Regional Body.  This method would make the Council more accountable to the individual state governments. 

B) Individuals without proper legal standing should not be allowed to bring Civil Action before the Council.

The Michigan Chamber strongly opposes language contained in section 3.9 of the Compact under paragraph 4 that allows any aggrieved person to commence a civil action on a water user.  Only those with a legal standing should be allowed to commence a civil action. The Annex should not provide a mechanism for expanded civil action, create an expansion of standing, or provide expanded mechanisms for equitable relief.

C) The current draft of the Annex fails to accommodate and leverage existing environmental authorities and processes. 

Annex 2001 provisions must utilize, not duplicate nor supercede these protective instruments.  Within current drafts, the use of other environmental permit findings and demonstrations to establish that a project will not have adverse impacts is far from assured.  The Agreement states that such findings “could contribute to a demonstration of the lack of significant ecological impact.”  To avoid conflicts with other permit requirements, and to make Annex 2001 standards consistent with existing environmental policy, the findings that result from existing environmental permits must serve as sufficient demonstration of lack of adverse environmental impact. (Agreement Appendix 2, Sec. D).

Background

The policy was developed by a subcommittee composed of 15 member firms of the Chamber’s Environmental Quality Committee.  The subcommittee was broadly represented and included member firms from various industries including chemical, utility, automotive, and paper manufacturing as well as attorneys and environmental consultants. 

The Great Lakes Charter Annex is an agreement signed by all eight Great Lakes Governors as well as the Premiers of Ontario and Quebec in 2001.  The Agreement was established to provide a legal framework to protect the Great Lakes from outside diversion. From this Agreement the Charter Annex draft documents have been created. 

The current drafts of the Charter Annex are divided into two main documents, the Annex Agreement and Charter Compact. The Agreement is a good-faith agreement between the Great Lakes states and provinces. The Charter Compact on the other hand, if ratified by the states and approved by US Congress, would be a legally binding between the Great Lakes states. Currently the Annex documents are going through a 90-day public hearing process. Each of the Great Lake states and provinces are holding hearings within their respective jurisdictions.  In addition, there are two regional public meetings, one in United States and one in Canada. 

Upon completion of the public hearing process, the Great Lakes Governors and Premiers will reconvene and attempt to find unanimity of opinion on the documents. Ultimately, if all of the Great Lakes Governors sign the document, it will require action by each of the state legislatures to come into compliance with the Compact.  Once this happens, the United States Congress must ratify the Compact for it to have the force of law. At that point, the Compact will become legally binding between the Great Lakes states. However, the compact is not binding on the Canadian provinces.  The Canadian Provinces will be bound to a good-faith agreement.  To date, Congress has clearly shown its interest in having the states undertake such an effort as written in the most recent reauthorization of the Water Resource Development Act (WRDA):

(2) “to encourage the Great Lakes States, in consultation with the Provinces of Ontario and Quebec, to develop and implement a mechanism that provides a common conservation standard embodying the principles of water conservation and resource improvement for making decisions concerning the withdrawal and use of water from the Great Lakes Basin.”

In January of 2003, the Michigan Chamber Board of Directors approved policy relating to water use at the federal, state, and regional levels. The Board policy stated the following about Annex 2001:

“Michigan has long applied the reasonable use doctrine of riparian law to determine the appropriate use of water.  This doctrine allows the owner of property adjacent to a surface water body the right to use that water in a non-wasteful manner.  The resource improvement standard in the Annex should reflect riparian law by granting in-basin water users the right to use water.

In implementing the Annex, the Michigan Chamber advocates that a clear distinction be made between in-basin consumptive water use and out-of-basin water diversions. The resource improvement standard in the Annex must accommodate the allowance of safe, beneficial in-basin water use while providing a defensible resource-based mechanism that requires a higher standard for diversions that do not provide in-basin benefits.

The Michigan Chamber recognizes that water diversions could pose serious threats to the Great Lakes and therefore advocates for their strict regulation. However, the Annex must allow for the consumptive use of water within the basin. Water uses that add direct value to the economies of the Great Lakes region must be considered consumptive uses and not diversions. In allowing for the consumptive use of water, the Annex must not impose a burdensome application process.”

The purpose of this policy proposal is to revise and update the statement approved by the Board of Directors in January 2003.

The Michigan Chamber of Commerce supports policy initiatives encouraging the good stewardship of Michigan’s environment and natural resources including conservation, recycling, litter control, and solid waste management. As such, the Michigan Chamber supports the development of a comprehensive statewide recycling program.

To achieve these goals, the Michigan Chamber endorses the following:

• Support amending the Michigan Constitution to establish a recycling fee of not more than one cent per sales transaction on tangible goods sold at retail. Such a fee should not be charged to consumer or business services, business to business transactions, goods sold from vending machines, motor fuel, heating oil, prescription drugs sold for human use, or utilities.
• Support creating a Michigan Recycling Trust Fund within the Constitution. Money in the fund could only be appropriated to support recycling, waste diversion, and litter reduction programs.
• This Constitutional Amendment must contain a provision that automatically repeals the one-cent recycling fee if the Bottle Deposit law is expanded.
• Support legislation that establishes the collection of data and the creation of quantifiable goals and measures to determine Michigan’s success at recycling.
• Support legislation that ensures all recycling funds appropriated to local units of government must be used to meet measurable recycling goals and objectives. Local units of government that fail to meet established goals should not be eligible for additional funding.
• Support legislation that ensures that recycling funds be made available to private sector entities to improve recycling. This may include grants, tax credits, or tax relief to encourage the purchase and use of recycling equipment and infrastructure.
• Prohibit the use of state and local recycling funds by local government to compete against established private sector waste and recycling enterprises.

Background

House Joint Resolution O is a proposed Constitutional Amendment sponsored by State Representative Geoff Hansen (R-Hart) that would levy a one-cent surcharge on the sale of consumable goods (proposal attached). Funds collected from this surcharge would be used to support recycling in Michigan. The legislation is supported by Michigan Recycling Partnership – a coalition with members in the soft drink, beverage container, convenience store, and grocery store industries. According to supporters, it is estimated this plan will generate between $40 million and $45 million annually in new funds for recycling.

Board Policy on Recycling

On September 12, 2001, the Michigan Chamber Board of Directors approved a policy supporting the development of Comprehensive Recycling in Michigan. The policy called for a comprehensive, cost-effective statewide recycling and litter control program that includes curbside recycling, redemption centers, roadside litter control, and recreational and park recycling programs At that time the Board did not endorse a funding source to achieve this goal.

2005-06 Legislative Priorities

Priorities approved by the Board on Solid Waste and Recycling call for opposition to both expansion of the bottle deposit law and raising the state’s garbage tax. The priorities related to the bottle bill state that “expansion of the bottle deposit law would have a negative impact on Michigan’s job providers.” Raising garbage taxes would require commercial and industrial sectors to dramatically subsidize residential recycling while providing minimal benefit to the businesses themselves.

Chamber Committee Review of Recycling Fee

Because this proposal dealt with both recycling and taxation issues, it was subject to review by both the Michigan Chamber’s Tax Policy and Environmental Quality (EQ) committees. The idea was originally presented to the EQ Committee on May 25, 2005. The EQ Committee voted to support the idea in concept and formed a subcommittee to further study the proposal. On September 1, 2005 the Tax Policy Committee heard a presentation from Rep. Hansen on the plan. The Tax Policy Committee also voted to form a subcommittee. A joint subcommittee was then formed with members of both committees; the subcommittee met three times and recommended that supporters of the plan complete both a legal and policy analysis on the proposal.

The Michigan Recycling Partnership hired Bill Rustem, of Public Sector Consultants, to complete the policy analysis and Arthur Siegal, of Jaffe, Raitt, Heuer & Weiss, to complete the legal analysis of the plan. The findings of the two analyses were favorable towards the proposal, although not all members the EQ and Tax committees agreed with the findings.

On February 28, 2006, a majority of the Chamber Tax Policy Committee voted to be neutral on the plan due to a lack of consensus among committee members. Supporters of the plan on the committee argued that this plan is a viable method to fund recycling. Other members of the committee were concerned that this proposal is not actually a fee but rather a tax. In the end a majority of the committee members voted to take a neutral position on the plan.

On the following day, March 1, 2006, the EQ Committee voted to support the plan. The majority of EQ Committee members felt the one-penny fee was the best alternative to counter bottle bill expansion and garbage tax proposals. There were some on the committee that voted to be neutral or oppose the plan. Those members were concerned about a lack of quantifiable goals and objectives.

Bottle Deposit Law

Michigan is one of 10 states with a bottle deposit law. The original bottle deposit system was created nearly 30 years ago with a voter-approved ballot initiative in November 1976 and included beer, soft drink, and carbonated and mineral water containers. The act was amended in 1988 to include wine coolers and canned cocktail containers. Now, some proponents of the bottle bill see inclusion of non-carbonated beverage containers, such as juice and water, as the next logical step to improve Michigan’s recycling rates.

It is questionable if expansion of the bottle deposit law would have a measurable impact on improving recycling rates, since non-carbonated beverage containers represent less than one percent of the municipal solid waste stream. Additionally, expansion would likely lead to major sanitation issues in our state’s supermarkets.

In April 2005, the Michigan United Conversation Clubs announced the creation of the “Bigger Better Bottle Bill Coalition” which then hired a campaign coordinator to begin the process of taking to the voters a plan to expand the current bottle law. The coalition has indicated its willingness to reconsider if a viable comprehensive recycling plan is put forward.

Garbage Tax

In the 2003-04 legislative session, Senate Republicans endorsed a plan to raise garbage taxes by $3 per ton to generate $50 million annually to support recycling. Due to the financial burden that would have been placed on the business community and numerous other policy problems, the Chamber EQ Committee overwhelmingly voted to oppose this plan. In the end, this plan was never reported out of Senate committee.

In the 2005-06 legislative session, Senate Democrats have proposed a $6 per ton landfill tax while House Democrats have proposed a $7.50 per ton tax. These plans would impose between $100 million and $150 million in new taxes. The Michigan Chamber completed an analysis on the House and Senate Democrats’ plan entitled, “Tax on Canadian Trash or Tax on Michigan Families and Business.” The analysis concludes that raising taxes on garbage disposal would hurt Michigan taxpayers and have little impact on the amount of material entering Michigan. To this point, House and Senate Republicans have repeatedly defeated efforts by the Democrats to move a garbage tax.

In January 2006, House Democratic Leader Dianne Byrum announced her intentions to lead an effort to place the Garbage Tax before the voters in 2006. At this point, it is unclear if Rep. Byrum intends to proceed with this plan.

The Michigan Chamber of Commerce supports the continued investigation and development of a citizen-approved bond initiative to fund targeted, strategic investments in natural resources and communities to improve the economic vitality of the state and guarantee enjoyment of these resources for generations to come. This Conservation Bond must be coupled with the implementation of significant reform and restructuring of our state’s regulatory structure including the Department of Environmental Quality (DEQ).  

Background

The Michigan Chamber has a history of supporting environmental/conservation bonds to help invest in our state’s natural resources. In 2002, the Michigan Chamber supported the $1 billion Great Lakes Water Quality Bond Initiative. In 1996, the Michigan Chamber supported the $675 million Clean Michigan Initiative. In 2009, the Nature Conservancy and several other groups are developing a proposed Conservation Bond for 2010.

The proposal being developed by the Nature Conservancy of Michigan calls for a $1.5 billion investment in natural resources and communities. The proposal would need to be authorized by the Michigan Legislature by a 2/3 vote in both chambers and then approved by a majority of voters in the November 2010 election. The proposal is made up of three key components: working lands, healthy waters, and great communities.

Working Lands – Agriculture and Forestry

Michigan’s agriculture and forestry industries make major contributions to our state’s competitive advantage. Because of the importance of these industries to Michigan’s future, an investment in these sectors will help to support the quality of the resources on which these sectors depend.  Funding will provide resources to create incentives for on-farm management to help improve water quality in the state. In addition, funds would be made available to support research and development related to forestry and agriculture.

Healthy Waters

Michigan’s land and communities are productive and attractive because of the quality and quantity of its waters. Investing in this critical asset will benefit the state’s economy and its residents long into the future. Funding will help improve and protect coastal health including investments in cleaning up areas of concern within the Great Lakes, dredging of harbors, and control of aquatic invasive species. In addition, funding would be made available to improve inland lakes and streams through such activities as dam removal and addressing non-point source pollution efforts.

Great Communities

Both employees and employers are seeking the opportunity to live and work in a community that provides for a rich quality of life with great natural assets. Funding for Brownfield projects would provide dollars to local communities that have a partnership with private sector developers in order to redevelop abandoned and contaminated sites. Funding for transit would provide matching dollars to local communities to help leverage federal resources to create and expand high-speed rail and rapid bus service in Michigan communities. 

Regulatory Reform

Michigan’s current regulatory burden is having a negative impact on our state’s economic competitiveness. Dramatic changes are needed at the Department of Environmental Quality. The 2010 Conservation Bond should be coupled with reforms that include the following:

Brownfield (Part 201) Redevelopment

In the mid 1990’s, policymakers in Michigan recognized the need to develop a comprehensive strategy to clean up and put into productive use contaminated properties. This strategy made Michigan a leader in the brownfield redevelopment movement. Unfortunately, the success of Michigan’s cleanup program is now waning. The program has become over-burdensome and few closures of sites are now occurring. To return as a leader in the cleanup and redevelopment field and entice business investment in our communities, Michigan must enact reforms to improve the performance of our cleanup program. 

Rules, OP-Memos, Permit Issuance

Delay of permit processing imposes serious constraints on the ability of businesses to plan for their operations. The Michigan Department of Environmental Quality has been unilaterally imposing standards beyond federal rules, beyond state legislation and in some cases even beyond state rules, making Michigan less competitive with other states. Aggressive action is necessary to help reduce the overall regulatory burden which will help to encourage job growth and investment in Michigan.

Regulation of Agriculture

Agriculture is one of Michigan’s leading industries. Recent decisions by the DEQ related to agriculture have had a negative effect on the growth of agriculture in the state. The Michigan Department of Agriculture is better suited to handle the regulation of agriculture and agri-business.  All regulatory functions currently being run by the DEQ that effect agriculture should be handed over to the Department of Agriculture.

Change in Regulatory Approach

Michigan needs to develop a more consistent, predictable regulatory structure that helps to both encourage economic growth and protect the natural resources. The current regulatory structure at the DEQ is having a negative impact on the state’s economy. The slow moving bureaucracy at the Department of Environmental Quality often leads to delay in permits and poor customer service.   Serious consideration should be given to merging the DEQ with the Department of Natural Resources and/or other departments. A change in management at the DEQ may also be helpful in facilitating change at the DEQ.

The Michigan Chamber of Commerce supports the proposed amendment to the Michigan Constitution of 1963 sponsored by the State Legislature under House Joint Resolution E that will be on the August 6, 2002 statewide primary election ballot for voter approval.

The proposed amendment would amend Section 12 to Article IV, to provide that the state officers compensation commission’s determination of certain salaries and expense allowances become effective only upon approval by the legislature for the following legislative session.

Background

The state constitution was amended in 1968 to give the responsibility for determining the salaries and expense allowance of members of the Legislature, the Governor, Lieutenant Governor, and Justices of the Supreme Court to a special commission, the State Officers Compensation Commission (SOCC). The seven-member SOCC meets every even-numbered year after July 1 for no more than 15 session days and, after holding public hearings and accepting public comment, files its determinations with the Clerk of the House of Representatives, the Secretary of the Senate, and the director of the Department of Management and Budget between December 1 and December 31. Those determinations take effect as of January 1 unless the legislature rejects them by concurrent resolution adopted by two-thirds of the membership of each house before February 1. The legislature can reject the entire determination or specific determinations for specific positions.

In recent years, the recommendations of the SOCC and the legislature’s response to them have been controversial. In 1991, the Legislature rejected the SOCC determinations; in 1993, a resolution to reject them failed in the House and the Senate did not vote. The commission’s 2000 report generated much public controversy: the commission recommended first year salary increases of 13.7 percent for the governor, to $172,000; 19.6 percent for the lieutenant governor, to $120,400; 13.6 percent for supreme court justices, to $159,960; and 35.8 percent for legislators, to $77,400. It recommended second year increases of 2.9 percent for each office.

Following much public outcry, the House of Representatives voted to reject the SOCC salary determinations; the Senate did not vote. As a result, the salary increases took effect, retroactive to January 1, 2001. The controversy can be seen as both the result of and a contributor to the perceived increase in public disaffection and cynicism with government.

There are several problems with the current process. For one thing, the SOCC determinations apply immediately, which means legislators are faced with a decision about their own current compensation levels. This invites public skepticism and cynicism. Further, the SOCC determinations go into effect automatically unless rejected by the legislature and the legislature is not required to vote on them at all. If the legislature does not put the issue to a vote, it is seen as dodging its responsibilities. So, there is a great deal of political pressure to vote on the issue, even if it is obvious that the SOCC recommendations have overwhelming support. The only resolution the legislature can vote on is one to reject the SOCC determinations, which casts the issue in an undesirable light. If a resolution to reject the determinations is put to a vote, but the necessary votes (two-thirds of the membership) cannot be found, the legislature is portrayed as “giving itself a raise,” because increases are effective for that legislative session. At the same time, a large majority of the legislators in any one house can vote to reject a pay raise (and point the vote out to the electorate in self-defense) without their votes defeating the SOCC determinations because of the supermajority requirement. Indeed, one entire chamber can vote to reject the recommendations without having any effect if the other does not vote to reject or does not address the issue at all. In addition, many legislators (and others) object to the “all or nothing” approach embodied in the current process; it is argued that the recent SOCC determinations, with a 35.8 percent increase in legislative salaries, was just too large an increase to be implemented all at once, but that a reasonable, “cost of living” increase would have been palatable to the public. In addition, some question of the credibility of a commission composed entirely of gubernatorial appointees with no specified qualifications or expertise in the practice of setting compensation.

While there may be no ideal way to establish legislative salaries or those of other elected officials or any way such decisions can escape some public criticism, amendments have been proposed aimed at improving the current system.

The Content of the Joint Resolution

Currently, under Article IV, Section 12 of the state constitution, the State Officers Compensation Commission (SOCC) determines the salaries and expense allowances of the members of the legislature, the governor, the lieutenant governor, and the justices of the state supreme court. Unless the legislature adopts, by a two-thirds majority of the members elected to and serving in each house, a concurrent resolution rejecting the salaries and expense allowances proposed by the SOCC, the salaries and expense allowances are implemented.

House Joint Resolution E would amend the state constitution to:

• Add the attorney general and the secretary of state to the list of state officials whose salaries and expense allowances are determined by the SOCC.
• Provide that commission members’ qualifications could be determined by law.
• Require that the SOCC determination of proposed salaries and expense allowances be approved by a majority vote of each house of the legislature. The two houses would alternate on originating a concurrent resolution to address the matter, with the Senate originating the first resolution after the constitutional amendment took effect.
• Allow the legislature to amend the SOCC’s determinations to reduce the salary and expense determinations by the same proportion for all of the elected officials subject to the SOCC determinations. However, salary and expense levels could not be reduced below the levels in effect on the date of the SOCC determination.
• Provide that the SOCC’s salary and expense determinations, as approved or amended by the legislature, would take effect after the next general election.

The joint resolution would place the constitutional amendment before the voters at a special election on August 6, 2002.

The Michigan Chamber of Commerce supports implementation of “budgeting for outcomes” for state government. This includes:

Setting the price of government. Establish up front the revenue citizens are willing to pay for the results they want from government. For this process the ‘price’ is the revenue expected from current taxes and fees.

Setting the priorities of government.  Define the outcomes or results that matter most to citizens, along with indicators to measure progress (these become the basis for accountability).

Setting the price of each priority. Divide the price or revenue among the priority outcomes on the basis of their relative value to citizens.

Developing a purchasing plan for each priority. Create “buyer teams” (legislative committees) to act as purchasing agents for the citizens. Ask each one to determine what works and what matters most when it comes to delivering their assigned result. This is critical; the buying teams must start with the evidence of what works rather than an inventory of current programs in shaping their purchasing plans.

Reviewing/evaluating offers from ‘providers’ to deliver the desired results.  Have the buyer teams issue “requests for results” to potential providers. These could include their own government’s agencies or departments and might also include other governmental jurisdictions, unions, or non-governmental organizations. Invite them to propose how they would deliver the result and at what price. The goal is to encourage creative proposals that get the job done at the best possible price.

Buying the best, leaving the rest. Have buyer teams rank the proposals in terms of their contribution to the result. Then starting at the top, buy down the list until their budget is gone. In doing so they will be choosing those proposals that will provide the best results for the money.

Negotiating performance agreements with the chosen providers. These should spell out the expected outputs and outcomes, how they will be measured, the consequences for performance, and the flexibilities granted to help the provider maximize performance.

Background

These principles of Budgeting for Outcomes are discussed in depth in the book “The Price of Government – Getting the Results We Need in an Age of Permanent Fiscal Crisis” by David Osborne and Peter Hutchinson. The authors provide a clear, step-by-step roadmap for change, offering concrete solutions drawn from their combined thirty years of experience leading and advising public institutions. They describe a radically different approach to budgeting – one that focuses on buying results for citizens rather than cutting or adding to last year’s spending programs. They go on to show how leaders can use consolidation, competition, customer choice, and a relentless focus on results to save millions while improving public services, at all levels of government.

During the last year of the Engler administration and first two years of the Granholm administration, the Executive Office and legislative leaders in both the House and Senate have struggled to balance the state budget. They have relied largely on one-time sources of revenue, tax and fee increases, across the board reductions in spending, and accounting changes to balance the state budget. Meanwhile, the executive branch continues to put forward proposed departmental budgets based largely on what was spent the year before; the appropriations process takes longer, but provides less oversight; and mid-year reductions in planned spending have become commonplace. State officials have foregone opportunities to dramatically restructure state and local government to hold the line on taxes and spending by improving government efficiency.

According to a January 10, 2005 report by the Michigan Senate Fiscal Agency (SFA), a comparison of the FY 2004-05 SFA revenue estimate with enacted and projected appropriations leads to a projected $405.9 million FY 2004-05 general fund/general purpose budget deficit. Governor Granholm is expected to make recommendations to the legislature regarding the elimination of this budget deficit about the same time she submits her FY 2005-06 budget message to the legislature on February 10, 2005. The SFA is now estimating that the FY 2004-05 School Aid Fund budget is in surplus by $74.2 million. For FY 2006, estimates of the budget shortfall range as high as $1 billion.

Implementation of this policy proposal is based on the following assumptions:

• The leaders of both houses of the legislature actively support taking a ‘not business as usual’ approach to the creation of the next budget. They will constantly reinforce this message throughout the process.
• The agenda and structure of legislative committees will be altered to facilitate the creation of a Budget for Outcomes. As much work as possible will be done jointly.
• The budget will be built using revenues available from current taxes and fees.
• Legislative staff will be dedicated to supporting this work.
• The Governor will present a budget proposal in the traditional form and on the traditional schedule. The Governor has expressed support for some of the principles in “Budgeting for Outcomes.”
• The Michigan Chamber of Commerce (MCC) and Michigan Association of Realtors (MAR) will be partners with the legislature in supporting this work. Funding will be provided by MCC and MAR for consulting assistance to the legislature. Total costs for consulting services by Public Strategies Group related to this project are estimated at $700,000.
• The FY 2006 budget will be the focus of this work – what is learned in this process will be applied to future budgets.

The goal is a budget that delivers results that matter most at the price citizens are willing to pay with accountability built in. The State of Washington successfully pioneered Budgeting for Outcomes in 2002 and continues improving it. Washington’s efforts just earned them the national award for innovation from the Council of State Governments. Iowa, Oregon and South Carolina are doing their own versions as are a growing number of cities and counties.

To provide for improved fiscal responsibility by the Executive and Legislative branches of state government, the Michigan Chamber supports amending the Michigan Constitution to:

• Require that state government operate on an October 1-September 30 fiscal year.   
• Require the Governor to submit a budget for the next fiscal year to the Legislature not later than the second Wednesday in February of each year. 
• Require that at least two members of the state revenue estimating conference be well-qualified and experienced economists from the private sector. These independent members would be appointed by the Governor with advice and consent of the Senate.    
• Limit total state spending to 96% of estimated revenue for each fiscal year, plus any surplus or less any deficit from the preceding fiscal year.
• Require any revenue above the 96% spending limit to be automatically deposited in the State’s Countercyclical Budget and Economic Stabilization (commonly referred to as the BSF or “rainy day fund”).
• Require a 2/3’s vote of both the House and Senate to transfer or appropriate any money from the BSF.
• Require enactment of all appropriations bills for the next fiscal year on or before June 30. If this deadline is not met, the legislature shall immediately impose a call of the House and Senate that includes the Governor and Lt. Governor.  Lawmakers and these state officers shall not be allowed to leave the Capitol, conduct any other business, or be paid any salary unless and until all appropriations bills have been enacted. 

Background
In recent years, the legislature and administration have found it increasingly difficult to control spending, restructure government and balance the state budget in a timely or effective manner. Measures used to balanced recent budgets have included payment delays to colleges and universities, securitization of tobacco settlement monies, borrowing from the Higher Education Loan Authority, and use of restricted fund balances. There is growing political pressure from various spending lobbies on the Governor and legislative leaders to raise taxes.

Over that past several months the State House and Michigan Senate have not moved forward on either significant spending reductions or revenue increases. There has been a lot of rhetoric, but little progress on government restructuring. 

To balance the state budget, the Michigan Chamber has supported legislative and/or executive action to achieve $500 million to $1 billion savings through reduced state spending and meaningful cost-cutting reform measures. Based on current Board policy and the Chamber’s 2007-08 Legislative Priorities, here is a summary of the cost-saving reform measures advocated by Chamber staff:

• A moratorium on new or expanded state government programs.
• Reducing 2008 spending targets to 2007 levels.
• Changes in corrections policy to bring Michigan prison costs more in line with other states (estimated savings of $200-350 million).
• Changes in eligibility and work requirements for welfare to bring Michigan costs more in line with other states (estimated saving of $30 million).
• Medicaid reform (estimated savings of $60 million).
• Public school employee healthcare reform (estimated savings of $157 million).
• Public school employee pension reform (estimated savings of $60 million).
• Suspend Michigan’s “prevailing wage” law on all government projects when the state unemployment rate is more than the national average (estimated savings of $150 million).
• Consolidate certain state departments (estimated savings of  $3 million).
• Repeal or revise PA 312, which mandates binding arbitration of police and fire labor agreements.
• Require a common school calendar by intermediate school district (ISD).
• Require local school districts to seek open, competitive bids for non-instructional activities such as transportation, janitorial and food services.

Michigan Chamber members and staff have made a concerted effort to play a constructive role in the on-going debate over how to balance the state budget. Chamber staff has consistently encouraged legislative leaders in the House and Senate to first, reduce spending; second, restructure state and local government through action on a series of cost-saving reform measures. Third, and only as a last resort, if real progress is made on reforms and reduced spending, we have acknowledged that a temporary increase in the personal income tax (sunset on a date certain) might be acceptable as part of a comprehensive solution to balance the state budget. 

We have also consistently informed lawmakers and the administration that three tax increases (a graduated income tax; inheritance or estate tax; and piece-meal expansion of the sales tax to services) are damaging to Michigan’s economic competitiveness and unacceptable to many in the business community. In the spirit of cooperation, Michigan Chamber staff have consulted with and coordinated with other business organizations to develop this common message. 

What is clearly needed at this time is a mix of short-term, mid-range, and long-term solutions to the state’s fiscal problems. Chamber staff developed this policy proposal to provide a status report for the Board and to seek further policy guidance as the deadline for action on the 2007-08 state budget approaches. The proposed amendment to the State Constitution is patterned after, but not identical to Senate Joint Resolution E (SJR E), introduced on June 27, 2007 by State Senator John Pappageorge and 25 co-sponsors from both sides of the aisle. The modifications to SJR E recommended here were suggested in an analysis of SJR E conducted for the Michigan Chamber by the Anderson Economic Group and are recommended by Chamber staff to strengthen and improve on SJR E, as introduced.  

The Michigan Chamber of Commerce is opposed to the Constitutional Amendment being proposed in the petition drive of “Reform Michigan Government Now!” The Michigan Chamber of Commerce will work to organize opposition to this ballot question.

Background

The Stealth Proposal

On February 22, 2008, a ballot question committee was filed with the Secretary of State entitled, “Reform Michigan Government Now! (RMGN).” The name is very similar to the recent part-time legislature ballot proposal formed on January 23, 2008, called “Reform Michigan Government”. The treasurer of “Reform Michigan Government Now!” is Harland Nye, an eighty-year-old farmer from Hastings, Michigan. Mr. Nye was previously active with an unsuccessful effort to have a unicameral legislature proposal placed on the ballot.

RMGN did not go to the State Board of Canvassers to have their petition approved as to form. That decision is highly unusual, although not legally required. Most ballot proposals take the opportunity to have the Bureau of Elections review their petition for compliance with the format, point size and warning statement requirements in the election code. Choosing not to have the petition approved as to form has kept this proposal beneath the radar of public scrutiny and media attention.

That anonymity recently ended when media reports disclosed that a California-based petition management firm, Progressive Campaigns, Inc. was circulating petitions across the state for RMGN and paying circulators $1.50 a signature.

Harland Nye has refused to speak to the media. We obtained a petition from a circulator. It is a twelve-page petition that folds together like a Michigan road map that amends 24 sections of the Michigan Constitution and adds four new sections. All three branches of Michigan state government would be drastically altered by this proposal, especially the judicial branch.

As the media closed in asking whose behind this petition?, who wrote it?, Diane Byrum of Byrum-Fisk Advocacy Communications and former State House Democratic Leader, stepped forward to announce her firm is handling the campaign. Mark Brewer, Chairman of the Michigan Democratic Party said the Party supported the proposal. Other traditional Democratic allies are on board.

To amend the Constitution by petition requires signatures equal to 10% of the total vote cast for Governor in the last election. That’s approximately 380,000 valid signatures needed to be turned in by Monday, July 7, 2008 in order to qualify the proposal for the November 4, 2008 statewide ballot.

Who is paying for the proposal? We don’t know and proponents aren’t saying. The first required financial report of contributions and expenditure is not due until 35 days after the qualification or non-qualification of the proposal. The last day the State Board of Canvassers has to certify sufficiency of the signatures submitted is September 4, 2008, sixty days before the election. A post qualification report would be due 35 days later. Most likely the report would not be due until late September or early October. Some speculate that Jon Stryker, who supported Democratic legislative candidates in 2006 with more than $5,000,000 and has a track record of working with Diane Byrum, may be involved in the financing of the effort.

The Details

We have identified 36 different changes that would be made to the Michigan Constitution, if this proposal were adopted by the voters on November 4, 2008:

1. No reason absentee voting.
2. Mandates a voter system paper trail.
3. Establish an autonomous Office of Elections removed from Secretary of State.
4. Establish a Bipartisan Redistricting Commission.
5. Prohibit judicial review of redistricting plans by the state courts; only permit judicial review by federal courts.
6. Prohibit redistricting plans from being rejected, amended or repealed by initiative, legislation or referendum.
7. Reduce size of State Senate from 38 to 28.
8. Redistrict the State Senate in 2009 using 2000 census data. One-half of districts elected in 2010 will be for a two-year term. The other half of the districts will elect a Senator for a four-year term. In 2012, those Senators up for election after a two-year term will run for a full four-year term after the 2011 redistricting using 2010 census data.
9. Reduce the size of the State House from 110 to 82.
10. Redistrict House District lines in 2009 using 2000 census data from 110 districts to 82.
11. Redistrict 82 Districts in 2011 using 2010 census data for the 2012 election and each subsequent election next decade.
12. Roll back legislative salaries in 2009 to December 31, 2000 levels.
13. Require legislators and executive branch officials elected after January 1, 2009 to have retirement and medical benefits no better than those offered to retired state classified civil service employees.
14. Transform the initiative from being an indirect to a direct initiative.
15. Require Legislature to ensure laws for the prevention and punishment of election and petition fraud.
16. No state or local officials who have responsibility for administering elections shall endorse or give support to any candidate or ballot question.
17. Restrict voting to 18 year olds and older who are not illegal aliens or legal resident aliens.
18. Mandate districts be drawn within ± 2.5% of ideal population. Require four Senate districts and nine House districts be drawn as swing districts with a base party percentage between 50 – 53%.
19. Prohibit former legislators and elected and appointed executive branch officials from lobbying for two years after leaving office.
20. Require legislators, elected executive branch officials and candidates for those offices to file financial disclosure statements for themselves and their spouses.
21. Financial records of the State legislature shall be open for public inspection.
22. Legislature shall give citizens standing to bring lawsuits and obtain injunctive relief for environmental violations.
23. Reduce number of state agencies to no more than 18 and cap the number of boards and commissions to no more than 200.
24. Reduce the size of the Supreme Court from seven to five. Two current justices with least seniority must leave office by December 20, 2008.
25. Open the Administrative files of the Courts to public inspection in accordance with Supreme Court Rules.
26. Reduce the size of the Court of Appeals from 28 to 21 and elect them from three districts. All Court of Appeals Judges with terms ending on December 31, 2010, must leave the Court of Appeals by December 20, 2008.
27. Add ten Circuit Court Judgeships across the state.
28. State paid salaries of justices and judges shall be reduced by 15% effective January 1, 2009.
29. Jury lists be representative of the population of the jurisdiction.
30. Replace Judicial Tenure Commission with a Judicial Performance Commission.
31. Require Justices, Judges and candidates to file financial disclosure statements.
32. Provide for disqualification of justices and judges in cases before them.
33. Permit the abolishment of the Mackinac Bridge Authority after action by the legislature to pay off the bonds.
34. Eliminate requirement that Lt. Governor, Secretary of State and Attorney General Candidate be nominated at political party convention.
35. Eliminate requirement that gubernatorial and lieutenant gubernatorial nominees run as a team in the November election.
36. Eliminate provision permitting Governor to appoint a successor if a vacancy occurs in the office of Attorney General or Secretary of State.

The Michigan Chamber reaffirms its longstanding position in favor of meaningful reform of state government. Most of these reform measures can and should be accomplished through the legislative process. We urge the Legislature and Administration to take action this fall or winter on the following measures:

• Repeal mandatory binding arbitration of municipal police and fire labor disputes.   
• Remove barriers to consolidation of municipal governments.
• Drive additional tax dollars into the classroom for student instruction by substantially reducing the extraordinary number of K-12 school districts from over 500 to a lower and more reasonable number along the lines of Michigan’s 83 counties.
• At a minimum, school districts should be required to consolidate administrative and non-instruction services through intermediate school districts, while retaining local control of academics.
• Change an overly generous and very expensive defined benefit pension system for public school employees to a competitive, but more affordable, defined contribution or 401(k) type retirement plan.
• Promote employee rights and professionalism by prohibiting compulsory unionization of public school employees.
• Provide for more prompt and vigorous enforcement of the state law prohibiting teacher strikes.
• Save money and increase voter participation by requiring that all school elections be held on regularly scheduled August primaries or November general elections.
• Save taxpayers money by exempting school construction projects from Michigan’s costly and anti-competitive “prevailing wage” law.
• Strengthen parental choice of schools by removing the arbitrary cap on the number of university-authorized charter public schools.

Furthermore, we continue to believe that it is not necessary or wise to convene a costly and open-ended Constitutional Convention to reform state government. To the extent that amendments to the State Constitution are necessary or would be helpful, these proposals should be limited to a single subject and stand or fall on their merits, instead of being bundled into packages.

Background

Over the past two years, numerous public opinion surveys have indicated that a growing number of Michigan residents think the state is on the wrong track. Many of these polls also indicate that a majority of voters hold a dim view of the job performance of the Legislature and Governor. More recently, over 400,000 voters signed a petition to rewrite the State Constitution to “Reform Michigan Government Now! (RMGN).” Although this petition was developed in secret and presented to voters on street corners in a way to hide its real purpose, it is clear that many Michigan residents want state government reform. 

During the recent debate and legal action relating to RMGN, proponents of this dangerous scheme to change the rules to gain one-party control of state government often tried to assume the mantle of reform. They also sometimes attacked our effort to protect the State Constitution as opposition to government reform or an attempt to preserve the status quo for special interests. 

For decades, the Michigan Chamber has been a champion of reform. From workers’ compensation reform in the 1970’s and early 80’s to property tax/school finance reform in the 90’s, we have fought to move Michigan forward. More recently, we advocated that legislative term limits should be retained, but revised and we supported a plan to improve state finances by limiting total spending to 96% of revenue and require the remaining 4% to be deposited in the state’s “rainy day” fund. 

It is likely that supporters of RMGN will continue to push their agenda of phony reforms. They may also push for a Constitutional Convention in 2010. We think the best way to build on public sentiment for reform, and counter RMGN, is to work with other responsible groups to encourage the Governor and legislative leaders to take action on a meaningful list of real reform measures. All of the reforms outlined in this policy proposal have been previously approved by the Chamber’s Board of Directors.

The Michigan Chamber of Commerce opposes any initiative to legalize marijuana in the state.

Background

Since 1995, the Michigan Chamber Foundation's DRUGS DON'T WORK program has assisted local chambers and employers in implementing drug-free workplace programs. A model progra consists of a policy, n Employee Assistance Program, supervisory training, employee education, and at least pre-employment drug testing.

This past year, a petition was undertaken in Michigan to qualify a constitutional amendment for the November 2000 ballot to legalize marijuana. Petitions circulated by a Saginaw attorney and a reported 3,000 volunteers gathered only half of the 300,000+ valid signatures required for a constitutional amendment to be placed on the statewide ballot. The initiative, called the "Personal Responsibility Amendment," would have allowed the possession of three marijuana plants and three ounces of marijuana. It also would have striped law enforcement of using forfeiture funds. (Forfeiture funds are assets such as cash and vehicls seized from drug dealers. These monies are then used for future law enforcement or prevention activities.)

This Libertarian approach has varied from other state initiaives that focus mainly on "medical marijuana." In 1996, both California and Arizona passed legalization propositions. California's Prop 215 allows individuals to use marijuana for any "medical condition" with just a doctor's verbal recommendation. There is no age limit or limit on the amount of marijuana. In Arizona, all Schedule I drugs were legalized for everyone. (Schedule I drugs are drugs for which there is a high potential for abuse, no currently acceptable medical use in treatment and a lack of accepted safety for use under medical supervision. Heroin, LSD, and marijuana are Schedule I drugs.)

In both states, more than 70 percent of the funding for the pro-legalization campaign was from out-of-state sources. New Yorker George Soros gave $550,000 to the California effort and $430,000 to the Arizona initiative. Two other large contributors ($500,000 & $200,000) indluded Peter Lewis of Ohio and John Sperling of Arizona. Other states which have passed similar "medical-excuse marijuana" initiatives include Oregon, Washington, Alaska, and Maine. Other pro-legalization organizations include the Drug Policy Foundation, NORML (National Organization for the Reform of Marijuana Laws), and Americans for Medical Rights.

The Drug Free America Foundation, based in Florida, is working to educate Americans about ballot initiatives and other attempts to legalize as "medicine" unsafe, ineffective and unapproved drugs such as marijuana and heroin. In May, the Drug Free America Foundation came to Michigan for a two-day conference on potential consequences of the legalization movement. Participants in the conference included representatives from the Michigan Chamber Foundation's DRUGS DON'T WORK program community coalitions, the Prosecuting Attorneys Association of Michigan, and the Drug Enforcement Administration.

Although the "Personal Responsibility Amendment" is not on the November ballot, any future attempt to legalize marijuana would be harmful for the following reasons:

1. Creates conflict with federal law. Marijuana is a controlled substance under federal law, listed on Schedule I. In addition, marijuana is one of five prohibited drugs tested for in the Omnibus Transportation Employee Testing Act of 1991 which covers safety-sensitive positions (Department of Transportation, Federal Aviation, etc.) Under the Federal Drug Free Workplace Act, the recipients of certain federal grants or contracts must have policies that prohibit the use of illegal drugs.
2. Removes marijuana from the drug approval process. Testing by FDA and other government agencies is designed to protect public health. Legalizing marijuana through a ballot initiative would circumvent this process. Smoking crude marijuana is an impractical delivery system. The dosage cannot be controlled and the chemical make-up of any two plants can differ significantly. Smoking is clearly a health risk and marijuana smoke contains even more carcinogens and tar than cigarettes (Jonsson Cancer Center @UCLA). Other approved drugs are generally more effective. THC, the active ingredient in marijuana, is available by prescription as Marinol (a Schedule II drug) to treat nausea associated with some cancer treatments.
3. Raises concerns about the safety and health of employees. In a study by Workplace Consultants, results showed that drug-using employees are three times more likely than non-using employees to be involved in a workplace accident and are fivetimes more likely to file a workers compensation claim. Impaired employees hurt themselves, their co-workers and overall business productivity. Legalization would invalidate a drug-free workplace program, thereby losing a chance for early intervention and a resource for help. Legalization would also create a new group of people unfit to hire because of their drug dependence.
4. Sends dangerous message to the future workforce. There is a direct correlation between perceived harm of a drug and its use. At the peak of drug use in the late 70s, results of the Monitoring the Future Study (U of M) 37 percent of high school seniors had used marijuana in the prior 30 days and 10.7 percent used marijuana daily. Following a solid national anti-drug message, the results were dramatically different in 1992. Marijuana use in the prior 30 days by high school students dropped to 11.9 percent and daily use dropped to 1.9 percent. Legalizing marijuana would certainly erode the perceived risk of drug use.

The Michigan Chamber of Commerce opposes the proposed amendment to the state constitution entitled Dedication of Tobacco Tax and Settlement Revenue to Improvement of Health Care because additional earmarking of funds in the state constitution restricts the ability of the legislature to make necessary decisions about the proper allocation of the state's financial resources in response to changes in the economy and the various needs of Michigan's citizens.

Background

Over a period of months during late 2001 and early 2002, members of the Chamber's legislative staff met with members of the legislative staff of the Michigan Health & Hospital Association (MHHA), which is spearheading the effort to pass this constitutional amendment. During those meetings, we made clear the Chamber=s longstanding belief that the settlement revenues should originally have been used for health care purposes and that the provider community had failed to advocate for that allocation when the legislature created the merit scholarship program.

Further, we advised the MHHA to lobby for a legislative solution, and against seeking a constitutional amendment. We also encouraged them to refrain from attempting to secure such a large percentage of the settlement monies, instead leaving at least enough budget flexibility for a means tested merit scholarship program.  We also made it clear that the Michigan Chamber has Board policy, and support from the Michigan Business Leaders for Education Excellence (MBLEE), for the merit scholarship program. Unfortunately, the MHHA and its allies proceeded in a different direction.

It should be noted that the MHHA was the only health care advocacy group that did not advocate for a "pause" in the rollback of the Single Business Tax in order to direct additional funds to health care. They, and other health care advocacy groups, did support the excise tax increase on tobacco products, which the Chamber opposed. 

While the Chamber agrees that the state has continued to under fund Medicaid, and acknowledges that state under-funding leads to cost-shifting adversely affecting employers who pay for employer health benefits, we believe a more equitable allocation of state funds from all sources can, and should, be made through the appropriations process.

The Michigan Chamber's Health and Human Resources Committee recommends adoption of this Policy Proposal.

The Michigan Chamber recognizes the significant challenges facing the health care profession, including shortages of trained personnel in nursing and other specialties due to increased utilization and an aging population. The Chamber believes issues such as mandatory overtime and nurse-to-patient staffing ratios should be addressed in the workplace by hospital employers and employees, not by state or federal legislation that ignores the needs of patients and the communities in which they live. Further, we believe all interested parties should work collaboratively to expand enrollment in nursing programs, break the barriers to entry into the nursing profession, ensure the retention of existing nurses, and improve quality and safe care in hospitals through sound management and marketplace solutions.

Background

The Michigan health care community is faced with the challenge of providing quality and access to care at a time when there is an acute shortage of caregivers. At the same time, the health care community is confronted with various legislative proposals to mandate nurse-to-patient ratios and eliminate mandatory overtime for registered nurses.

Senate Bill 1190 is the Michigan Nurses Association’s most concerted effort to push through legislation that would mandate nurse-to-patient staffing ratios in Michigan hospitals and prohibit mandatory overtime. House Bill 5049 and Senate Bill 669 are similar bills being pursued by others in the nursing community.

Proponents of these bills argue that legislation is necessary to reduce some of the most serious threats to patient safety and quality of care. They argue that lower nurse-to-patient staffing ratios would result in higher job satisfaction, lower burnout, higher rates of retention, and lower rates of turnover among nurses. Further, they argue that the legislation should prohibit mandatory overtime because it forces exhausted nurses in short-staffed facilities to work long consecutive hours--thereby compromising patient safety.

Opponents of these bills argue that the legislation is capable of having the exact opposite effect of its stated purpose. They argue that the critical shortage of nurses in Michigan and nationwide would cause hospitals to have to curtail services and close beds if they are faced with having to fill a one-size-fits-all ratio. Further, they argue that a one-size-fits-all approach to the state’s hospital system is risky, inefficient and wasteful because ratios do not take into consideration the ongoing assessment of patients’ needs, the differences in the skill levels of nurses, the availability of other ancillary workers and support services, or the types of equipment and technology available in a particular hospital.

The Chamber’s Health and Human Resources Committee heard presentations from the Michigan Nurses Association and the Michigan Health and Hospital Association regarding this issue at its September 15, 2004, Committee Meeting. After listening to both sides of the debate, the Committee unanimously agreed to recommend to the Board of Directors that the Michigan Chamber oppose legislative efforts to mandate nurse staffing ratios and prohibit mandatory overtime. Although the Committee agrees that these issues are valid employee concerns, they believe it is imperative for hospitals to have the flexibility to manage staffing based on patient needs and the skills and competencies of their staff—without governmental interference. The Committee believes nurses, hospitals and other interested parties should work collaboratively to encourage individuals to enter the field of nursing, work with colleges and universities to support and expand nursing programs and scholarship opportunities, and explore opportunities for tax credits and other marketplace solutions.

The Michigan Chamber supports Medicaid reform based on the following principles: 

• Reforms to the Medicaid system must provide suitable coverage to eligible recipients;
• Restructuring the state’s Medicaid payment methodology in a manner that rewards high-quality, low-cost health care providers;
• Reducing the cost-shift of Medicaid to the private sector by addressing the state’s chronic underpayment to providers and highlighting the exceedingly low Medicaid reimbursement rates, especially compared to Medicare;
• Incorporating individual responsibility, consumerism, cost transparency and incentives for health behavior in Michigan’s Medicaid program;
• Physicians are currently under compensated for the care they provide Medicaid recipients. The state must pay providers at least the cost of services.

Background

The Medicaid program was established in 1965 under Title XIX of the Social Security Act. Medicaid is a federal-state partnership and was designed to finance health care services for the nation’s poor. Medicaid’s original focus was on recipients of cash assistance through welfare programs, but the program was expanded in 2003 to fund health services for approximately 52 million low income Americans, including single parents with children, and the elderly, blind and disabled. With Medicaid expenditures soaring and state revenues dropping, the Medicaid system is in dire need of reform. In Fiscal Year 2006-07, the State of Michigan will spend over $7 billion on the Medicaid program to cover approximately 1.4 million – or one in seven – Michigan citizens who are eligible under state and federal guidelines. Today, Medicaid is the largest payer of health insurance benefits for America’s – and Michigan’s – poor. 

In May and September of 2006, the Chamber’s Health and Human Resources Committee heard presentations from the Grand Rapids Chamber of Commerce regarding it’s business case for Medicaid reform, set forth in a position paper titled “A Business Case for Medicaid Reform.” The Committee unanimously voted to support the proposal, recognizing that sensible reforms to Medicaid are necessary to stem the burgeoning cost of health care not only for the State of Michigan but also for Michigan job providers who are currently subsidizing uncompensated and under-compensated health care costs – in the amount of over $1.3 billion – for Michigan’s uninsured, Medicaid and Medicare populations when they purchase health insurance for their employees in the private marketplace.

The Michigan Chamber is neutral on a proposed ballot initiative to legalize marijuana for medical proposes. 

Background

In September of 2000, the Michigan Chamber’s Board of Directors adopted Board policy to “oppose any initiative to legalize marijuana in the state.”  This Board policy was developed and adopted in response to a petition drive undertaken in Michigan to qualify a constitutional amendment for the November 2000 ballot to broadly legalize marijuana. The initiative, called the “Personal Responsibility Amendment,” would have allowed the possession of three marijuana plants and three ounces of marijuana for any purpose.  It also would have stripped law enforcement of using forfeiture funds (i.e., assets, such as cash and vehicles, seized by drug dealers then used for future law enforcement or prevention activities).  Ultimately, the petition drive failed when petitioners failed to gather more than half of the 300,000+ valid signatures required for a constitutional amendment to be placed on the statewide ballot. 

Although in 2000 the so-called “Personal Responsibility Amendment” failed to qualify for the ballot, the Michigan Chamber’s Board of Directors reviewed the issue and voted to oppose any similar initiative for the following reasons:  it creates a conflict with federal law; removes marijuana from the drug approval process within the federal Food and Drug Administration (FDA); raises concerns about the safety and health of employees; and sends a dangerous message to the future of the workplace.

In November of 2007, the Michigan Coalition for Compassionate Care submitted just under 500,000 signatures to qualify a carefully drafted and more narrowly focused initiative for the ballot to allow seriously ill patients to use, possess and grow their own marijuana for medical purposes with their doctors’ approval. Under this initiative, if certified by the Michigan Board of Canvassers and passed by the voters in November 2008, Michigan would become the twelfth state – and the first in the Midwest -- to have a law on its books to allow patients to use medical marijuana despite federal law. 

The ballot initiative being proposed in Michigan would do the following: allow terminally and seriously ill patients to use medical marijuana with a doctors’ approval; protect these patients from arrest and prosecution for the use of medical marijuana; permit patients and caregivers to cultivate their own medical marijuana for medical use, with limits on the amount they could possess and where it may be grown; create registry identification cards for law enforcement purposes and establish penalties for false and fraudulent ID cards; allow patients and caregivers who are arrested to discuss their medical use in court; and prohibit the use of medical marijuana in public places. It is important to note that the language expressly states that the proposal would not require “[a]ny employer to accommodate the ingestion of marijuana in any workplace or any employee working while under the influence of marijuana.”

Although the proposed ballot initiative seems to legalize medical marijuana under state law, its use would remain a criminal offense under federal law. However, proponents are not deterred by this fact, arguing that the federal government cannot force states to have laws that are identical to federal law, nor can the federal government force state and local police to enforce federal law. In addition, proponents’ claims 99 percent of all marijuana arrests in the nation are made by state and local (not federal) officials, thereby protecting 99 out of every 100 medical marijuana users who otherwise would have been prosecuted. 

In December of 2007, the Chamber’s Health and Human Resources (HHR) Committee heard a presentation from a spokesperson for the Michigan Coalition for Compassionate Care regarding their proposed ballot initiative to legalize medical marijuana. Following this presentation, the HHR Committee overwhelmingly voted to recommend to the Board of Directors of the Michigan Chamber of Commerce that the Chamber remain neutral on this latest ballot proposal. The Committee’s recommendation was largely based on the language in the most recent ballot proposal, which minimizes the impact on the workplace, agreeing that employers could work with the language as they do with other “no tolerance” policies for alcohol and other drugs. The Committee acknowledged the concerns raised by the Chamber Board in 2000 (i.e., that the widespread legalization of marijuana would be harmful because it removes it from the FDA approval process and creates conflicts with federal law), but felt the priority of the Chamber in reviewing this legislation should be to look at it from a workplace/employer’s perspective. In addition, the Committee felt the benefits this legislation could potentially offer the seriously ill, in the form of pain management, outweighed these concerns. 

The Michigan Chamber of Commerce is opposed to a proposed ballot initiative to insert “Health Care Security” language into the State Constitution that would require the Legislature to “pass laws to make sure that every Michigan resident has affordable and comprehensive health care coverage through a fair and cost effective financing system.”

Background

In January of 2008, the Michigan Health Care Security Campaign (“Campaign”) began gathering the required 380,012 signatures to qualify a constitutional amendment for the November 2008 ballot. The ballot question is worded as follows: “The State Legislature shall pass laws to make sure that every Michigan resident has affordable and comprehensive health care coverage through a fair and cost effective financing system. The Legislature is required to pass a plan that, through public or private measures, controls health care costs and provides for medically necessary preventative, primary, acute and chronic health care needs.”

In February of 2007, the Chamber’s Health and Human Resources (HHR) Committee heard a presentation from a spokesperson for the Campaign regarding their proposed ballot initiative. The proponents explained that their strategy was not to put forward a specific set of reforms, but rather to bring about a strategy for reform and to deepen the Legislature’s commitment to tackling health care reform. Groups supporting the Campaign include the SEIU Healthcare Michigan, MichUHCAN, Michigan Legal Services, Gamaliel Michigan, MOSES, Cabrini Clinic, Michigan Medical Students’ Association, ACORN, Detroit Wayne County Health Authority, UNITE/HERE, Area Agency on Aging Association, Michigan Osteopathic Association, AFSCME Counsel 25 and others.

Following the Campaign’s presentation, the HHR Committee unanimously voted (with two members abstaining) to recommend to the Board of Directors that the Michigan Chamber of Commerce oppose this ballot proposal, citing several primary concerns with the ballot initiative as written:

1. Constitutional Amendment: This language doesn’t need to be – nor should it be – in the Michigan Constitution. There is nothing stopping the Legislature from amending state law to put such a program in place today. 
2. Definitions: Because the language contained in the Constitutional Amendment is broad and undefined, it could be interpreted differently by different people. Every key word found in this Constitutional Amendment (e.g., “affordable,” “comprehensive,” “fair,” “cost effective,” etc.) could be subject to years of litigation. As a result, court opinions – not legislators – would ultimately be writing these laws and, even then, the meaning of these laws would be subject to change over time as different courts change the meaning of the various definitions. 
3. Cost: Although proponents of this Constitutional Amendment argue that their goals can be achieved without adding to the overall cost of health care in Michigan, this proposal is drafted to “make sure that every Michigan resident has affordable and comprehensive health care coverage through a fair and cost-effective financing system” through public or private measures. Unless achieved through private measures, it is difficult to imagine how this could be achieved under the State’s current health care financing system without a significant tax increase – or without moving Michigan in the direction of a single-payer state.
4. No timeline: The Constitutional Amendment fails to set a date by which the Legislature would need to act or specify what would happen if the Legislature fails to pass legislation dealing with this issue.

The Michigan Chamber of Commerce supports adhering to the following principles when debating state or federal proposals to modify our health care delivery system.

New health care policy should:

• Maintain an employer’s right to choose to provide health care coverage for their employees and should not penalize job providers who choose not to.
• Not increase taxes on Michigan job providers.
• Allow greater flexibility in plan design and encourage personal responsibility for managing health care costs and wellness.
• Foster competition through the private marketplace.
• Not grow the size of government.
• Identify ways to reduce health care costs.
• Provide a genuine opportunity for increasing the number of individuals with health benefit coverage. 
• Not add any new mandated benefits.
• Encourage individuals to purchase health care coverage.
• Be based upon free market principles and sound actuarial practices rather than artificial rate restrictions.
• Aim to increase choice by fostering plan competition and availability.
• Reduce cost-shifting from government to private payers and reward provider efficiency and quality.
• Ensure meaningful legal reform is an integral part of health care reform legislation.

Background

The United States Congress has spent the summer of 2009 trying to broker a deal to reform the nation’s health care system. There are many problems with the current system but the number one issue for employers purchasing health care coverage for their employees is affordability.

The Michigan Chamber of Commerce is dedicated to improving our nation’s and state’s health care system, especially in terms of lowering costs, improving the quality of care and making sure every American has access to affordable coverage. This could include giving consumers timely information on the cost and quality of their care, providing them with a broad array of health plan options, including plans without government mandated benefits, and rewarding both providers and consumers for positive health outcomes that will reduce long-term costs. 

We believe that responsible and constructive modifications to our health care system can be achieved and enacted in 2009; however, we believe that the legislation currently under consideration in the U.S. Congress would not improve the system, but jeopardize the parts that currently work.

In particular, we are opposed to proposals that would mandate that employers either provide health insurance or pay huge fines or payroll taxes to the government. This “pay or play” mandate is especially harmful because employers are also required to pay the majority of employee premiums. Even with some exemptions, this provision would kill many jobs. We believe market forces and employer autonomy should determine what benefits employers provide, rather than government.

The Michigan Chamber is also opposed to the creation of a new government-run insurance plan to “compete” with private insurance companies. This is a step in the wrong direction because the government will never be a fair competitor. Employers currently suffer a significant cost-shift from existing public programs, and the program described in the House legislation would significantly increase costs for every American who purchases private insurance. Because of these increased costs, the Lewin Group, an independent health care and human services policy research and management consulting firm, estimates that 130 million people would move from private to public insurance, which could lead to a government-controlled single-payer system.

Finally, we are opposed to imposing new tax burdens on individuals and businesses to pay for changing the current system. The implementation of new taxes and fees on businesses and/or individuals would be dramatically counterproductive, especially during this economic downturn. In particular, the taxation of employer-sponsored health benefits would lead to a reduction in benefits offered to employees, drive up Michigan’s unemployment rate and rob businesses of their valuable resources.

In addition to federal health care proposals, the Michigan Legislature is also considering several ideas that would impact Michigan’s individual health insurance market as well as employer-sponsored health insurance. There are several provisions in both the House and Senate plans that the Michigan Chamber could support, such as regulating the individual market by imposing a six-month, pre-existing condition waiting period and establishing recession rules for all carriers.  However, just as with the Congressional plans, the Michigan Chamber has several key concerns with the Michigan House and Senate plans. 

Our primary concern with the Michigan Senate’s plan relates to the creation a new governmental entity responsible for facilitating the availability, choice and subsidized purchase of eligible health coverage plans to uninsured individuals. The subsidized plan would be paid for by a “surcharge” of up to 1.8 percent on all paid claims, a payment in lieu of taxes (local and MBT) by Blue Cross and an increase in the Quality Assurance Assessment Program (QAAP) tax on hospitals.  We are concerned that the surcharge will result in a tax shift from insurers and third party administrators to job providers purchasing health insurance for their employees, which could cause some employers to drop health insurance coverage altogether. In addition, we are concerned that the proposal would grow the size of government at a time when the State of Michigan can least afford to do so.

The Michigan Chamber’s primary concern with the Michigan House’s plan also relates to the creation of prioritized subsidies for the poor uninsured.  hese subsidies would be paid for by a yet-to-be-determined assessment amount on all non-profit health insurers, including Blue Cross Blue Shield of Michigan (BCBSM) and Health Maintenance Organizations (HMOs). We are concerned that the proposal would increase taxes on some health insurers, which could result in a tax shift to private payers, including employers purchasing health insurance for their employees.  This could put many workers in jeopardy of losing this coverage. As with the Senate plan, we are also concerned that this proposal grows the size of government by expanding current entitlement programs.

The Michigan Chamber of Commerce supports reform of national immigration laws  to allow foreign-born, highly skilled  professionals increased   access to job opportunities in the United States. The Michigan Chamber believes such reform is necessary as part of a comprehensive strategy to address existing workforce shortages, especially in technology dependent businesses and industry, and that such legislation should provide maximum flexibility in hiring without increasing the regulatory burden for job providers.

Background

A study conducted by the United States Department of Labor (DOL) in 1998 found that there were  340,000 job vacancies in the high-tech industry. The Society for Human Resource Management  estimates this number will reach one million by 2008 if short and long-term solutions are not implemented. 

The Immigration Act of 1990 (IMMACT) was designed to allow highly skilled, foreign workers the opportunity to work in the United States, but limits the number of visas granted each year in order to protect the domestic labor market. These visas are commonly referred to as H-1B, or specialty worker,  visas. Employers must comply with strict regulatory requirements when petitioning for an H1-B visa. In order to obtain an H1-B visa for foreign-born potential employees, employers must:

• Limit visa petitions to those potential employees who have a minimum of a bachelor's degree in a specific occupational specialty, or a combination of education and experience equivalent to a bachelor's  degree and who hold all required licenses.
• Pledge to pay at least 95% of the prevailing wage, or the actual wage, whichever is higher, and provide equal benefits to H1-B employees. Benefits may not be included in calculating the prevailing wage. The actual wage is the wage paid by the employer to other employees with the same job duties, education, and experience.
• File with the DOL and post in the workplace a Labor Condition Application (LCA). The LCA must contain the position, rate of pay offered, number of workers being sought, and how the prevailing wage rate was calculated.
• Pay an H1-B filing fee of $110, and an additional fee of $500 earmarked for scholarships and training programs, and to fund DOL administration and enforcement of the visa program.
• H-1B visa eligibility covers a variety of jobs that normally require a specific type of college degree and training, including engineering, computer science, biotechnology, medicine, architecture and physical sciences.

Raising the H-1B visa cap is a short-term solution to the workforce shortage problem. The ability to hire H-1B professionals allows employers to meet product and service demand, continue research and new product development, and remain competitive while longer term solutions are developed. The Michigan Chamber has long identified improved quality of K-12 education, expanded technical training, and curriculum revisions as necessary components of preparing American students for these job opportunities. While the business community, elected officials and educators develop long-term strategies relating to changes in the education system, interim measures are necessary to alleviate serious workforce shortages.

IMMACT capped the number of H1-B visas that could be issued to 65,000 per Federal fiscal year (October 1 - September 30).  In 1998, Congress raised the cap to 115,000 for FY 1999 and FY 2000, stepping back to 107,500 in 2001 and returning to 65,000 for 2002 and beyond.  Each year since 1997, the cap has been reached well before the end of the fiscal year. Despite the increase in the cap, this year the cap was reached on March 21 - six months before the end of the fiscal year.

Several proposals to raise the cap again are currently pending in Congress, two of which meet the criteria in the Chamber's policy proposal.  H.R. 3983 [Drier (R-CA) and Lofgren (D-CA)] would raise the cap to 200,000 for FY 2001-2003 and address strengthening American educational systems. S. 2045 [Hatch (R-UT) and Abraham (R-MI)], would raise the cap to 195,000 through FY 2002 and appropriate $20 million over six years to provide high-tech learning tools and provide scholarships for high-tech areas of study.

Despite bipartisan support for raising the cap, amendatory legislation has been held up by attempts to link unrelated issues to the bills. At the time Congress recessed this summer, the Clinton administration was insisting upon linking the visa legislation to a proposal legalizing the status of Caribbean and Central American migrants now in the country illegally.

The Michigan Chamber of Commerce supports voluntary and cooperative efforts between labor and management to promote safety in the workplace. The Michigan Chamber also encourages the Michigan Department of Labor and Economic Growth (DLEG) to offer education and training programs for employees and employers to help prevent repetitive motion injuries and provide information and assistance concerning ergonomics.

Recently, DLEG, under authority granted to the Department through the Michigan Occupational Safety and Health Act or MIOSHA, began the process to develop a comprehensive state ergonomics standard. Unfortunately, this proposed Michigan ergonomics standard is being developed in the absence of a nationwide federal rule and without any evidence demonstrating that there is a compelling need for Michigan to develop a costly state standard. This attempt to impose an excessive regulatory burden on Michigan employers is in conflict with the message on DLEG’s website that the department was created “to promote job creation and economic growth in Michigan” and also at odds with recent comments by the Governor expressing concern about the outsourcing of jobs to other states.

With state government facing a budget deficit and many of Michigan’s job providers facing growing competition from companies located in other states and foreign countries, the Michigan Chamber strongly believes that now is not the time for the State of Michigan to become only the second state in the country, after California, to unnecessarily impose this type of burdensome regulatory scheme on business. The Michigan Chamber respectfully requests that DLEG halt the rule-making process for a Michigan ergonomics standard. If DLEG continues the effort to impose a state-level ergonomics standard, the Michigan Chamber supports legislation amending the DLEG budget bill to withhold funding for development, administration or enforcement of such a standard.

Background

At a regular meeting of the Michigan Chamber’s Health and Human Resources Committee on March 25, 2004 committee members reviewed and discussed several items including the proposed MIOSHA ergonomics standard.

This issue came to the attention of the news media and lawmakers in February, 2004 when Charles Owens, the State Director of NFIB, resigned from the DLEG Ergonomic Standard Advisory Committee in protest over the “Committee’s intention to promulgate a standard unacceptable to small business.”

In a February 18, 2004 press release Mr. Owens said, “ At a time when Michigan is shedding manufacturing jobs by the thousands, I find it incredible that we are about to become only the second state in the country, besides California, to have our own state specific ergonomics standard replete with fines, penalties and compliance enforcement. Certainly this does not seem to indicate that we are serious about saving and creating jobs in Michigan.”

In a March 2, 2004 new release concerning this subject State Senator Valde Garcia said this type of burdensome regulation will hurt our state. Senator Garcia, who chairs the Senate Appropriations Subcommittee with jurisdiction over the DLEG budget also said, “This is just one more example of how government restrictions are killing job opportunities in this state. In this case 48 other states see fit to follow OSHA’s guidelines that call for voluntary compliance with ergonomic standards. The Legislature is working to ease restrictions on businesses, not add to their headaches.”

In response to questions and concerns that have been expressed by lawmakers and representatives of the business community, the Department has indicated that it’s their intent to promulgate a standard that will be acceptable to business and labor. The Department has also indicated that it will be several months or perhaps more than a year before the administrative rules process is completed. To date, the Department has not been able to provide documentation indicating that repetitive motion injuries have significantly increased in Michigan or that ergonomic related problems are more serious in Michigan than in other states.

On March 25, 2004 at a regular meeting of the Michigan Chamber’s Health and Human Resources Committee, Chamber members reviewed and discussed this subject. Following a presentation by an experienced corporate industrial hygienist who is very knowledgeable about the MIOSHA Ergonomics Advisory Committee, the Committee agreed to recommend to the Board that the Michigan Chamber support voluntary and cooperative efforts to address the ergonomics issue, while at the same time taking a strong stand against the establishment of a mandatory state standard.

If the Board approves this policy proposal as presented, the first step in carrying out the policy would be for the Chamber to offer to work with the Department on a partnership or strategic alliance on ergonomics to facilitate educational efforts relating to voluntary performance based standards that reflect industry best practices. This type of public-private partnership would provide greater work site flexibility, more quickly address job specific concerns, and would be more consistent with other voluntary efforts to improve health status. If the Department declines to enter into this type of partnership or strategic alliance on ergonomics, the Chamber would then pursue a legislative remedy.

The Michigan Chamber advocates a national policy that encourages and supports responsible and well-planned legal immigration, while at the same time strengthening and protecting our borders to fight illegal immigration. We strongly urge Congress and the President to do their job and promptly address this federal issue in 2008 or 2009.

More specifically, the Michigan Chamber supports comprehensive immigration reform at the federal level that focuses on streamlining and improving the immigration process for people who play by the rules and want to become Americans or work in the United States on a temporary basis, especially in high-demand occupations. In addition, we believe the federal government should devote additional human and financial resources to the federal agencies that are responsible for protecting our borders, and maintain and improve Michigan’s three high-volume border crossings with Canada. 

If Congress cannot or will not adequately address this federal issue, we recognize that state and local units of government may seek to fill the policy vacuum. If so, we strongly believe policymakers should work to avoid the unintended consequences that would result from a piecemeal approach to the immigration issue based on conflicting state and local policies that alternately condone and penalize illegal immigration, while placing an undue burden on employers in the private sector to take primary responsibility for enforcement of state or federal immigration laws. In particular, employers should not be required to be immigration ‘police’ or undertake investigations that are the proper role of law enforcement agencies.

Therefore, we believe any state level immigration legislation should contain provisions that: pre-empt any local ordinances covering the same subject; require any new or additional employment related immigration duties be imposed first on state and local government agencies before being applied to the private sector; require any sanctions imposed on private sector employers for failure to comply with the law must be applied equally to all employers in the public sector; subject any job applicant or employee who knowingly uses false documents to apply for work or obtain employment to be subject to penalties that are at least as severe as the sanctions imposed on employers. No sanctions or liabilities should be imposed on employers unless they knowingly and intentionally violate applicable laws. 

Background

The history of the United States is that we are nation of immigrants. People from around the world who have chosen to become Americans have greatly enriched our society. Each year, millions of people legally cross the U.S. border in search of the American dream – a land of freedom and opportunity. 

Unfortunately, the number of people crossing the U.S. borders illegally has grown unmanageable. Today, there are an estimated 11 to 12 million illegal immigrants living in the United States (2000 Census) and it is estimated that Michigan’s illegal immigration population ranges anywhere from 70,000 (Bureau of Immigration and Naturalization Services, 2003) to 100,000 to 150,000 (Pew Hispanic Center, 2005) to 200,000 (Federation for American Immigration Reform [FAIR], 2007). 

Given this data, many Americans – and federal, state and local officials -- have become increasingly concerned with illegal immigration and the costs associated with it, including public services such as education, legal and emergency medical systems. To this end, Congress began to tackle the immigration debate in 2006 with little to no success. As a result, states have begun developing a variety of their own approaches and solutions. Immigration-related legislation now covers almost every policy arena, including employment, health, identification, drivers and other licenses, law enforcement, public benefits and human trafficking. 

In December of 2007, the Chamber’s Health and Human Resources (HHR) Committee heard a presentation from the Montana Chamber of Commerce regarding legislation proposed in their state -- similar to that being proposed in Michigan -- to make employers the “immigration police” by making it a felony for employers to hire illegal immigrants, requiring employers to document the legal status of their workers through I-9 forms, and giving workers legal recourse when companies replace them with undocumented laborers. Following this presentation, the HHR Committee voted to recommend this comprehensive immigration reform policy proposal to the Michigan Chamber Board of Directors for its consideration.

The Michigan Chamber of Commerce believes unemployment insurance trust funds should be used only to provide benefits to people who are unemployed through no fault of their own, and who are able and available to work. The Michigan Chamber is opposed to expanding eligibility for unemployment benefits to workers who take leave for birth or adoption.

Background

On December 3, 1999, the U.S. Department of Labor published Proposed Rule for Birth and Adoption Unemployment Compensation [64 Fed. Reg. 67971-67979] with a 45-day public comment period scheduled to expire January 18, 2000. Because the expiration date preceded the Board  meeting, the Chamber moved forward in opposition to the proposed rule based upon existing Board policy relating to unemployment insurance. To date the Chamber has:

• become an active participant in the national coalition working to block the proposed rule,
• written to the U.S. Department of Labor and members of Michigan's congressional delegation urging opposition and an extension of the comment period,
• distributed a press release stating the Chamber's objections to the proposal, and
• requested that the Michigan Department of Consumer & Industry Services formally oppose the proposal.

The position is before the Chamber Board for ratification.

The Clinton Administration's proposed rule would allow states to enact legislation amending unemployment insurance laws to permit parents taking leave for the birth or adoption of a child to collect unemployment benefits while on leave. This rule reverses 65 years of state and federal unemployment law requiring that a person be unemployed through no fault of his/her own, and be "able and willing to work." We expect state legislation to be introduced when the Michigan Legislature returns to session this month.

The Clinton Administration did not seek Congressional approval for the rule, which was published while Congress was in recess. Several business organizations, including the U.S. Chamber and the Michigan Chamber, urged Labor Secretary Alexis Herman to extend the comment period. Congressman Pete Hoekstra (R-Michigan) also sent a letter to the Department of Labor asking Herman to extend the comment period by 75 days. On January 10, 2000, the comment period was extended by only 15 days to February 2, 2000.

The U.S. Department of Labor proposed rule, which also includes language for a model state law, do not require that the leave be approved by the employer.  It also allows  payment of unemployment insurance (UI) benefits to those who resign from employment. The state model bill would allow the claimant to collect benefits for 12 weeks, but the rule contains no time limit. While the proposal is limited to new parents by birth or adoption, states would be free to divert unemployment insurance trust funds for not only that provision but broader coverage for parental and disability leave as well. This rule, if upheld, will expand the Family & Medical Leave Act,  increase both direct and indirect costs for employers, threaten the solvency of Michigan's UI Trust Fund and, in an economic downturn, jeopardize the payment of benefits to those who are involuntarily unemployed.

History of the UI Trust Fund

Employers in Michigan pay two taxes on payroll to fund the federal-state unemployment insurance system.  The first is an experience-rated tax levied against the first $9,500 of each employee's wages. The tax rate ranges up to ten percent. The second tax is assessed under the Federal Unemployment Tax Act (FUTA).  The current FUTA tax rate is 0.8 percent on the first $7,000 of each employee's wages. 

Michigan's UI Trust Fund has been in the negative numbers in recent history. In 1977, the Michigan UI Trust Fund owed the federal UI Trust Fund $624 million.  That debt was repaid in 1979. In 1982, employer tax rates were increased and a "trigger" mechanism was placed in the account building component (ABC) of the tax rate calculation. The trigger automatically increases the tax on employers when the UI Trust Fund balance drops below a specific level. But again, in 1983, the Michigan UI Trust Fund had a debt to the federal government of $2.4 billion. Michigan job providers paid a FUTA penalty tax for three years to speed repayment of that loan.

Despite the earlier legislative changes and the accelerated payments, in 1991 and 1992 a FUTA penalty tax was again imposed on employers to pay off the remaining $417 million debt. Finally, in 1993 employer payments to the UI Trust Fund began to exceed benefit payments.

In 1995, the Chamber lead the fight for further legislative reform of the UI system and Governor Engler signed into law P.A. 25 of 1995 which significantly reformed our state system, reducing employer taxes and bringing benefit payments more in line with our competitor states. The lower UI tax rates in the Act, however, are tied to the solvency of the UI Trust Fund. According to state law, the fund balance must now be at least $2.077 billion to trigger the tax reduction. If the fund reserves fall, as they would under the Clinton proposal, employer tax savings will be eliminated and tax rates will increase.

The Michigan UI Trust Fund currently has a reserve of more than $2.5 billion. While that amount is a dramatic improvement over the past, that level is still below the actuarially recommended 1.5 times the average high cost multiple (ACHM). The ACHM is a calculation based on the worst-case scenario for benefit payments during a recession, based on past claims experience in the state.

The Michigan Chamber of Commerce supports legislation to amend state law governing the Michigan Catastrophic Claims Association (MCCA) by increasing the retention level to cover losses for medical benefits for injuries sustained in automobile accidents.

The Chamber believes operation of the MCCA, and assessments for that purpose, are business issues. Chamber members purchase fleet automobile policies that are affected by the MCCA assessment. The costs of injuries sustained in work-related automobile accidents are covered by workers' compensation, and impact both premium and system costs borne by employers. In addition, employee health benefit plans cover automobile accident costs even for non-work-related accidents and injuries. In fact, workers' compensation is, and insured employee health benefit plans may be, primary in automobile accidents, meaning they pay first - before the automobile insurance policy. For these reasons, the Chamber believes the retention level should be established at a level that fosters competition, allows for accurate rating,and encourages medical management of claims.

Background

Michigan is the only state in the nation with a no fault insurance law that provides unlimited lifetime medical and rehabilitation benefits. Since enactment of the no fault law in 1973, the unlimited nature of these benefits has created challenges for insurers because of the potential for overwhelming losses that are impossible to actuarially project. No reinsurance company has ever been willing to write reinsurance coverage for such a risk. To address this problem, and preserve unlimited benefits, the Legislature established the MCCA in 1978.

While created by statute, the MCCA is a private, non-profit association of companies writing automobile insurance in Michigan, in essence operating as a reinsurer. This mechanism allows companies of all sizes to compete in the auto insurance market. The MCCA does not receive any state funding. The member companies are required by statute to be charged a premium to cover the costs of catastrophic claims plus the operating expenses of the MCCA. The companies collect this funding for the MCCA through an assessment of each insured vehicle. The amount of the annual assessment is determined by the MCCA's Board of Directors. Members of the MCCABoard are appointed by the Insurance Commissioner, who also serves as a non-voting member.

Each automobile insurance company, since 1978, has been responsible for the first $250,000 of a personal injury protection (PIP) claim, while amounts above that retention level are reimbursed by the MCCA. Claims exceeding the $250,000 are referred to as catastrophic claims. When this retention level was established more than 20 years ago, it was believed only the most severe automobile accidents would surpass this amount.

Since that time, as medical technology has improved, the cost of medical care has escalated and related litigation and adverse court decisions have increased, more claims have exceeded the existing retention level. As a result, the amount of money needed to fund the MCCA has also increased.

The insurance industry has spent a number of years studying this issue and attempting to forge a consensus on a change in the retention level to reflect this dynamic. The members of Michigan Insurance Federation (MIF), a trade association representinga broad cross section of insurance companies, have recommended legislative approval of a three-tiered retention level approach, designed to accommodate various sizes of companies by allowing them to select the retention level best suited to their business. Under the MIF proposal, the MCCA would provide reimbursement for losses that exceed one of three different retention levels selected by the member company: the current $250,000; $500,000, or $1 million.

Other insurance companies, including Michigan's two largest automobile insurance writers - State Farm and AAA - which are not MIF members, have expressed reservations about the MIF proposal for various reasons. The Michigan Association of Insurance Agents has also declined to support the proposal, citing concerns expressed by some small independent agency companies about its potential uncompetitive impact.

Most of the interested parties would agree to a standard increase in the retention level, though there is not consensus on the amount of the increase.

The Michigan Chamber reaffirms its support for the preservation of Michigan's no-fault automobile insurance law, including the prompt payment of benefits in exchange for strict limitations on the right to sue an at-fault party for non-economic damages (i.e., pain and suffering). Moreover, the Michigan Chamber supports legislation to address insurance fraud and the over utilization of benefits and is in support of current legislative proposals to provide Personal Injury Protection (PIP) benefits for private passenger auto insurance with a variety of optional benefit levels and impose a medical fee schedule for personal auto PIP claims based upon the existing workers’ compensation fee schedule.

The Michigan Chamber of Commerce opposes the proposed amendment to the state Constitution to allow state employees to collectively bargain and have binding arbitration when the union and the state cannot agree on a contract.

Background

This proposed amendment to the Michigan Constitution of 1963 has been submitted by initiative petition for placement on the November 5, 2002 statewide general election ballot. Currently of state employees, only the Michigan State Police Troopers have express collective bargaining rights in the Constitution. The State Civil Service Commission was given the authority to oversee and regulate state employment in the 1963 Constitution. The Commission, not the Constitution, grants state employees the authority to join a union and bargain with the state. A coalition of public employee unions (Service Employees International, AFSME, State Troopers and the UAW) has filed petitions to place this proposal on the ballot.

The unions' claim this proposal is in response to the actions of the Civil Service Commission during the Engler Administration which amended agreements previously negotiated but the state personnel director and the state employee's unions. Unions claim that provisions in contracts agreed to by the state for outsourcing of jobs were stripped out of negotiated and agreed upon contracts by the Commission.

The office of State Employer counters that the state constitution requires the Civil Service Commission to make sure that contracts follow Commission rules for negotiations. There have been certain instances where the Commission has modified contract language to be consistent with commission rules regarding prohibited subjects such as sub-contracting, classification and retirement.

Police and firefighters currently have had binding arbitration under state law. Detroit Mayor Coleman Young, who was the sponsor of that legislation as State Senator, regretted his sponsorship when the cost of arbitration to the City of Detroit nearly bankrupt the city while he was mayor.

The Michigan Chamber of Commerce opposes, in concept, mandating that offenders charged with or convicted of illegal drug possession have a state constitutional right to treatment including a wide range of substance abuse treatments at taxpayers expense. The Michigan Chamber of Commerce opposes the proposed state constitutional amendment of 2002 on drug sentencing practices.

Background

On September 6, 2000 the Board of Directors approved a policy statement opposing the legalization of marijuana, largely in response to a threatened initiative petition effort to put such a proposal on the Michigan general election ballot that year. Now the same group of individuals has been successful in getting the above-described constitutional amendment on the November 2002 ballot. This is part of a national agenda by three out-of-state billionaires opposed to using jail as a sanction for drug offenders.

The establishment of a state constitutional right to treatment includes a range of substance abuse treatments, including inpatient and outpatient therapy, narcotic replacement therapy, and “additional related rehabilitation programs such as literacy training, vocational training, mental health services and family counseling.” The jail and prison lockout in favor of mandatory treatment is estimated to cost Michigan Taxpayers $20 million annually.

It also requires that to receive a 20-year mandatory sentence for drug trafficking, the state must prove that the drug trafficker earned a net profit of at least $500,000 and that the drug trafficker is a leader, organizer or manager of five people.

The Michigan Chamber supports legislation establishing a Health Court for the exclusive purpose of resolving healthcare disputes and a Business Court for the exclusive purpose of hearing commercial cases. The Chamber supports the creation of pilot courts and the expansion of Health Courts or Business Courts if pilot projects prove successful. Further, the Chamber supports federal legislation to provide start-up funding for Health Courts and establish a medical appeals court.

Background

The concept of having particular disputes resolved in special courts is not new. Special courts exist today for workers' compensation, tax, and domestic relation disputes, as well as for bankruptcies and other areas where complex and technical subject matter demands special expertise for dispute resolution.

Proponents of bills to expand specialized courts to include healthcare and commercial disputes argue that existing specialized courts are functioning as an important part of our justice system and should be expanded to provide for more consistent, efficient, fair and reliable rulings.

Supporters of special Health Courts – including the Michigan State Medical Society, the Michigan Osteopathic Society and Michigan Lawsuit Abuse Watch (M-LAW) -- argue that unreliable justice is destroying the American health care system because medical justice is random; healthcare costs are skyrocketing; medical errors are widespread; and distrust of the justice system is undermining the healthcare profession. They argue that reliability must be restored to the medical justice system by creating special Health Courts with judges dedicated full-time to resolving healthcare disputes – and leaving juries, which usually lack medical or scientific training, out of the equation. They argue that patients injured by mistakes should be compensated for their injuries without waiting years and without paying one-third or more to their lawyers, and that unfairly charged doctors should be affirmatively protected. Finally, they argue that the reliable justice Health Courts will create will improve the quality of health care by clarifying standards of proper care and providing incentives for doctors to keep up with the latest developments in medicine.

The creation of Health Courts will require cooperation between the states and the federal government. The federal government has an important role to play, in establishing a medical appeals court and in providing start-up funding for health courts. Ultimately, a new Health Court system could be developed in the states on a pilot project or statewide basis.

Proponents of the creation of a Business Court system dedicated exclusively to the resolution of commercial disputes – including the Business Court Ad Hoc Committee of the State Bar of Michigan -- argue that a well-functioning business community benefits from an effective judiciary. Businesses often express dissatisfaction with the judicial system not only because overburdened courts take months to decide cases but also because outcomes are unpredictable. Supporters of Business Courts argue that a specialized court is particularly appropriate for commercial cases because these cases frequently are very complex or draw upon a body of law developed in response to the unique nature of commercial disputes. They argue that devoting specialized judicial resources to commercial cases will lead to more consistency in the disposition of litigated cases and increased efficiency in the use of judicial resources. A dozen states -- including California, Delaware, Illinois, Maryland, Massachusetts, Nevada, New Jersey, New York, North Carolina, Pennsylvania, Rhode Island and Wisconsin -- have introduced specialization into their courts to deal with business disputes.

Opposition to proposals to create Health and Business Courts mainly comes from plaintiff attorneys, including the Association of Trial Lawyers of America (ATLA). These opponents argue that the idea of Health Courts is radical because it eliminates juries in medical malpractice cases; is subject to Congressional whims because compensation for injured patients would be determined by a pre-set payment schedule established by a Commission appointed by the President and Congress; and is unfair because it adopts a one-size-fits-all schedule for injured victims. Opponents of Business Courts argue that the concept is elitist and would afford a higher-level quality of justice to corporations at the expense of individuals. Opponents argue that both proposals are expensive; however, it is important to note that fiscal analysis is not available for either.

The Chamber’s Health and Human Resources Committee heard a presentation from M-LAW regarding Health Courts on November 9, 2005. Although concerns were raised over the fact that implementing state legislation would require a Constitutional Amendment to eliminate the right to trial by jury, the Committee unanimously agreed to recommend to the Board of Directors that the Michigan Chamber endorse the concept and establishment of pilot projects.

The Michigan Chamber of Commerce supports reform of the recall process for public officials in Michigan.

Special interests and political parties have recently begun to use recall as a political weapon against public officials not for misconduct in office, but because of policy disagreements with that public official.

Michigan courts from 1926 to 1960 restricted recall of public officials in Michigan to instances of malfeasance, misfeasance or nonfeasance in office. However, the 1963 Michigan Constitution made recall a political rather than a legal question. The recall provision in the state Constitution is not self-executing. The Constitution provides that the legislature shall enact laws providing for the recall of public officials. Absent a constitution amendment, the legislature cannot restrict recall to misconduct in office.

The Michigan Chamber supports such an amendment to the Constitution, but recognizes that the amendment process is a difficult and costly task. To put such an amendment on the ballot for voter approval would require either a 2/3 vote in both houses of the state legislature or as an alternative, the circulation of petitions seeking signatures for such an amendment equal to 10% of the total vote cast for Governor in the last election (2010 – 322,609). Absent an effort to amend the constitution, the Michigan Chamber supports legislation to reform the recall process. The following reforms can be accomplished statutorily without amending the Constitution:

• The Michigan Chamber advocates legislation to shorten the time period in which petitions can be circulated that call for the recall of a public official from 90 days to 60 days.
• The Michigan Chamber advocates legislation that eliminates the requirement for a clarity hearing and the approval of the language by a county elections board before a recall petition can be circulated. Under Michigan’s Constitution recall is to be a political rather than a legal decision. The clarity of the reason for a recall should be the function of the recall election campaign.
• The Michigan Chamber advocates legislation to streamline recall elections. Instead of having one election to determine whether the public official should be recalled, and if recalled another election to fill the vacancy, this process should be condensed into one election where the public official being recalled would have the opportunity to run against other candidates seeking that office.

Background

Michigan and Oregon were the first two states to provide for recall of public officials in their Constitutions in 1908. In 1903, Los Angeles, California became the first city to provide for recall in their City Charter. Sixteen states provide for recall of state officials and thirty-six provide for recall of local officials.

Since 1908, nationally only two governors have been recalled, Lynn Frazier in North Dakota in 1921 and Gray Davis in California in 2003. Since 1908 only thirteen state legislators have been recalled: California – 1913, 1914 and 1995 (2); Michigan – 1983 (2) and 2011; Oregon – 1988; Wisconsin – 1996, 2003 and 2011 (2); Arizona – 2011.

Recall is much more common at the local level than at the state level.

In 1926 in Newberg v. Donnelly, the Michigan Supreme Court required a showing of malfeasance, misfeasance or nonfeasance before recall could be commenced. That standard lasted thirty-four years when in 1960 the Michigan Supreme Court reversed Newberg precedent and held that recall was a political not a judicial question (Wallace v. Tripp).

In 1961-62 delegates to the Constitutional Convention were well aware of the Wallace case reversing Newberg. The 1963 Constitution specifically provided: “…the reasons or grounds shall be political rather than a judicial question”. In 1979 in an Attorney General Opinion, Frank Kelley opined that pending legislation to limit recall to malfeasance, misfeasance or nonfeasance would be unconstitutional in violation of the express terms of Article II, Section 8.

Recall is not a self-executing provision in the state Constitution. It requires the legislature to enact laws regarding recall. Michigan’s recall law consists of twenty-six sections of the Election Code. The problem with recall is a little like Michigan’s problem with term limits: not all term limits are created equal and not all recall laws are created equal. A strong argument can be made if Michigan adopted the wrong model for both.

There are three models for recall: Michigan, California and Wisconsin. The Michigan model:

Clarity Hearing on reasons for recall
90 Day Petition Drive
Signature requirements equal to 25% of the total vote cast for Governor in that jurisdiction (Constitutional requirement)
Determination of signature sufficiency
Special Recall Election
Special Election to fill vacancy if public official is recalled
Recalled official cannot run in this election

The process can last ten to eleven months or more which keeps a community in turmoil for far too long.

California Model:

120 day petition drive
Signature requirement equal to 12% of the total vote cast for Governor in that jurisdiction (Constitutional requirement)
Two part recall election:

First question:
Shall Gray Davis be recalled (removed) from the office of Governor? Yes or No

Second question:
Candidates listed to succeed Gray Davis as Governor if he is recalled
Vote for one:
In 2003 Arnold Schwarzenegger was one of 135 candidates

If recall against Davis had failed, it would have wasted a lot of effort. The California model provides a greater incentive to toss the incumbent out.

Wisconsin Model:

Recall Committee simply registers (no need to state reasons for recall of state officials) and has 60 days to complete the petition drive.
Signature requirement equal to 25% of the total vote cast for Governor in that jurisdiction (Constitutional requirement).
Special Recall Election – Incumbent is automatically place on the ballot. Other candidate can file to be on the ballot.
The highest vote getter finishes out the remainder of the term.

The advantages of the Wisconsin Model over Michigan’s recall process are:

1. Limit petition drive to 60 days not 90 days.
2. Allow incumbent’s name to automatically appear on the ballot – gives public official more of a fighting chance to keep his/her office by running against other candidates.
3. Michigan’s Recall Election: Public Office is measured against some imaginary ideal and we don’t know who is likely to be the potential successor if the public official is recalled.
4. Recall in Michigan has become a public humiliation. In Wisconsin it is more a political contest between competing candidates.

The Michigan Legislature can adopt the Wisconsin Model by statute without the need to amend the State Constitution.

There are some individuals and groups who think the current recall process for public officials in Michigan is adequate and should be retained as is. This view is reflected in the attached article from the Mackinac Center for Public Policy.

The Michigan Chamber of Commerce supports reasonable term limits and legislative reforms on elected officials in the executive and legislative branches of state government.

The Michigan Chamber of Commerce believes the limits adopted by Michigan voters in 1992 for the executive officers of the state (two 4-year terms) to be acceptable, and acknowledges the efforts of many Chamber members in getting them adopted in Michigan. However, the Chamber recognizes that some members believe the limits on legislators (three 2-year terms in the House, and two 4-year terms in the Senate) are too short, and others believe they are the proper length.

The Chamber is willing to discuss alternatives to the current term limits and legislative reforms for legislators in Michigan, and to review focus group and polling data on the topics.

Adoption of this policy does not commit the Michigan Chamber to endorse a specific proposal to amend the term limit amendment. Any proposal drafted as a result of this research would be subject to the approval of the Board of Directors.

Background

Interested organizations and individuals who work with Michigan legislators generally agree that limiting State Representatives to six years is insufficient to develop adequate knowledge of appropriation and policy issues.

Two states had term limit extension proposals on their statewide ballots on November 2, 2004. Both proposals went down to crushing defeat.

Arkansas -- Yes 30%, No 70%

Montana -- Yes 31%, No 69%

Arkansas’ proposed Constitutional Amendment would have extended legislative service from six years in the State House and eight years in the State Senate to 12 years in the House and another 12 years in the Senate

Montana’s proposed Constitutional Amendment would have extended service in the State House and Senate from eight years in a 16-year period to 12 years in a 24-year period in each legislative chamber.

The Arkansas proposal was placed on the ballot by petition. The Montana proposal was placed on the ballot by the legislature.

To have reasonable opportunity for approval of a Constitutional amendment in Michigan, the focus of discussion may need to be expanded beyond term limits to include legislative reform. The following are elements of a possible Legislative Reform Amendment:

1. No legislator could serve more than 12 years in either the House, Senate or both. This is similar to the Pappageorge Proposal (14 year limit) which tested the best in polling done in 2003. This proposal cuts two years from the maximum legislative service that is currently permitted (6 years House and 8 years Senate = 14 years), possibly eliminating or diminishing opposition to change from term limit advocates.
2. Reduce the size of the State Senate from 38 to a lower odd number that would not result in a tie, and divide each Senate district into three House districts.
   33 x 3 = 99 State House Districts (-11)
   35 x 3 = 105 State House Districts (-5)
   or
   Maintain current size of Senate and House
3. Impose Staff Size Limitation. Each Senator could employ no more than five full-time employees (FTE’s). Representatives could employ no more than 2.5 FTE’s. House Caucus staffs could employ no more than one person for every member in the party caucus. Senate Caucus staffs could employ no more than three people for every member of their party caucus. Employees of the non-partisan Legislative Council, such as Legislative Service Bureau, House and Senate Fiscal Agencies, etc. could also be staff limited.
4. Adopt the Iowa Plan for Redistricting in 2011 and beyond. The Iowa Plan delegates the drawing of redistricting plans to the Legislative Service Bureau (LSB) which draws districts using traditional redistricting criteria (similar to Michigan’s Apol standards – acceptable population variance; preservation of county, city and township lines; adherence to Federal Voting Rights Act; contiguous districts, etc.) with no use of political voting behavior data base permitted. The legislature votes on the LSB plan without amendment.
5. Leadership Limitation. No legislator could serve more than four years as House Speaker or Senate Majority Leader. This would encourage leadership ladders: Committee Chair, Floor Leader, and Speaker. Individuals would likely work their way up the ladder, providing the opportunity for significant experience prior to becoming a leader. Minority leadership positions would be unaffected. Like in the U.S. House and U.S. Senate, no legislator could serve more than six years as a chair of a standing committee.
6. Prohibit Lame Duck Sessions. 
   Require the legislature to adjourn sine die on or before October 1 in an even numbered year. The ability of the Governor to call a special session of the legislature would be unaffected.
7. Remove legislator pay from the purview of the State Officers Compensation Commission. Freeze legislative pay at levels currently in effect. Future increases are contingent on certain conditions including:
   a. The entire state budget must be enacted on or before June 30th for the fiscal year beginning October 1st.
   b. The Budget Stabilization Fund has a balance of $100,000,000 or more.
   c. Private sector employment in the State of Michigan is maintained or increased from the previous year.
   If these conditions are met, legislative pay will be increased automatically by 3% or the rate of inflation, whichever is less.
8. Any bill that establishes a new tax, new user fee, or increases an existing tax or existing user fee shall lay over in each house a minimum of 10 days before being eligible for passage; and shall be subject to at least one public hearing and one committee meeting held by the standing committee with proper jurisdiction in each house.

The Michigan Chamber of Commerce supports reasonable term limits and reforms to the legislative branch of state government. A proposed constitutional amendment that would be submitted to voters at a general election to accomplish this goal should include the following provisions:

• Require annual personal financial disclosure by legislators.
• Require all taxation bills before becoming law to be in the possession of each legislative chamber 10 days, and receive a public hearing and committee vote in each chamber.
• Limit combined service in the legislature to a total of 14 years in the House, Senate or both.
• Prohibit former legislators from becoming legislative agents for two years after leaving office.
• Reduce the salary of legislators on a pro-rata basis for each day they are absent from session without a compelling reason approved by the membership of that legislative chamber on a recorded vote.

The Michigan Chamber’s board of directors authorizes Chamber staff to work with a coalition of interested persons and organizations to conduct a petition drive to qualify this proposal for the ballot.

Background

The 1992 term limits amendment to the Michigan Constitution attempted to bring new individuals and ideas into state government. Michigan went from no limits on service for legislators, Governor, Attorney General, and Secretary of State to a lifetime limit of six years for State Representatives, eight years for State Senators, and eight years for Governor, Attorney General and Secretary of State.

This policy proposal supports 14 years as a reasonable time limit for service in the legislature; however, the lifetime limit would be 14 years in either chamber, or a combined 14 years in both chambers.

Most states do not have legislative term limits. In the 15 states that adopted term limits in the 1990s and are still in place today, there is variance. Most have 8-year limits for both legislative chambers, and the limitations are on consecutive terms not lifetime bans. Michigan and two other states fall outside the national term limit norm and are the most restrictive with regard to term limits.

Public opinion polling indicates that voters continue to support the concept of term limits; however, they are not necessarily opposed to attempts to fine tune them.

In the past, many members of the legislature were what advocates of term limits considered “career politicians.” Now they are not. They often have other careers to which they may return. Yet, Michigan is one of only three states in the nation without a personal financial disclosure requirement for legislators or state officials. Also, there is the possibility that those serving in the legislature could be unduly influenced on important issues by the prospect of employment opportunities immediately upon leaving legislative service.

Some legislators miss dozens or hundreds of votes, without any impact on their compensation. Most job holders have pay reduced if they miss work on a regular basis, and the possibility of immediate dismissal.

One recurring complaint in Michigan is that, despite the fact that the legislature is full-time, too much business is done at the last minute. There is little time for the public to weigh in, and when it comes to creating or repealing taxes, or raising or lowering existing taxes, action can be taken in a very short timeframe without much opportunity for public input.

The proposal before the board of directors was drafted based upon survey research and focus groups commissioned after the April 20, 2005 Board meeting. A coalition of corporations, associations and labor organizations assisted the Chamber in funding that research. This proposal has a good opportunity to be passed by state voters if it reaches the ballot.

In summary, this proposal retains term limits. It keeps the influx of new individuals and ideas in the legislature. It provides the opportunity for committee members and chairs, and legislative leaders, to have more experience in dealing with Michigan’s public policy issues.

This proposal adds more accountability by docking the pay of legislators who miss session and roll call votes without an excused absence. It requires legislation on taxes to be given a fair hearing and a chance for the public to be heard.

The proposal adds stricter ethics standards by requiring personal financial disclosure for state elected officials and prohibits former legislators from becoming lobbyist agents for two years after leaving office.

Proposal 06 – __

A Proposal to Amend Provisions of the State Constitution

Relating to the Legislative Branch

The proposed constitutional amendment would:

1. Require annual personal financial disclosure by legislators.
2. Require all taxation bills before becoming law to be in possession of each house 10 days, receive in each house a public hearing and committee vote.
3. Limit combined service in the legislature to a total of 14 years in the house, senate or both.
4. Prohibit former legislators from becoming lobbyist agents for two years after leaving office.
5. Reduce salary of legislators for each day they are absent from session without a compelling reason approved on a recorded vote.

Should this proposal be adopted?

Yes _______

No _______

Term Limits Plus: Common Sense Legislative Reforms for Michigan

Article IV

Require Financial Disclosure

Sec. 10. No member of the legislature nor any state officer shall be interested directly or indirectly in any contract with the state or any political subdivision thereof which shall cause a substantial conflict of interest. TO AVOID CONFLICTS OF INTEREST, EACH MEMBER OF THE LEGISLATURE OR STATE OFFICER SHALL ANNUALLY PUBLICALLY DISCLOSE HIS OR HER EMPLOYMENT RELATIONSHIPS, SOURCES OF INCOME, CREDITORS, DEBTORS, AND PROPERTY OWNER SHIP. The legislature shall further implement this provision by appropriate legislation.

Prevent Stealth Tax Changes

Sec. 32. NOT WITHSTANDING ANY OTHER PROVISION OF THIS CONSTITUTION, every law which imposes, continues or revises a tax shall distinctly state the tax. NO BILL WHICH IMPOSES, REPEALS, CONTINUES, DECREASES OR INCREASES A TAX SHALL BE PASSED AND BECOME LAW AT ANY REGULAR OR SPECIAL SESSION OF THE LEGISLATURE, UNLESS IT HAS BEEN PRINTED OR REPRODUCED AND IN THE POSSESSION OF EACH LEGISLATIVE CHAMBER FOR AT LEAST TEN DAYS, IS SUBJECT TO AT LEAST ONE PUBLIC HEARING IN EACH CHAMBER, AND IS VOTED ON IN COMMITTEE IN EACH CHAMBER.

Overall, Strengthen Not Lengthen Term Limits

Sec. 54. No person shall be elected to the office of state representative more that three times. No person shall be elected to the office of state senate more than two times OR STATE SENATOR FOR A COMBINED TOTAL OF MORE THAN 14 YEARS. Any person appointed or elected to fill a vacancy in the House of Representatives or the State Senate for a period greater than one half of a term of each office, WHO HOLDS OFFICE FOR ONE DAY OR MORE WITHIN A CALENDAR YEAR, shall be considered to have been elected to serve one time in that office SERVED THE ENTIRE CALENDAR YEAR for purposes of this section. This limitation on the number of times YEARS a person shall be elected to MAY SERVE IN office shall apply to terms of office beginning on or after January 1, 1993. A PERSON IS NOT ELIGIBLE TO BE APPOINTED OR ELECTED TO THE OFFICE OF STATE REPRESENTATIVE OR STATE SENATOR UNLESS THAT PERSON IS ELIGIBLE TO COMPLETE THE ENTIRE TERM OF THAT OFFICE UNDER THIS SECTION.

This section shall be self-executing. Legislation may be enacted to facilitate operation of this section, but no law shall limit or restrict the application of this section. If any part of this section is held to be invalid or unconstitutional, the remaining parts of this section shall not be affected but will remain in full force and effect.

No Work, No Pay

Sec. 55. IT SHALL BE THE DUTY OF EACH LEGISLATOR TO ATTEND SESSION EACH DAY THE LEGISLATIVE BODY IS IN SESSION. ANY DAY THE LEGISLATIVE BODY IS IN SESSION AND A LEGISLATOR DOES NOT ATTEND SESSION, THAT LEGISLATOR SHALL HAVE HIS OR HER SALARY REDUCED ON A PRO RATA BASIS UNLESS THE LEGISLATOR RECEIVES AN EXCUSED ABSENCE. THE REASON FOR THE EXCUSED ABSENCE SHALL BE PUBLICLY STATED AND APPROVED ON A RECORD ROLL CALL VOTE OF THAT LEGISLATIVE BODY. AN EXCUSED ABSENCE SHALL ONLY BE GRANTED FOR A COMPELLING REASON SUCH AS THE BIRTH OR ADOPTION OF A CHILD OR GRANDCHILD, MILITARY DUTY, SERIOUS ILLNESS OF THE LEGISLATOR OR A MEMBER OF THE LEGISLATOR’S FAMILY, OR DEATH OF A FAMILY MEMBER. AN EXCUSED ABSENCE SHALL NOT BE GRANTED FOR AN OUT OF STATE TRIP OR TOUR TAKEN AT PUBLIC OR PRIVATE EXPENSE, VACATION, OR TIME SPENT CAMPAIGNING FOR OFFICE.

Close the Revolving Door

Sec. 56. A FORMER MEMBER OF THE SENATE OR HOUSE OF REPRESENTATIVES SHALL NOT BE A LOBBYIST AGENT FOR 2 YEARS IMMEDIATELY FOLLOWING THE END OF THE TERM OF OFFICE TO WHICH HE OR SHE WAS ELECTED.

The Michigan Chamber of Commerce recommends a “No” vote on the question of whether the state should convene a new constitutional convention (Con-Con) that will appear on the November 2, 2010 election ballot.

The Michigan Chamber strongly supported the adoption of a new constitution for the state in 1963. We believe that the constitution of 1963 has served Michigan citizens well.

The costs to Michigan society, both in the actual costs of the convention (estimated at $28 – $31 million) and the special election of Con-Con delegates, are not merited. A process is provided for amending the present constitution. The Michigan Chamber believes that amendments, where deemed appropriate by the electors, can best be achieved on an issue-by-issue basis rather than through a complete revision.

Furthermore, the Michigan Chamber will act as the catalyst to form a coalition of organizations opposed to a call for a new constitutional convention in 2010 as it did in 1978 and 1994.

Background

On November 2, 2010, as Michigan voters go to the polls to elect a new Governor, Secretary of State and Attorney General, as well as the entire State Legislature, the electorate will also be asked to decide whether to call a new constitutional convention for the State of Michigan.

The ballot proposal will be on the statewide ballot not by the action of the current Legislature or as a result of any petition drive; rather the state’s constitution requires that this question be placed before state voters every 16 years.

Since this proposal automatically goes on the ballot, the constitutional convention question (Con-Con) will be Proposal 10-1 on the November 2, 2010 ballot.

If voters defeat this proposal in 2010, the question will automatically reappear in 2026 and, if defeated, again in 2042 and every 16 years thereafter – 2058, 2079 and 2090.

The people of Michigan have adopted over the years four state constitutions in 1835, 1850, 1908 and most recently in 1963. In contrast, the United States has had only one constitution over the past 220 years.

Michigan’s first constitutional convention was held while Michigan was still a territory. Congress, before granting statehood after accepting that constitution, required Michigan to recognize the loss of Toledo to Ohio in return for the western portion of the Upper Peninsula.

Michigan’s first constitution provided for a strong governor whose power of appointment even included the Attorney General, Secretary of State and Supreme Court Justices.

The undoing of the 1835 constitution were provisions granting the Legislature the authority to spend and borrow state money for internal improvements such as roads and canals. The Legislature proceeded to spend the state into fiscal crisis.

Pressure mounted to replace the 1835 constitution with a new document restricting the spending and borrowing power of the Legislature and extending “Jacksonian Democracy” by electing most of Michigan state-level public officials rather than having them appointed by the governor. The Legislature placed the question of a new constitutional convention on the ballot in 1849, which was approved. In 1850, Michigan held a second constitutional convention which wrote a document twice as long as the 1835 constitution full of legislative detail and created an infamous “long ballot” to elect seven statewide officials. Also included in the 1850 constitution was a requirement that in 1866 and every 16 years thereafter the question on whether to call a new constitutional convention be placed on the ballot. That constitutional requirement has continued ever since.

In 1866 when the question first appeared, Michigan voters agreed to call a new constitutional convention. However, in 1867, the new constitution that the convention had spent months drafting was rejected by the voters. In 1874, similar attempts to revise the constitution were rejected by the voters.

There were four more elections on whether to call a new constitutional convention in 1882, 1892, 1898 and 1904. The last three of those elections the Con-Con question received a majority of those voting on the question but not a majority of those voting in the election as was required.

Finally, in 1906, Michigan voters agreed to hold a new constitutional convention, which was held in Lansing in 1907-1908.

Every constitutional convention reflects the issues of the times. The 1908 constitution provided for such progressive reforms as municipal home rule, line item veto, initiative and referendum and women and child labor restrictions, but it retained the “long ballot” and most features of the 1850 constitution including the requirement that every 16 years the question to call a constitutional convention be placed on the ballot.

In 1926, 1942, 1948 and 1958, the Con-Con question was on the statewide ballot. In 1948 and 1958, voters cast more yes votes than no votes, but did not obtain a majority of those voting in the election. In 1960, the League of Women Voters, the Michigan Jaycees and a group headed by auto executive George Romney, called Citizens for Michigan, launched a petition drive to amend the requirements for calling a new constitutional convention. Their “Gateway Amendment” would no longer require a majority voting in the election, but merely a majority voting on the question.

Their proposal provided that delegates to a constitutional convention be elected from each State House and Senate district rather than three from each Senate district whose district lines had not been redistricted since 1925. The proposal also provided that the question to call a new constitutional convention be placed on the April 1961 ballot and every 16 years thereafter.

In November 1960, while Michigan voters were electing John F. Kennedy president, the “Gateway Amendment” was approved.

Five months later, Michigan voters narrowly approved the call for a new constitutional convention. The question lost in 79 counties but the vote margin in Wayne, Oakland, Macomb and Washtenaw counties, where it carried, were enough to give the question a 23,000 vote margin.

In the summer of 1961, delegates were nominated and elected in partisan elections and the convention convened in Lansing in October 1961.

The 1961-62 Constitutional Convention produced a new generation of leadership. George Romney was elected a delegate and went on in 1962 to be elected governor. Other Con-Con delegates who left their mark on Michigan politics were Secretary of State Richard Austin, Detroit Mayor Coleman Young and Congressmen Bill Ford, Ed Hutchinson and Garry Brown. The convention also produced five State Senators, 14 State Representatives and two Appellate Judges.

Ironically, the 1963 Michigan constitution almost suffered the same fate as the 1867 and 1873 constitutional drafts. The constitution was adopted by less than 7,500 votes and had to survive a statewide recount.

Since 1963, our current Michigan constitution has been amended 30 times; 37 proposed amendments have been rejected. Only nine of the 30 amendments were a result of petition drives. Twenty-one of the 37 proposed amendments rejected by the voters were placed on the ballot by petition.

In 1978, the automatic question to call a new constitutional convention went before state voters for the first time since the adoption of the 1963 constitution. Michigan voters defeated the call by a 70% to 30% margin and again in 1994 by a 72% to 28% margin. The Michigan Chamber managed the opposition to a call for a constitutional convention in both campaigns.

If voters approve the call for a new constitutional convention in 2010, delegates would be elected within six months. The elections would be partisan, requiring a primary election and a general election to be held no later than May 3, 2011. One-hundred-forty-eight delegates would be elected, one each from every State House and Senate district. These 148 delegates would convene in Lansing not later than October 4, 2011. The convention could be expected to last at least until July 2012. Constitutional conventions in Michigan are unlimited in scope – they can propose a completely new constitution or offer specific amendments. Any proposed constitution or amendment approved by a majority of the delegates must be submitted to the voters not less than 90 days following the adjournment of the convention.

If voters approve Proposal 10-1 on the November 2, 2010 statewide ballot, issues may include:

• State legislative and congressional district reapportionment – how to do it.
• Direct gubernatorial appointment of all department directors eliminating commission or board appointment of directors of DNR, Agriculture, Education, Civil Rights and Civil Service.
• An elected or an appointed judiciary.
• Election or appointment of the University of Michigan, Michigan State University, and Wayne State University Governing Boards.
• Abortion rights.
• Term limits/Unicameral Legislature.
• Repeal of the State Officers Compensation Commission.
• Removal of the prohibition on the death penalty.
• Revisit the cap on the sales tax and the prohibition of a graduated income tax.
• Headlee tax limits and prohibition on new state mandates without state funding.
• Eliminate the elected posts of Secretary of State and Attorney General and provide for direct gubernatorial appointment.
• Public school district consolidation.
• Elimination of township government.
• Restore affirmative action programs by state government and public universities.
• Remove ban on same sex marriage.
• Permit a physician-assisted suicide.
• Provide for drug legalization.
• Remove the prohibition on public aid to non public education.
• School funding and equity.

On December 12, 2006, the organization, Citizens for Michigan, completed a four-year review of the 1963 constitution. Citizens for Michigan, in addition to making 62 specific recommendations to change the constitution, urged approval of the call for a constitutional convention in 2010. The alternative is to be supportive of constitutional reform and modernization without agreeing to a constitutional free-for-all at a convention. Constitutional change can come about amendment by amendment. Although the present constitution is not perfect, it contains no fatal flaw.

The Michigan Chamber of Commerce has previously expressed its opposition to calling a new Constitutional Convention for Michigan in 2010, when that question is next placed automatically before state voters. However, the Michigan Chamber supports periodic revision of the Michigan Constitution on an amendment-by-amendment basis. The Michigan Chamber of Commerce recognizes that the current Michigan Constitution adopted in 1963 contains certain deficiencies that should be addressed by policy-makers and voters. Several provisions in the Michigan Constitution are inoperative and obsolete because they violate the U.S. Constitution.

One of the primary reasons for having a written Constitution is to inform citizens of the fundamental law by which they are governed. Therefore, the text of the Michigan Constitution should reflect the actual status of state law.

The Michigan Chamber supports placing an amendment on the ballot in 2008 to delete the invalid provisions that are in conflict with United States Supreme Court and Michigan Supreme Court interpretations of the United States Constitution. Passage of such an amendment would remove one of the arguments proponents cite as a reason to call a new constitutional convention.

Background

The following provisions have been invalid for many years. Their deletion from the Michigan Constitution need not be accompanied by replacement provisions:

Exclusionary Rule

In People v Pennington, 383 Mich 611 (1970), the Michigan Supreme Court held that the last sentence of Section 11 of Article 1, which allowed certain evidence to be admitted into criminal proceedings, violated the exclusionary rule adopted by the United States Supreme Court in Mapp v Ohio, 367 US 643 (1961). In general terms, the exclusionary rule provides that evidence obtained by law enforcement in violation of the Fourth Amendment to the United States Constitution must be excluded from criminal proceedings.

Voting Age

The requirement contained in Section 1 of Article 2 that voters be at least 21 years of age was rendered invalid by the Twenty-Sixth Amendment to the United States Constitution, which reduced the voting age to 18.

Property Ownership Requirement

Section 6 of Article 2 restricted to property owners the right to vote on certain ad valorem tax limitation increases and bond issues. This provision has not been enforceable since the United State Supreme Court held that such restrictions violated the Equal Protection Clause of the Fourteenth Amendment to the United States Constitution. City of Phoenix v Kolodziejski, 399 US 204 (1970). The reference to this property ownership requirement found in Section 6 of Article 9 of the State Constitution is also inoperative for the same reason.

County Board of Supervisors

Section 7 of Article 7 required that a board of supervisors be established in each county of the state. The board of supervisors was to consist of one member from each organized township and representation from cities as provided by law. In 1966, the Michigan Supreme Court held that the method of apportioning county boards of supervisors violated the equal Protection Clause of the Fourteenth Amendment to the United States Constitution. Advisory Opinion re: Constitutionality of Public Act 261 of 1966, 380 Mich 736 (1966). The Michigan Supreme Court followed the reasoning of a U.S. Supreme Court decision regarding the redistricting of local governmental legislative bodies. The Michigan legislature later enacted county commission redistricting standards legislation (MCL 46.401).

Prohibition of Public Aid to Nonpublic Schools

In 1970, Section 2 of Article 8 was amended to prohibit public financial support for non-public schools. The amendment added three sentences to Section 2. In Traverse City School District v Attorney General, 384 Mich 390 (1971), The Michigan Supreme Court held that a portion of the second sentence violated the First and Fourteenth Amendments to the United States Constitution (free exercise of religion and equal protection of the laws, respectively). The sentence in question, and that portion of it held invalid, provided that “[n]o payment, credit, tax benefit, exemption or deduction, tuition voucher, subsidy, grant or loan of public monies or property shall be provided directly or indirectly, to support the attendance of any student or the employment of any person at any such nonpublic school or at any location or institution where instruction is offered in whole or in part to such nonpublic school student.”

Legislative Apportionment

Parts of five sections in Article 4 that relate to legislative apportionment are invalid. Legislative apportionment is the method by which the state is divided into geographic districts from which voters elect state Senators and state Representatives. The state Constitution is deficient as regards to legislative apportionment in two respects: it neither specifies what official is responsible for legislative apportionment, nor what standards are to govern the process. Less than one year after the state Constitution was adopted, a majority of the apportionment provisions (Sections 2 through 6 of Article 4) were rendered unconstitutional by virtue of the United States Supreme Court decision of Reynolds v Sims, 377 US 533 (1964). The essence of Reynolds is that the Equal Protection Clause of the Fourteenth Amendment requires that both houses of a state legislature be apportioned on the basis of one person, one vote. The Michigan Supreme Court invalidated the Commission on Legislative Apportionment in 1982. The Michigan Supreme adopted redistricting standards for the drawing of house and senate districts and appointed Bernard Apol, retired director of the Bureau of Elections as a special master to draw a plan following those standards for the 1982 election. In 1996, the Michigan legislature enacted a State Legislative Redistricting Standards Act, which codified the standards used by the Michigan Supreme Court in adopting a state legislative redistricting plan in 1982 and 1992 (MCL 4.261).

Term Limits on Federal Officials Elected from Michigan

Article II, Section 10 of the Michigan Constitution was added by the adoption of Proposal B in November 1992. Members of the U.S. House of Representatives from Michigan were restricted to serving no more than three two-year terms (6 years) in a twelve year time period. U.S. Senators elected from Michigan were restricted to serving no more than two six-year terms (12 years) in a 24 year time period. State term limits on federal legislators were challenged in Arkansas. The U.S. Supreme Court in 1995 held that states could not impose term limits on federal officials, only an amendment to the U.S. Constitution could impose such limitations. U.S. Term Limits v Thorton 514 U.S. 779 (1995).

The Michigan Chamber of Commerce supports Michigan’s mining industry and is opposed to a potential ballot initiative that would essentially prohibit most types of new mining in Michigan.

Background

The mining industry has played an important role throughout Michigan’s history. Despite the current economic downturn, the mining sector remains viable and continues to play an important part in Michigan’s economy. Michigan’s mining sector provides $5.64 billion in economic activity annually and supports over 30,000 jobs. 

In 2004, the Legislature passed, and the Governor signed into law, Part 632 of the Natural Resources and Environmental Protection Act. The act created a new section of law to regulate nonferrous metallic mining. Nonferrous metals include copper, gold, nickel, platinum, and zinc but do not include iron ore. The legislation was developed with a wide range of stakeholders, including business and environmental groups. The legislation was supported by the Michigan Chamber of Commerce and unanimously approved by both the House and Senate. Proclaimed as one of the toughest and most protective mining laws in the country, the legislation set standards for protecting water quality, ensuring proper reclamation, and requiring post-closure monitoring for over 30 years. 

Near Marquette, an important new mining project, Kennecott Eagle, is preparing to open. Kennecott has spent several years gathering all of the necessary permits to operate in Michigan. When operational, the project will provide good-paying jobs and economic benefit for an area of the state with high unemployment. The operation would provide 500 new construction jobs and 180- 200 full-time jobs. The total wage and benefits of the operation would be $135 million for the life of the project.

Recently, a new group called “Save our Water” was formed to lead a petition drive to try and amend the mining law (Part 632). The group was formed out of Grosse Pointe, Michigan. The goal of the group was laid out in an email fundraiser from an Ohio resident who is supporting the campaign.  The email states “this ballot initiative will make Michigan’s sulfide and uranium mining law so tough that it will virtually stop all mining.” The proposal is currently supported by some environmental groups, including Clean Water Action, Yellow Dog Watershed Preserve in U.P., and Save the Wild UP. Former Governor Milliken is serving as the honorary chair of the group. The proposal was certified as to form by the State Board of Canvassers on October 14, 2009. It is believed that the group is now in the process of hiring a professional petition signature collection firm. If the group collects the necessary signatures, the Legislature will have 40 days to adopt or reject the proposal. If the proposal is not acted upon by the Legislature, it will be submitted to the voters at the November 2010 general election. 

A new group has been formed in the Upper Peninsula to try to defeat the ballot proposal. The group is called “Citizens to Protect Michigan Jobs.” The group is gaining support from many key individuals, groups, and elected officials in the Upper Peninsula. All members of the State House of Representatives and the State Senate from the UP have spoken out against the ballot proposal.  

County commissions in Alger, Baraga, Delta, Dickinson, Gogebic, Marquette, and Ontonagon have all passed resolutions against the ballot proposal.  Business groups, such as the Lake Superior Community Partnership (Regional Chamber), have also come out against the proposal. 

On December 1, 2009, the Michigan Chamber’s Environmental Quality (EQ) Committee met and reviewed the proposed ballot initiative. Members of the EQ Committee unanimously voted to oppose the initiative. Members of the EQ Committee were particularly concerned about the fact that a company can make an investment in Michigan based on the law and then have the investment threatened by a ballot initiative. EQ members felt this created a high level of regulatory uncertainty. EQ members were also concerned about the bad precedent of regulating a key industry through ballot initiative; if it is mining today, it could be forestry, manufacturing, or agriculture in the future.

The Michigan Chamber of Commerce reaffirms its longstanding position in support of outdoor advertising as necessary and important to the ability of Michigan businesses to inform customers about products and services.

Because billboards are already adequately regulated under state and federal law, and increasingly subject to regulation by local units of government, the Michigan Chamber is opposed to proposed legislation that would further regulate the industry by: establishing an advisory council administered by the Michigan Department of Transportation to define best practices for the industry; increase billboard permit fees and establish a government fund to remove certain billboards; and place a cap on the number of billboards in Michigan by stopping new permits from being issued.

Background

Since enactment of the federal Highway Beautification Bill of 1965, the question of who should regulate outdoor advertising and the related issue of how far billboard regulation should go has been an issue of interest and concern to Michigan’s business community. The Michigan Chamber’s first policy proposal concerning this subject was adopted by the Board of Directors in January of 1966.

Over the years, federal, state, and now local government regulation of billboards has increased considerably. Several years ago the Michigan Chamber filed an amicus brief in support of the outdoor advertising industry position that local ordinances adopted by several Michigan cities to require the removal of some billboards constituted a government taking of private property without just compensation. In support of commercial free speech, the Michigan Chamber has also spoken out against various proposals to regulate or censor the content of billboard advertising. As the attached news release from the Outdoor Advertising Association shows, many members of the Michigan Chamber routinely use billboards as part of their advertising campaigns.

While some individuals and groups advocate additional regulation of outdoor advertising, others would like to see billboards banned entirely. It is often hard to separate these agendas as opponents of outdoor advertising have most recently attempted to reframe the issue as a question of land use or scenic beauty, as the attached news release from State Senator Tom George suggests.

At the September 2003 Board meeting, the Board reviewed and approved a series of Chamber policy statements in response to numerous recommendations from the Governor’s Land Use Leadership Council, including a statement opposing the Council recommendation that “MDOT should propose a billboard management program including strategies to limit billboards and increase fees on billboards to remove illegal billboards”. That statement reads as follows:

“Many Michigan Chamber members rely on billboards to communicate with customers. For many years, the Michigan Chamber has actively opposed legislative or legal efforts to prohibit or severely restrict the use of billboards. Michigan Chamber staff recommends that we maintain our longstanding position in support of outdoor advertising.”

The Michigan Chamber supports remedial legislation targeted to address consequences of the recently approved state minimum wage increase. These include legislative action to maintain the status quo with respect to overtime requirements for certain categories of employees and to revise and update the training wage to maintain employment opportunities for young, inexperienced workers.

The Michigan Chamber also reaffirms opposition to any proposal to write the minimum wage law into the State Constitution; peg future minimum wage increases to the rate of inflation (commonly referred to as indexing); eliminate or substantially reduce the tip credit for employees who regularly receive gratuities; and/or impose more harsh penalties on employers for non-compliance with the law.

Background

Last year, with encouragement and support from Governor Jennifer Granholm and U.S. Senator Debbie Stabenow, the Michigan Democratic Party (MDP) and the Michigan AFL-CIO launched a petition drive to amend the State Constitution to substantially increase and index the state minimum wage. This highly partisan proposal also contained provisions that would have imposed more stringent penalties on any employer who failed to comply with the law and would have negatively impacted the hospitality industry by ending the tip credit.

As the business community and Republican legislative leaders monitored the progress of the MDP/AFL-CIO petition drive, it became increasingly apparent in February and March of this year that the effort would gather more than enough signatures to qualify for the ballot. Recent experience with minimum wage ballot proposals in other states and private sector sponsored public opinion polling in Michigan showed that the MDP/AFL-CIO proposal was almost certain to be overwhelmingly approved by voters if it was on the ballot this November.

Faced with this public policy dilemma, Senate Majority Leader Ken Sikkema and House Speaker Craig DeRoche decided to take action to pre-empt the MDP/AFL-CIO petition drive by passing a bill to raise the minimum wage that did not contain the other harmful provisions included in the ballot proposal. Legislation passed to increase the minimum wage from the current $5.15 per hour to $6.95 per hour effective October 1, 2006, to $7.15 per hour effective October 1, 2007, and to $7.40 per hour effective July 1, 2008. The Governor signed the more moderate legislative proposal and the petition drive was halted. These minimum wage increases will be costly and will have a significant economic impact on many employers unless corrective legislation is approved before October 1, 2006.

Please see the attached April 2006 Legal Alert from the Butzel Long law firm for a more detailed explanation of the impact the minimum wage increase will have on overtime pay.

The Michigan Chamber of Commerce supports Proposal 10-2 (Proposal 2) which would make a person ineligible for election or appointment to state or local elective office and to hold public employment under certain circumstances, if within the past 20 years the person had been convicted of particular work-related felonies. 

Background

Article XI of the State of Michigan Constitution concerns “Public Officers and Employment.” The article has seven sections that specify some of the qualifications and conditions for holding public office or working as a public servant in Michigan. Among other things, Article XI addresses the oath of office that public officials swear, impeachment from office, merit-based civil service systems of employment and serving as a custodian of public money.

This prohibition, currently applicable only to state legislators, would be extended to all elected and appointed officials – including for example, mayors and school district accountants. The Proposal was drafted specifically to prohibit convicted felons who have previously violated the public trust from holding elective or appointed office in all levels of local and state government.

Proposal 2 was introduced to help ensure the preservation of the public trust by prohibiting felons from holding elective office or being hired for public employment, if they have been convicted of a felony involving dishonesty, deceit, fraud, or a breach of the public trust in the past 20 years, and if that conviction was related to the person’s official capacity while holding any elected office or position of employment in the local, state or federal government.

Proposal 2 was approved by two-thirds of the members elected and serving in both the House and Senate (Joint Senate Resolution V) and is submitted to the voters at the November 2, 2010 general election. 

Proposal 2 would amend the State Constitution to specify that a person would be ineligible (1) for election or appointment to any state or local elective office in Michigan and (2) to hold a position in public employment in Michigan that was policy making or that had discretionary authority over public assets, if, within the immediately preceding 20 years, (1) he or she had been convicted of a felony involving dishonesty, deceit, fraud, or a breach of the public trust, and (2) the conviction was related to the person’s official capacity while holding any elected office or position of employment in local, state or federal government.

This requirement would be in addition to any other qualification required under the constitution or by law.

Proposal 2 would add a new Section 8 to Article XI of the State Constitution. That article deals with “public officers and employment.” The joint resolution specifies that the Legislature must “prescribe by law for the implementation of this section.”

For your information, we have attached a copy of the official ballot proposal language for Proposal 10-2, as approved by the State Board of Canvassers, and analyses of the proposal by the non-partisan Senate Fiscal Agency and House Fiscal Agency. Staff recommends to the Executive Committee and Board of Directors that the Michigan Chamber support this proposal.

The Michigan Chamber of Commerce believes governments should have the following objectives:

1. To focus on priorities by determining, through comprehensive analysis, the appropriate role of government and identifying opportunities where the private sector can assist in the achievement of those functions necessary to fulfill government responsibilities.
2. To provide the level and quality of services that citizens require in the most cost efficient manner possible.

The Michigan Chamber of Commerce supports public policies that promote fair competition and prevent unfair competition by government. Such policies are critical especially when governments seek to compete in traditional private sector markets. The Michigan Chamber believes that “Fair Play” legislation is now needed in Michigan, in part, to address the emergence of local units of government competing against telecommunications businesses. The Michigan Chamber supports the following “Fair Play” policy:

• A government-funded business activity must be subject to the same regulation as private sector competitors providing the same service(s). Fair Play promotes vigorous competition.
• A government-funded business activity enjoys substantial unfair advantages over private sector competitors through access to financial subsidies such as tax exemptions (including income, property, gross receipts and excise taxes), and tax exempt bond financing. Government funded business activities must be subject to the same tax rules and regulations as private sector competitors.
• A government must not use its sovereign powers, such as control of rights-of-ways or powers of condemnation, to advantage its business activities over private sector competitors. In addition, a government must not delegate its sovereign powers to a competitive non-government funded business activity.
• A government-funded business activity should have no greater ability to allocate costs among other services/departments/agencies than private sector providers.
• Government-funded business activity must impute to its cost of providing service the cost of taxes and fees consistent with the obligations of private competitors. A government-funded business activity should also impute to its cost of providing services a cost of capital consistent with the cost of capital available to private firms.
• One competitor in a business market should not be able to regulate another competitor. In other words, a government-funded business activity should not be regulated by the same government entity that funds it.

The Michigan Chamber of Commerce supports public energy policies that improve fuel economy standards through traditional market forces and consumer demand. The Chamber supports such measures as federal income tax credits and other consumer incentives toward the purchase of vehicles with advanced energy efficient technologies.

The Chamber opposes legislation that directly increases the Corporate Average Fuel Economy (CAFE) standards. We believe that as consumers become more aware of and interested in efficient fuel economy, automakers will respond with the appropriate redesign to their products.

Background

First enacted by Congress in 1975 after the Arab oil embargo, the Corporate Average Fuel Economy (CAFE) program mandates all auto manufacturers selling in the United States to meet certain fuel economy levels. The intended purpose was reduce reliance on foreign oil supplies and to lessen air pollution levels. Today, each manufacturer’s fleet must average 27.5 mpg for cars and 20.7 mpg for light trucks (pickups, minivans and sport utility vehicles). Unfortunately, CAFE failed to meet its objectives and had several unanticipated side effects:

In 1974 the import share of U.S. oil consumption was 35 percent. Since then, new car fuel economy has doubled, but oil imports have risen about 50 percent nevertheless. Since CAFE brings the cost of driving down, it allows for more miles to be driven for the same cost to the consumer. As more miles are driven, the reductions in the consumption of gasoline from higher fuel economy are eroded. Over the life of the CAFE program, consumers have reacted to higher fuel economy by driving more.

The Clean Air Act regulates tailpipe emissions on a “grams per mile” basis. All vehicles, regardless of the amount of gasoline they use to drive a mile, cannot emit more than established levels permitted by the Act. Raising CAFÉ standards does not directly improve air quality because CAFÉ standards affect fuel economy, not emissions levels.

Increasing CAFE standards puts auto manufacturers at odds with consumers. To meet the standards, automakers must divert resources from the development of promising advanced fuel efficiency technology to the production of lower performing smaller and lighter cars. However, consumers today are more interested in vehicle size and utility than they are in fuel economy levels. The CAFÉ standard is also a sales-weighted fleet average, meaning that meeting the standard depends on what the consumer purchases. If not enough customers purchase the higher fuel economy models (smaller, lighter cars), then the fleet average for that manufacturer may drop below the CAFE standard exposing the manufacturer to fines or costly product restrictions or changes.

On April 1, 1994 the National Highway Traffic Safety Administration (NHTSA) issued a proposed standard, which suggested an increase of up to 40% in the light truck CAFE standard. As a reaction to these proposed increases in light truck CAFE standards, Congress prohibited the use of funds to increase the passenger car or light truck CAFE standards in the FY 96 DOT appropriations bill. The FY 97, FY 98, FY 99, FY 00 and FY 01 DOT appropriation bills contained identical provisions continuing the freeze.

Rising gas prices in recent months have motivated policy makers to discuss our dependence on foreign oil and vulnerability to future fluctuations in prices. Changes being deliberated would require cars, vans, pick-ups and sport utility vehicles to meet much higher mile per gallon fuel requirements.

Consequently, higher CAFE standards would adversely affect vehicle safety, consumer choice and the development of advanced technology solutions. The Michigan Chamber feels there are better ways to approach this important national goal that balance consumer choice and safety with the need to decrease American consumption of imported oil. In addition, technological advances that were not even conceived when CAFE was enacted present an opportunity to shift to a new and more effective direction in automotive fuel economy.

PROS AND CONS RELATING TO INCREASING CAFÉ STANDARDS

Supporters of CAFÉ Comments:

• Conserves a depletable, irreplaceable natural resource
• Reduces the U.S. trade deficit
• Protects the U.S. economy from national security threat posed by reliance on foreign oil supplies
• Reduces greenhouse gas emissions
• Reduces pollution
• Limits vehicle performance and acceleration, thereby making highways safer
• Saves consumers money
• Stimulates technological innovation and more frequent product updates
• Necessary to force the domestic automakers to make products that are competitive with imported vehicles.
• CAFÉ makes U.S. produce small cars in U.S.
• Creates lower, subsidized prices for poorer, small car buyers at the expense of richer, large car buyers

Opponents of CAFÉ Comments:

• Increase in CAFÉ would have a major adverse impact on the employees, operations and overall production at automotive plants and the domestic auto industry.
• CAFÉ increase would result in less production of some of the most popular vehicles, including SUVs and pickup trucks. (Pickup trucks are an integral part of jobs held by farmers, suppliers, construction workers, etc.
• CAFÉ standards will adversely affect vehicle safety, customer choice and the development of advanced technology solutions.
• To meet CAFÉ standards, automakers must reduce vehicle mass, compromising vehicle safety.
• The National Highway Traffic Safety Administration, as well as independent research groups and think tanks, have concluded CAFÉ has increased the fatality rate on our highways.
• CAFÉ disproportionately penalizes domestic automakers, which make a full range of vehicles and will have to restrict the sale of larger vehicles to help their fleet average, allowing foreign automakers to increase their competitive foothold.
• More breakthroughs in fuel efficiency will come from development of advance technologies– on which the auto industry spends nearly $18 billion each year. Substantial increases in fuel economy will come from introducing these market-tested advanced technologies into the cars and trucks consumers want to buy.
• Efforts to meet increased CAFÉ standards directs financial and technical resources away from advanced technology efforts.
• Increases in CAFÉ standards ignore market forces and will have a significant adverse effect on our economy.

The Michigan Chamber reaffirms its position to support open, competitive markets.  Government should seek to create or maintain an economic environment that enhances consumer well-being and promotes a dynamic business climate.  It is an accepted economic principle that the widest range of services and products are most likely to be provided at the lowest price when competition between businesses is decided in the marketplace instead of the political arena.  Government’s primary regulatory role should focus on adequate safeguards for consumers. 

In the context of the current debate over the use of credit scoring for insurance purposes, the Michigan Chamber supports legislative efforts to implement adequate safeguards for insurance policyholders while preserving the use of credit for Michigan insurers.  The Michigan Chamber is opposed to efforts by the Granholm administration to ban the use of credit scoring through the administrative rules process.  The Chamber opposes this action because it is a deliberate attempt to circumvent the legislative process and ignores the fact that credit scoring is fair and legal for all segments of the financial services industry under state and federal laws.

Background

During the debate in 1994 over whether banks should be prohibited from offering insurance, the Michigan Chamber’s Board of Directors adopted a policy in support of open competition and free enterprise within the financial services industry.  The Official Policy Relating to Regulation, Competition and Barriers to Entry has served the Michigan Chamber well over the years and allowed Chamber staff to remain consistent in its messaging.

A bill was introduced in April of 2004 in the Michigan House of Representatives to limit how and when insurers may establish and maintain premium discount plans based upon an applicant or insured’s credit history or lack thereof.  Four days after introduction, the Insurance Commissioner — at the urging of Governor Granholm — proposed an administrative rule to ban the use of credit information for insurance purposes. 

Due the potentially widespread implications for all sectors of the financial services industry, the Michigan Chamber became involved in this issue.  Using the Official Policy Relating to Regulation, Competition and Barriers to Entry, the Chamber Staff testified in opposition to the proposed rule.  (See attached testimony.) 

Given the controversy surrounding the use of credit for insurance purposes, the impasse between the Legislature and the Granholm administration, and the potential for the Chamber to be involved in litigation challenging the legality of the proposed rule, Chamber Staff felt it was both timely and appropriate to bring the Board up-to-date on this issue and reaffirm support for the principles incorporated in the Official Policy Relating to Regulation, Competition and Barriers to Entry.

MICHIGAN CHAMBER OF COMMERCE
Testimony to the Office of Financial and Insurance Services on the Proposed Rule to Ban the Use of Insurance Scoring
July 19, 2004

Presented by
Wendy Hofmeyer, Director of Health Policy and Human Resources

Good afternoon Commissioner Watters.  My name is Wendy Hofmeyer and I am the Director of Health Policy and Human Resources for the Michigan Chamber of Commerce.  I am pleased to have the opportunity to discuss the proposed rule to ban the use of credit scoring, or “insurance scoring”.

The Michigan Chamber of Commerce represents a broad cross-section of businesses throughout the state. Over 380 of our nearly 6,500 members include insurers, financial institutions, real estate companies and other creditors.

After a thorough review of federal and state laws, the proposed rules, and the pending legislation introduced in the Michigan House of Representatives to regulate the use of insurance scoring, we have come to the conclusion that we must oppose the Office of Financial and Insurance Services’ (OFIS) proposed rule 2004-022 LG.

The proposed rule would ban the use of insurance scoring in setting automobile and home insurance rates and require insurers to make a “base rate” adjustment when they discontinue their insurance scoring discount plans.  The Michigan Chamber believes this rule, if adopted, would set a dangerous precedent by delivering into the hands of a regulator the power to circumvent the legislative process.  Further, we believe this politically charged proposal ignores state and federal laws authorizing the use of credit information, the separation of powers provisions found in the state constitution, and questions over whether a ban on insurance scoring will actually save Michigan policyholders money. 

The debate over the use of credit is not new nor is it unique to the insurance industry.  In fact, the federal Fair Credit Reporting Act (15 U.S.C. § 1681b), passed over 30 years ago and renewed in 2003, expressly authorizes consumer reporting agencies to furnish consumer reports to persons which they have reason to believe “[intend] to use the information in connection with the underwriting of insurance involving the consumer”.  The law also authorizes consumer reporting agencies to furnish consumer reports to others who have a legitimate business need for the information, such as creditors, financial institutions, employers, landlords and others. 

In addition to federal law, Michigan’s Essential Insurance Act (PA 145 of 1979) specifically authorizes the use of risk classifications, such as credit information, for insurance purposes—but constrains the use of this information more tightly than any other state.  Specifically, the EIA prohibits insurers from using risk classifications to refuse to write, cancel or nonrenew a policy because it guarantees all eligible persons access to automobile and homeowners’ insurance. This is not the case in other states.  Michigan is unique in that insurers may only use credit and other risk factors to offer premium discount plans in an effort to classify those individuals who are less likely to experience a loss and/or file an insurance claim.  For automobile and homeowners coverage, insurers offer discounts based upon insurance scoring by authority of Section 2110a of the Insurance Code of 1956 (MCL 500.2110a), which provides:

If uniformly applied to all its insureds, an insurer may establish and maintain a premium discount plan utilizing factors in addition to those permitted by section 2111 for insurance if the plan is consistent with the purposes of this act and reflects reasonably anticipated reductions in losses or expenses....

The Michigan Chamber recognizes that many policyholders question the correlation between insurance scores and the likelihood of loss.  We believe these questions are only natural but that we cannot ignore the overwhelming amount of evidence and actuarial data submitted by insurance regulators, universities, independent auditors and insurance companies to support the fact that certain aspects of an individual’s credit history are a proven, strong indicator of how likely that person is to file a future claim. 

If adopted, Michigan would be the first and only state to ban the use of credit information for a sector of the financial services industry by administrative rule.  To date, 19 states have enacted laws based upon the National Conference of Insurance Legislators’ model act regulating the use of credit by the insurance industry. In context, Maryland is the only state that has legislatively banned the use of credit information in its homeowners’ market.   Their experience has not been positive.  Since enactment, rates reportedly have been increased by a higher margin than they would have if a ban had not been in effect and the writing of new business has been curtailed. We do not wish to see this scenario repeated in Michigan. 

The Michigan Chamber believes the Commissioner’s actions and proposed rule 2004-022 LG pose a serious threat to all segments of the financial services industry that rely on credit for risk-related purposes.   We believe this outright circumvention of the legislative process sets a bad precedent because it ignores the plain language of Article 3, Section 2 of the Michigan Constitution which reads:  “The powers of government are divided into three branches; legislative, executive and judicial.  No person exercising powers of one branch shall exercise powers properly belonging to another branch except as expressly provided in this constitution.”

The Michigan Chamber is opposed to proposed rule 2004-022 LG because it is an attempt by the regulator to usurp power from the legislature and reduce legislative oversight of the insurance industry.  We are also very concerned that the proposed rule will later be used to argue that the Commissioner should be given the authority to limit the use of credit for other sectors of the financial services industry, such as banks, credit unions, landlords, retailers and employers. 

Finally, although we recognize that the public is skeptical about the use of credit for insurance purposes, we are very concerned that this rule will do little to address the rising cost of insurance in Michigan, as the Governor and Commissioner have promised it will.  We recognize that the proposed rule requires insurers to make an adjustment to their “base rates” but would like to remind you that a “base rate” reduction does not automatically translate to a reduction in the premiums charged to policyholders.  In the end, we estimate that under this cost-shifting ploy up to 2/3 of all policyholders could see an actual increase in their insurance premiums because they would lose their “good credit” discounts.

In summary, the Michigan Chamber believes some regulation of the use of credit information for insurance purposes may be appropriate.  However, we believe OFIS has over-stepped its constitutional authority by proposing a ban by administrative rule.  For this reason, we respectfully request that OFIS abandon proposed rule 2004-022 LG.  

Thank you for your consideration of our views. I would be happy to take any questions.

The Michigan Chamber of Commerce supports an energy plan for Michigan that provides a diverse mix of fuel sources including nuclear, coal, natural gas, and renewable energy. The Chamber supports moving forward with energy technologies that are determined to be both affordable and reliable.

The Michigan Chamber supports all of the following as it relates to siting wind turbines in the Great Lakes:

• The Michigan Chamber supports a permit process for siting of wind turbines in the Great Lakes that includes meaningful local input and participation. The views and concerns of local communities must be considered in the decision-making process. However, final decision-making must rest with state government. Michigan cannot have a patchwork of rules and regulations related to energy development.
• The Michigan Chamber supports a permit process for siting wind turbines that includes a review and approval by the Public Service Commission. The Commission shall only approve projects where there is a demonstrated need and the projects are determined to be both reliable and affordable.
• The Michigan Chamber reaffirms support for cost-of-service rates for all customer classes, and opposes any further energy subsidies or mandates, beyond those provided by Public Act 295 of 2008, that are paid by industrial and commercial customers related to the development of renewable energy. The Chamber would oppose any effort through tariffs or mandates that would force utilities or industrial or commercial customers to purchase or pay for offshore wind that is not determined to be cost competitive.
• The Michigan Chamber reaffirms support for the protection of the Great Lakes. The Great Lakes are Michigan’s greatest natural asset. The development of wind turbines on the Great Lakes should be done with great caution. The permit approval process must take into account protection of such things as wildlife, view sheds, fishing areas, harbors, and marinas. The permit process should also include requirements for strong upfront financial performance instruments that protect the Great Lakes in case of unforeseen circumstances (i.e. bankruptcy and damage to turbines).

Background

Offshore wind provides Michigan with a substantial energy supply potential. Offshore wind operates at a higher capacity factor typically in the range of 37% to 40%, which is substantially more than onshore wind. In addition, offshore wind could likely be built to a much larger scale as compared to onshore projects, which are often limited by land use patterns.

The announcement by Scandia Wind that it planned to build 200 wind turbines in Lake Michigan near Ludington has set off a heated and contentious debate along the West Michigan lakeshore. Many local residents, small business, and locally-elected officials have been coming out in opposition to the proposed Scandia project. A group called Lake Michigan Power Coalition has been formed to try and stop the Scandia project from moving forward. They are concerned that turbines could negatively impact Lake Michigan's waters, regional economy, shoreline ecosystem, and quality of life.

Great Lakes Offshore Wind Council
Through Executive Order 2009-46, Governor Granholm established the Great Lakes Wind Council with the responsibility to “provide input on proposed new Great Lakes wind development legislation.” The council was made up of eight state agency members and 21 outside government members. The council put forward 24 criteria to map the best locations for offshore wind energy development. The criteria for the most favorable areas included being at least six miles offshore and avoiding sensitive wildlife areas and shipping lanes. Based on the criteria, five sites were selected as being most favorable:

1. Berrien County – SW Michigan – Lake Michigan
2. Delta County – Upper Peninsula – Lake Michigan
3. Alger County – Upper Peninsula – Lake Superior
4. Sanilac County – Thumb – Lake Huron
5. Outer Saginaw Bay – Lake Huron

The council recommended a permit process conducted and run by the Department of Natural Resources and Environment (DNRE). Under the proposed process, the DNRE would conduct a public hearing in the county nearest the selected parcel. The DNRE would be the final decision maker. The recommended process does not include an approval by a local unit of government or an approval by the Public Service Commission.

EQ/ETT Meeting
On May 18, 2010, the Michigan Chamber’s Energy, Technology & Telecommunications and Environmental Quality committees held a joint meeting where the issue of Great Lakes offshore wind was debated and discussed. Skip Pruss, formerly director of energy, labor and economic growth and chair of the Great Lakes Wind Council, presented the recommendations of the council to the Michigan Chamber committees. Former Director Pruss emphasized that Great Lakes wind was part of Governor Granholm’s strategy to bring green jobs to Michigan and help to diversify the state’s economy.

The committee also heard from Jeff Hoenle and Peter O’Neil from the Lake Michigan Power Coalition. This coalition is made up of concerned residents along the shoreline in West Michigan. The coalition advocated for local input into the decision-making process related to siting wind turbines in the Great Lakes. The coalition articulated a position that, in addition to approval by state government, there must also be an approval by a local unit of government. They argue that municipalities know best in serving long-range civic planning.

After the presentations, the Chamber committee held a members-only discussion on the issue. There was consensus in the room that the recommendations of the Great Lakes Wind Council gave a good framework on how and where to site offshore turbines. However, members of the committee agreed that the council report failed to take into account the rate impacts associated with offshore wind. The Chamber committee recommended that Chamber staff push cost containment measures that include all necessary and related costs, including transmission.

Based on the discussions and recommendations of the committee, staff prepared a draft policy for review. The draft policy was sent out to members of the committee for review and comment. Committee members provided excellent and thoughtful feedback. Staff took the feedback and developed a revised version. EQ Committee Chair Rick Van Dellen agreed and supported the revised version. The revised version was then sent to the committee for a vote. Committee members were given the option of support, neutral, or oppose. A strong majority of committee members who voted, voted to support the policy proposal.

Energy Rates
An important victory for the business community in passage of PA 286 of 2008 was to require the Public Service Commission to implement cost-of-service rates for all customer classes within five years. For 30 years, Michigan’s job providers have been unfairly paying higher electric rates in order to subsidize residential rates. These higher electric rates for business customers in Michigan have made Michigan’s rates less competitive with those of other states. The annual savings for business customers was expected be over $350 million.

To date, the Public Service Commission has moved slower in implementing the cost-of-service rates than was anticipated when the bills were approved. In a Consumers Energy rate case, the commission used a formula to calculate cost-of-service results that was different than expected. The net result in Consumers’ territory is that, instead of rate cuts for commercial and industrial customers, rates actually increased.

Costs of Renewable Energy
Public Act 295 of 2008 requires that, by 2015, 10 percent of Michigan’s energy come from renewable sources. During the legislative debate, the Michigan Chamber worked hard to develop a cost cap that would minimize the rate impact associated with a mandated renewable portfolio standard. Under the new law, surcharges for renewable energy are capped at a per-meter charge not to exceed $3.00 per month for residential customers, $16.58 per month for commercial customers, and $187.50 per month for industrial customers.

In compliance with PA 295 of 2008, the Michigan Public Service Commission, in May of 2010, approved four renewable projects with a capacity of 243.2 megawatts of energy. The projects had an average 20-year levelized price of 9.75 cents per kWh. This levelized price means that customers will pay the same 9.75 cents for the next 20 years. The projects included three onshore wind farms and a landfill gas operation.

In August of 2010, the Public Service Commission approved two additional renewable projects with a capacity of 20.2 megawatts of energy. The projects had an average 20-year levelized price of 9.89 cents per kWh. The projects were a landfill gas operation in Oakland County and a biomass (primarily wood) facility in the Upper Peninsula.

In the US and Canada, offshore wind projects are proving to be very expensive. Two of the most recent projects are at least double the cost of the onshore wind projects approved in Michigan. Both of the projects include annual inflationary increases. The most high-profile project is the Cape Wind project off the coast of Massachusetts. The Purchase Power agreement for Cape Wind is 18.7 cents per kWh with a 3.5% annual inflator that will impact every year of the PPA for 15 years. In Ontario, the Ontario Power Authority is moving ahead with a 300 MW project in Lake Ontario. The signed contract is at 19.5 cents per kWh with a 2% annual inflator.

Comparison of Prices: Michigan Renewable Energy vs. Current Offshore Projects

Michigan Onshore Wind

Landfill Gas

In addition to wind, other options exist to help meet Michigan’s Renewable Portfolio Standard. Landfill gas is a cost-competitive technology that provides reliable and affordable power. Landfill gas projects in Michigan have a capacity factor of over 90 percent. This means that they operate 90 percent of the time. This compares to wind that has capacity factors in the range of 20 to 30 percent. The Public Service Commission recently approved a contract between Consumers Energy and Waste Management at a 20-year levelized price of 9.875 cents per kWh.

The Michigan Chamber has endorsed bipartisan legislation, HB 5334 (Mayes – D-Bay City) and SB 725 (Birkholz – R-Saugatuck), designed to increase energy production from landfills. The legislation would allow yard waste to be deposited into approved landfill energy production facilities. This change in law could provide up to an additional 60 MW of affordable and reliable renewable energy.

Green Jobs 

Creating “green jobs” has been a centerpiece of the Granholm Economic Development Strategy. Green jobs are generally considered those jobs related to renewable energy sources including wind, solar, and battery storage technologies. The green jobs strategy is built on government mandates to purchase green power and targeted tax incentives to try and lower the cost of the technologies. According to the presentation from Skip Pruss to the EQ/ETT meeting, the Granholm strategy has created $173 million in investment in wind technology, $3.1 billion in solar investment, and $5.7 billion in investments in battery technology.

Some studies are now questioning the green jobs strategy being implemented by Governor Granholm and many European countries. The European countries have more years of experience with the green jobs strategy, starting the strategy in the mid-1990’s, thus allowing more studies and data to be collected. The European policies were driven by goals to reduce overall carbon emission. Following  is a summary of key studies and information from the European experience:

Spain

In Spain, the government mandated that by 2010, 20 percent of energy must come from renewable energy sources. A recent study by a Spain University entitled, “Study of the Effects on Employment of Public Aid to Renewable Energy Sources,” found that for every one green job created by the mandate, 2.2 jobs were lost due to the higher electric rates. The study concludes that the high cost of electricity drives away energy-intensive manufacturing business. http://www.juandemariana.org/pdf/090327-employment-public-aid-renewable.pdf (February 4, 2010).

Germany

In Germany, they used a subsidy program that put a tariff on all energy customers to support the wind and solar industries. The program has led to one of the largest installed capacities of wind and solar in the world. However, a recent study in Germany entitled “Economic Impacts from the Promotion of Renewable Energies: The German Experience,” concludes that the German policy created green jobs but at a high cost. The study found that it took 175,000 € in subsidies to create one green job. In addition, the German policy caused job losses from the manufacturing sector due to higher electricity rates, and a loss of purchasing power for consumers due to the rate increases. 

http://www.instituteforenergyresearch.org/germany/Germany_Study_-_FINAL.pdf (2009).

France

The European country with the lowest emission rates and lowest energy costs is France. France has taken a different path than Spain and Germany. The French are one of the leaders in the world in nuclear energy with over 78 percent of energy coming from nuclear fuel. France is the largest exporter of electricity in the European Union because of its low prices.

Approved by Michigan Chamber Board of Directors January 25, 2012

The Michigan Chamber of Commerce reaffirms its support for legislative action to eliminate the burdensome business personal property tax. The Michigan Chamber opposes efforts to implement a constitutionally guaranteed source of revenue replacement.

Background

Michigan’s personal property tax is imposed on virtually all Michigan job providers and continues to be a source of great frustration for business taxpayers. The tax is levied generally on machinery and equipment which is not considered real property (land and buildings), including industrial, commercial and utility equipment. The tax is primarily administered by individual local units of government.

The tax has been the subject of debate for decades; many legislative efforts have begun and failed primarily due to the fact that local governments (and to a lesser extent schools) are the primary benefactors of the tax revenue. Total revenue generated statewide is approximately $1.2 billion, with approximately $800 million going to locals and $400 million going to schools. Further complicating the debate is the fact that different local governments depend on personal property tax revenue to varying, and wide, degrees.

However, the tax places Michigan at a competitive disadvantage, particularly in the Midwest. While numerous states still do impose the personal property tax, nearly all Midwest states do not. In fact, Ohio recently phased out its tax effective 2009. In addition the complicated nature of assessing a tax on multi-use, depreciable property, which is often inconsistently administered, does not lend itself to uniform taxation across jurisdictions, but rather numerous and costly appeals. The State Tax Commission and Tax Tribunal are currently experiencing significant backlog due to appeals regarding classification of property. The costs associated with compliance are not exclusive to taxpayers; local governments often report that it is more costly to administer the tax than the tax revenue itself generates.

The Michigan Chamber of Commerce has been a strong advocate for eliminating the personal property tax in a responsible manner that recognizes the need for adequate revenue replacement options for local governments. The Snyder Administration and House and Senate leadership have indicated a strong desire to address personal property tax, while at the same time seeking alternative revenue replacement options.

However, led by the Michigan Municipal League, numerous local government service providers have recently called for a constitutional guarantee of full funding replacement if the tax is eliminated. Providing a guaranteed revenue stream despite population shifts and competing priorities would remove legislative oversight and accountability, regardless of the circumstances, and should be opposed.

The Michigan Chamber supports meaningful efforts to begin elimination of personal property tax through proposals including:

• Phase-out of tax over time for all taxpayers. Providing a planned phase-out of the tax would allow local governments to adjust resources, seek efficiencies and consolidation.
• Immediately implementing a reasonable threshold exemption. Approximately 80% of taxpayers have property valued at less than $50,000 in taxable value. For relatively little cost (estimated $70 million) most taxpayers would be alleviated from the tax. In addition, local governments would be immediately relieved from administration of the tax.
• Efforts to improve administration of the tax statewide. Providing clarity and consistency in assessing the tax would help reduce costly and time-consuming disputes and appeals.
• Allocating expiring tax credits as a source of revenue replacement. Efforts to rely less on targeted industry, and company, specific tax credits potentially affords an opportunity to re-direct those “unused” dollars towards general business tax relief to benefit a wide range of job providers.

Bills to implement repeal of the personal property tax have been introduced in both the House and the Senate. The Administration has indicated that addressing personal property tax is a priority and Lieutenant Governor Brian Calley has taken the lead on this issue. We anticipate legislative debate and action in 2012.

The Michigan Chamber of Commerce supports legislation to allow the State of Michigan to enter into a multi-state agreement to simplify administration of sales and uses taxes by reducing the burden of tax compliance on individuals and businesses through the development of a more uniform collection process. In order to receive support from the Michigan Chamber, any streamlined sales tax legislation must:

• Conform with national model legislation.
• Provide for adequate legislative oversight, including a December 31, 2002 sunset date.
• Contain meaningful safeguards for taxpayers, and
• Not result in a broadening of the tax base.

Background 

On January 25, 2001 the Michigan Chamber Board of Directors reviewed and approved legislative priorities for the 2001-2002 legislative session. These legislative priorities include a chapter captioned "Cutting Taxes" which contains a section on Sales and Use Taxes that has the following statement relating to streamlined sales tax legislation:

"The Michigan Chamber supports reasonable efforts to level the playing field between retailers located in Michigan who must collect the state sales tax and out-of-state companies that may not be subject to Michigan's sales or use tax. However, due to on-going problems with the administration of the current sales and use tax laws, plus many unanswered questions about the practical and revenue implications of the proposed model legislation, the Michigan Chamber does not at this time support the proposed multi state 'streamlined sales tax project.' Should the Legislature decide to take up this issue, we urge the House and Senate to proceed slowly and with caution to avoid opening the door to a broadening of the tax base."

During the past few months, members of the Michigan Chamber's Tax Policy Committee and Chamber staff have spent a considerable amount of time and effort working to improve proposed streamlined sale tax legislation to make it worthy of support. As introduced, Senate Bill 433 (Emmons) was poorly drafted and lacks meaningful procedural safeguards for taxpayers.

For example, contrary to model legislation developed at the national level, the original version of the Michigan bill said that if there was a conflict between Senate Bill 433 and Michigan's Sales Tax Act of 1933 or Michigan's Use Tax Act of 1937, the provisions of the new law would prevail. This could easily have been interpreted by the Michigan Department of Treasury as a grant of authority to narrow many carefully crafted exemptions affecting industries statewide, without prior legislative approval. Many of these exemptions are currently enjoyed by retailers, manufacturers, vendors and other businesses. Allowing the Michigan Department of Treasury sole authority to determine sales and use tax laws could have led to the overturning of decades of case law protecting current exemptions. Michigan Chamber lobbyists worked to close this loophole.

The original bill also contained broad language preventing taxpayers from having access to the courts to resolve problems with the new law, but did not contain a sunset or expiration date to provide for legislative oversight. Taxpayers must have the ability to file tax grievances and appeal assessment findings through a dispute and appeals process. These rights were abdicated in the original bill. Given these shortcomings and other significant problems with the original bill, Chamber staff, after consulting with members of the Chamber's Tax Policy Committee, decided to oppose Senate Bill 433 as introduced. Throughout the process, the Michigan Chamber has worked with the sponsor of the bill, other lawmakers, and the Treasury Department to strengthen and improve this legislation. We were joined in this cooperative effort by members and staff from the Detroit Regional Chamber and the Grand Rapids Area Chamber of Commerce. We are pleased to report to you that a concerted lobbying effort by all three chambers of commerce resulted in numerous positive changes to Senate Bill 433.

Regrettably, on July 27, 2001, the Michigan Retailers Association (MRA) sent an Action Alert concerning Senate Bill 433 to some of its members. This document, captioned "Michigan Chamber and State House Turn Backs on Main Street," unfairly blamed the Michigan Chamber for a lack of progress on this issue. When the Chamber became aware of the July 27th MRA Alert, we called the CEO of the association to bring these inaccuracies to his attention. He said he would remedy the situation. On July 30th,  the Michigan Retailers Association sent out an Action Alert captioned, "Chamber On Board with Retailers over Streamlined Sales Tax."

Despite these difficulties, Chamber members and staff have continued to work diligently on this issue to set the record straight about our position and continue to play a constructive role in the legislative process. The Board of Directors is requested to revise and update our policy statement to more accurately reflect the progress we have made on this complicated but important tax issue.

The Michigan Chamber of Commerce supports the statutory initiative and/or legislation to repeal the Single Business Tax (SBT) in 2007, while continuing to work to develop replacement tax revenue to be paid by business that results in a net tax reduction, is less burdensome on employers, less complicated, and encourages economic development.

Background

In 1999, the Michigan Chamber supported legislation to implement a 23-year phase-out of the SBT, which currently has stalled. In 2002, legislation was passed and signed by Governor Engler to move repeal of the SBT to December 31, 2009.

The merit of Michigan’s Single Business Tax continues to be the subject of intense debate and scrutiny. While Michigan’s economy struggles, many legislators and policy leaders believe one source of our state’s troubles rests with this unique and burdensome tax system.

Republican legislative leaders as well as Oakland County Executive, L. Brooks Patterson, propose to accelerate repeal of the SBT by moving the elimination date to December 31, 2007, and to develop an alternative that is “less burdensome and less costly to employers, more equitable, and more conducive to job creation and investment.” Brooks Patterson is leading an effort to gather petition signatures (350,000) for a statutory initiative to repeal the SBT. Simultaneously, the Michigan legislature has passed legislation to do the same (HB 5743 and SB 1170). Governor Granholm vetoed the legislation on March 31, 2006. Legislators may have another opportunity to pass the statutory initiative or voters would vote on the question of repeal during the November 2006 election if at least 254,206 valid signatures are gathered by May 31, 2006.

Numerous business organizations support legislative and petition efforts to repeal the SBT in 2007 including; the Detroit Regional Chamber, the National Federation of Independent Business - Michigan, the Small Business Association of Michigan, the Michigan Business and Professional Association, and the Michigan Food and Beverage Association.

Since 2002, the Michigan Chamber has continued to be a strong advocate for substantially reducing the overall burden of the SBT on job providers, but current Board policy does not speak directly to the question of repeal. On March 10, 2006, a special meeting of the Michigan Chamber’s Tax Policy Committee was held to discuss pending legislation and Mr. Patterson’s petition drive to accelerate repeal of the SBT, and determine a recommended position regarding repeal of the SBT. Mr. Patterson presented his proposal to the Tax Policy Committee and answered questions. After discussion, and by a majority vote, the Tax Policy Committee recommends that the Michigan Chamber support repeal of the SBT while working to develop an alternative. 

The Michigan Chamber reaffirms opposition to any state level inheritance or estate tax.

Background

In her 2008 Executive Budget Message, Governor Jennifer Granholm proposed a seven-part plan to revise Michigan’s tax structure and provide additional revenue for various state and local government programs and projects.

In addition to replacing the Single Business Tax and imposing a new two percent tax on services, an important element of the governor’s 2008 tax plan is: “An estate tax applicable to about 350 estates each year and decoupled from the federal estate tax. At least 18 states and the District of Columbia have decoupled from the federal estate tax to ensure that their tax codes would be independent and no longer affected by federal changes. Estates that are valued at $2 million or more would be subject to this change with the exception of family farms and businesses. This change will generate about $119 million in 2008.”

Bills to implement the governor’s estate tax proposal have been introduced in the State House (HB 4377) and Michigan Senate (SB 314). On March 15, 2007, as part of the debate over how to balance the state budget, Senate Bill 314 was discharged from the Senate Finance Committee to the floor of the Senate, where it remains on the Senate calendar eligible for debate under general orders (committee of the whole).

Throughout the 1980s and early 1990s, the Michigan Chamber was a leading advocate for repeal of Michigan’s inheritance tax. On July 28, 1989, the Chamber’s Board of Directors approved a policy statement that said, “The State Chamber supports repeal of Michigan’s inheritance tax to help reduce Michigan’s heavy tax burden, assist family-oriented small businesses, and make our state attractive for retirees.” In July 1990, the Chamber Board again approved a similar statement supporting repeal of Michigan’s inheritance tax.

In a major breakthrough for taxpayers and the business community, Michigan’s burdensome inheritance tax was abolished in 1993. However, quickly thereafter Michigan implemented a “pick-up tax”, dependent upon the federal estate tax, which provided taxpayers with a credit for any state death taxes they paid. In 2001, Congress voted to phase out the federal estate tax by 2010. As a result of this federal action, Michigan’s “pick-up tax” was also phased out in 2005. Only 17 states have chosen to establish a stand-alone estate tax as the governor has proposed.

The Granholm administration has called for an estate tax between 8% and 16%, with a $2 million exemption, excluding assets of family-owned businesses and farms. However, this provision relating to small businesses may be disingenuous. According to the American Family Business Institute (AFBI is a Washington, D.C.-based organization opposed to death taxes), the Internal Revenue Code criteria to qualify for the small, family business exemption are extremely difficult to meet. In fact, AFBI experience with this wording has been that it can cost thousands of dollars in legal fees to determine if a business qualifies for this relief.

Inheritance and/or estate taxes result in double taxation of income and encourage Michigan residents to engage in costly and complicated tax planning or simply move to other states. Re-establishment of a Michigan inheritance or estate tax would send taxpayers a negative message that Michigan plans to punish successful entrepreneurs and investors.

Another significant effect of a state inheritance tax is the loss of leaders who set up residency where estates are not taxed. This leads to disinvestment of financial resources in Michigan, and affects service and gifts to various philanthropic cultural, educational, religious and other institutions.

The Michigan Chamber reaffirms support for retaining Article 9, Section 7 of the 1963 State Constitution, which provides “No income tax graduated as to rate or base shall be imposed by the state or any of its subdivisions.”

Background

The Citizens Research Council of Michigan (CRC) Outline of the Michigan Tax System, January 2007, reports that as of December 31, 2006 48 state and local taxes were levied in Michigan, including an income tax. The CRC Outline goes on to explain that income taxes are levied on earnings, with state and local income taxes based on federal adjusted gross income. Local nonresident income taxes are based on earnings from within the taxing cities. In Michigan, only state government and cities are authorized to levy income taxes. Twenty-two Michigan cities have exercised this option.

The State of Michigan enacted a 2.6% flat rate personal income tax in 1967. The state income tax rate reached an all time high of 6.35% in 1983. The current income tax rate is 3.9%. Net income tax collections in 2004-05 totaled $6,038,578,000. Revenue from the income tax is deposited into the State’s General Fund and School Aid Fund.

Historically, the Michigan Chamber has supported a flat rate income tax and opposed establishment of a graduated income tax. Broad policy statements on taxes were approved by the Michigan Chamber’s Board of Directors on January 18, 1967 and July 25, 1980. Portions of the 1967 policy relating to the state income tax follow:

“INDIVIDUAL INCOME TAX: A tax with low rates and low individual exemptions, on the federal exemption system, is definitely preferred over a higher tax rate with higher exemptions … The great majority of public expenditures are made for the benefit of individuals, and good government requires that as many as possible of those whose needs and desires create pressures for public spending should have the corresponding responsibility to assume their fair share of its tax costs …”

The 1980 policy statement effectively guided Chamber efforts in the area of tax reform and tax limitation for over a decade. The following on income taxes still seems appropriate today:

“The State Chamber continues to endorse the concept of a flat rate income tax as embodied in the Michigan Constitution and opposes the concept of a graduated income tax. Considering the graduated rates of the federal income tax, the graduated affect of exemptions and credits on the Michigan income tax, and the exemption of food and drugs from the sales tax, Michigan citizens are already burdened with a highly progressive tax structure …”

Over the 40-year history of the Michigan personal income tax, state legislators and governors have taken steps to make the tax “more equitable” by raising the personal exemption 10 times and creating or expanding various credits. Most recently in 2006, the Legislature approved and Governor Granholm signed into law a bill to further moderate the impact of the tax on low-income individuals by establishing an Earned Income Tax Credit (EITC) beginning in 2008. By 2009, the annual tax savings from the Michigan EITC are estimated to be approximately $300 million.

Since 1967, Michigan voters have rejected three proposals to amend the State Constitution to establish a graduated income tax. Each of these ballot proposals was defeated by a wide margin. In November 1968, a proposal to permit the state to impose a graduated income tax was rejected by a vote of 614,826 in favor to 2,025,052 against. In November 1972, a proposal to permit the state to impose a graduated income tax and allow the Legislature to authorize political subdivisions to levy graduated income taxes was rejected by a vote of 959,286 in favor to 2,102,744 against. In November 1976, a proposal to permit the state to impose a graduated income tax was rejected by a vote of 897,780 in favor to 2,332,513 against. The Michigan Chamber was a lead organization in opposition to the 1968, 1972 and 1976 ballot proposals relating to a graduated income tax.

According to “Michigan at the Millennium, A Benchmark Analysis of Its Fiscal and Economic Structure” (2003 Michigan State University Press), 42 states and the District of Columbia levy income taxes. Most states employ a graduated income tax. Michigan is one of eight states that employ a flat rate income tax. As mentioned previously, Michigan’s personal income tax has numerous credits and exemptions. In the Great Lakes region, Illinois and Indiana also use flat rates. Minnesota, Ohio and Wisconsin use graduated rates.

Following the November 2006 election, much of the public policy debate in Lansing has been focused on the size and scope of state government’s budget issues. As the Legislature and administration have wrestled with possible solutions, Governor Granholm, Speaker Andy Dillon, other Democratic lawmakers, and some interest groups have expressed support in pursuing a ballot proposal in 2007 or 2008 to amend the State Constitution to establish a graduated income tax. This would require a 2/3’s vote of the House and Senate to put a proposal on the ballot for the November 2008 general election. The same type of proposal could be placed on the ballot through a petition drive. Some proponents of a graduated income have also suggested the possibility of a costly special election to consider this new tax as part of the effort to balance the state budget.

Unfortunately, unlike much of the debate over possible expansion of the sales tax to services (which often includes consideration of reform measures like lowering the sales tax rate and/or exempting business-to-business transactions), the latest proponents of a graduated income tax for Michigan have focused almost exclusively on the desire for a substantial increase in state revenue to maintain or increase government spending with little or no consideration of tax reform.

Michigan’s business climate has several strikes against it in terms of tax policy. For example, the Single Business Tax has resulted in decades of confusion and litigation. Our state also continues to impose a costly and burdensome personal property tax on business equipment, machinery and furnishings. Yet, one tax advantage that we have over other states is a flat rate income tax that does not penalize or discourage individual and business taxpayers from working, saving or investing in Michigan.

The Michigan Chamber supports significantly reducing or fully eliminating the Michigan Business Tax Surcharge at the earliest opportunity. The Chamber is also opposed to any further increase in the Michigan Business Tax or the Personal Income Tax.

Background

Michigan’s state budget continues to face structural problems. The Citizens Research Council of Michigan estimates that state government spending pressures will grow 6.5 percent per year compared with a 2.8 percent growth per year in revenues unless significant changes are made in state spending priorities and tax policy. The Fiscal Year 2007/2008 budget “solution” resulted in little in the way of government restructuring, spending reforms, or fiscal efficiency measures. Instead, the budget process relied heavily on tax increases, which were enacted in the middle of the night without adequate input from the business community. Specifically, the legislature and governor agreed to $1.4 billion of increased taxes through a personal Income Tax increase and a new 6% service on over 60 business and personal services. These taxes were increased under the guise of filling a “hole” in a budget that has been “cut to the bone.”  

However, in reality the ‘07/08 state budget was increased by a stunning $900 million over previous year’s spending. The Michigan Chamber’s 2007-2008 Legislative Priorities – under the heading of “Cost of Government” – clearly state “That the appropriations process should not drive tax policy decisions.” Yet, it’s become increasingly clear that that is exactly how, and why, tax policy decisions in Michigan are currently being made.

Faced with an angry business community over the passage of an ill-conceived 6% services tax that did not provide business clarity or appropriate time to adapt business practices and procedures to cope with the new law, the legislature replaced the services tax with a new tax on business; a 21.99% surcharge to the new Michigan Business Tax (MBT). The Surcharge is expected to “sunset” in 2017. However, in light of the fact that Michigan can no longer sustain unbridled spending, real and meaningful cost-saving reform measures must be enacted immediately, and the legislature and governor should make every effort to reduce or fully eliminate the MBT surcharge at the earliest opportunity in order to improve the tax and business climate.

The Michigan Chamber of Commerce continues to believe that our state's economic competitiveness should be improved by providing all taxpayers with broad based tax relief. However, we oppose the 2008 Michigan Fair Tax ballot proposal to amend the State Constitution to impose a 9.75% sales and use tax on consumer purchases of goods and services because the petition currently being circulated has too many unanswered questions and unresolved problems to warrant support.

Background

The Michigan Chamber is convinced that the current situation with taxes and spending in Michigan is unacceptable. Allowing the state appropriations process to drive tax policy decisions has resulted in significant tax increases on many Michigan job providers. Furthermore, the complicated and administratively burdensome nature of our current tax system leaves much to be desired. Though a state-level “Fair Tax” initially sounds appealing, and a national-level concept may have some merit, the proposed 9.75% Fair Tax ballot proposal has too many unanswered questions and unresolved problems to warrant support.  

In response to increasing calls to reduce Michigan’s tax burden and improve our business climate, proponents of a so-called “Fair Tax” have spent the past three years advocating for a Michigan Fair Tax. Their goal has been to eliminate certain business taxes and broaden Michigan’s sales and use taxes in an effort to bring simplicity to our current tax system. The plan generally calls for imposing Michigan sales/use taxes to 9.75% (an approximate 62% increase), expanding the taxes to services, food and drugs (except those exempt by law), while repealing two major business taxes (MBT and business personal property taxes) and Michigan’s Personal Income Tax.

The State Board of Canvassers has approved language for this Constitutional amendment, and the petition and signature-gathering effort (approximately 400,000 needed) is underway to place this on the November 2008 ballot. Due to public interest, and the fact that the Michigan Chamber has been actively involved in the state’s tax limitation movement, it is important for the Michigan Chamber to formulate a position on this issue.

Proponents are advocating the plan based on the following selling points: simplicity; repeal of the MBT, the business personal property tax, the Michigan Personal Income Tax; and “pre-bates” (annual refunds to all taxpayers to alleviate regressive nature of sales tax).

Other features of the plan include providing increased and guaranteed funding to local governments, elimination of any estate taxes and a constitutionally required insurance premiums tax.

There are too many unanswered questions and unresolved issues to warrant support; first and foremost is the recent experience with the 6% “service” tax, which was hastily approved by the Legislature and Administration. The debacle proved that it is much easier to talk about the idea of a sales tax on services than it is to implement. 

Michigan “Fair Tax” advocates claim that their proposal will eliminate income taxes and prohibit general business tax increases without a vote of the people. However, in their proposal is the potential for a major expansion of the income tax, allowing any subdivision of the state (City, Village, Township, County, School Districts) to levy an income tax. Currently, only cities above a certain population threshold may adopt a city-level income tax. In addition, the proposed Article IX, Section 47 of the proposal, provides that if revenues from the increase in the expanded sales and use tax falls short of expected revenues, the rate will automatically increase for one year (the baseline formula is previous years’ sales and use tax revenues adjusted for population and inflation). No reference to these two provisions is found in the proponents marketing material.

There are several other significant concerns and reservations about the Michigan “Fair Tax” proposal.

• This proposal would shift out-of-state tax burden to in-state taxpayers. Despite the ability to levy a higher sales tax on visitors from outside Michigan, we would lose the ability to tax out-of-state taxpayers through the MBT (shifting an estimated $850 million onto Michigan taxpayers). States are currently prohibited from mandatory collection of sales tax across state borders. This would put Michigan sellers at a competitive disadvantage to businesses in other states that would not have to charge a tax on services, or such a high rate in general – particularly those in border counties.  In addition, the potential for tax avoidance is increased. Michigan would have the highest state sales tax rate in the country, having a potentially negative impact on sales of cars, boats, trucks, appliances, etc. 
• Shift to individual taxpayers. Regardless of the reality of the final incidence of tax, the perception that businesses would be nearly fully relieved of paying taxes at the expense of individuals could create challenges in securing voter approval. 
• Complicated and difficult to administer. For example, the proposal calls for providing “pre-bates” to be sent to individuals to offset the regressive nature of sales taxes. Upon close inspection, the tax application, collection and distribution are complicated and would be difficult for taxpayers and administrators of the tax policy. Also, the proposal calls for a complicated revenue distribution stream based on sales on tangible property versus sales of services, food, drugs, etc. It is not uncommon for a retailer to remit sales tax revenues to the state of Michigan en masse. There is not a tracking system currently within the remittance mechanism to determine the revenue source. This problem would introduce a whole new level of administrative complexity for taxpayers and Administrators.
• Rate and revenue questions. “Fair Tax” proponents claim their proposal would be “revenue neutral,” – however, this has not been confirmed by an objective third party. There has been some concern expressed that the revenues generated by a 9.75% rate fall significantly short of the intended goal.

As of this date, the only business organization supporting this proposal is the Small Business Association of Michigan.

At the February 29, 2008 meeting of the Michigan Chamber Tax Policy Committee, a majority of committee members voted to oppose the 2008 Michigan Fair Tax ballot proposal.

The Michigan Chamber believes that broadband deployment is an important economic development issue. The Chamber also agrees with those who think state government can and should play a more proactive role in encouraging private sector development of Michigan's telecommunications infrastructure.

Two of the greatest barriers to broadband deployment in Michigan today are: 1) over regulation by local government and, 2) disincentives to investment in current state tax law. We urge the legislature and administration to make removing these existing barriers to broadband deployment a top priority. We also encourage the legislature and administration to consider prompt action of other policy alternatives intended to leverage free market principles more effectively.

The Michigan Chamber also reaffirms its support for: meaningful tax incentives for broadband deployment, and strong "fair play" standards to prevent the public sector from using its regulatory authority and tax-exempt status to engage in unfair competition with the private sector.

In keeping with the Michigan Chamber's support for free enterprise and limited government, we believe the debate over broadband deployment must not be allowed to turn into an effort to re-regulate Michigan's telecommunication industry. On-going regulatory issues concerning Michigan's Telecommunication's Act, such as end user line charges or structural separation, are public policy questions that can and should be addressed separately.

We oppose a state agency with open-ended powers over broadband, including:

• the ability to own and operate facilities,
• the authority to regulate broadband, and
• the authority to give grants and levy charges.

Instead, the Michigan Chamber supports legislation to provide limited and carefully targeted community assistance to allow local officials to develop their own "last mile" solutions for broadband deployment. In order to maximize administrative efficiency and promote flexible local solutions, we recommend that this legislation be modeled after Public Act 32 of 1986, the "Emergency Telephone Service Enabling Act" which allows communities to provide 9-1-1 service, or the State Water Pollution Control Revolving Fund which provides low interest loans to local governments for storm water and waste water infrastructure.

Furthermore, the Michigan Chamber supports the following recommendations based upon the Michigan Economic Development Corporation's LinkMichigan report:

Statewide Public User Aggregation

State government should join forces with higher education users, K-12 users, local government users and other public partners willing to aggregate their collective purchasing demand and ask private sector-bidders interested in serving the state to provide advanced telecommunications services to each. 

Tax and Permitting Fairness

State government should establish a common tax and fee system to replace all of the differing systems in place around the state today. This legislation should be developed with minimal revenue impact and, while recognizing appropriate differences, place all carriers under a common system. Such a system should be linked to a central one-stop right-of-way application and permitting system administered by the state.

Access to Information

State and local governments should be provided access to more detailed information about the location of telecommunications.

The Michigan Telecommunications Act (MTA) establishes a state regulatory framework for an important industry that continues to transform itself due to emerging technologies, evolving customer demands, and regulatory developments at the federal level. Since enactment in 1991, the MTA has been revised and updated on several occasions to reflect changes in technology, markets and the regulatory environment. In keeping with this legislative history, the Michigan Chamber supports revising and updating the MTA before the law sunsets on December 31, 2005 in a way that continues to provide certainty and predictability in Michigan’s pro-competitive telecommunications policy.

The Michigan Chamber supports legislation to amend the MTA so that all providers are able to compete freely and fairly. To carry out this pro-competitive policy, the Chamber advocates the following:

• Maintain the role of the Public Service Commission (PSC) as the arbitrator of disputes between providers and retain existing state regulatory authority over wholesale matters, including interconnection agreements.
• Maintain adequate consumer protections such as prohibiting slamming or cramming.
• Maintain retail price regulation on essential residential telephone service so that customers have a basic option available with PSC oversight.
• Preserve the current prohibited conduct provisions of the Act.
• Allow providers to offer other retail services and combinations of retail services without PSC price regulation.
• Prohibit schools from selling or disposing of excess network capacity for competitive purposes.
• Allow local governments to invest in networks for internal purposes, but prohibit competition against the private sector.
• Maintain the current requirement that state regulations be consistent with federal regulations.
• Ensure that providers investing in network infrastructure in Michigan are not subject to state rules that are more burdensome than federal regulations.
• Maintain the PSC’s role in administering and enforcing state and federal regulations.
• Retain the requirement that the PSC prepare an annual progress report to the Legislature on the state of telecommunications competition in Michigan and revising the report to include additional information from public sources on the level of competition.

Due to a lack of consensus within our membership, the Michigan Chamber takes no position on the franchise issue.

Background

Michigan’s Telecommunications Act (MTA), enacted in 1991, was the focus of major rewrites in 1995 and 2000, and amended in 1997, 1998, 1999 and 2002. This important law is currently scheduled to sunset or expire on December 31, 2005.

According to the Michigan Public Service Commission (PSC), the MTA encouraged competition in the provision of local communication services, the introduction of new and enhanced services, and among other things, emphasized streamlining the process for new entrants into the telecommunications marketplace. The PSC has issued over 176 licenses to companies to provide local service in Michigan. The MTA is also widely recognized in the private sector as one of the better state statutes in the country.

On May 31, 2005, the PSC issued its fifth annual report on the status of telecommunications competition in Michigan. In releasing that report, PSC Chairman Peter Lark said, “Michigan continues to be a leader in the nation in offering telecommunications services to customers. As telephone competition has grown, customers have benefited.”

Chairman Lark also said, “This year’s report, however, does show that the increase in competition is the smallest since the Commission issued its annual report. My fellow commissioners and I will carefully watch what happens to Michigan’s competitive local exchange market in 2005 and beyond. The full effect of the Federal Communications Commission’s order, which no longer requires local providers to offer competitors the use of a platform of their facilities at regulated rates after March 11, 2006, is not yet known. The PSC will continue to work to preserve competition in Michigan during this transitional time and thereafter.” The entire report is available on the MPSC web site at: www.michigan.gov/mpsc.

This policy proposal is recommended for approval by the Michigan Chamber’s Energy, Technology & Telecommunications Committee and is the result of extensive discussions among member firms.

Approved by Board of Directors September 20, 2011

The Michigan Chamber supports Governor Snyder’s proposal to build a New International Trade Crossing and supports as well a comprehensive, statewide transportation investment plan. 

Background

The Detroit River has been a major international crossing for many years, with the volume of commerce that flows between the two countries being important to both nations. For Michiganders, the issue of international trade was put front and center when Governor Snyder surprised many lawmakers by including the call for a new crossing during his inaugural State of the State address. Lieutenant Governor Brian Calley has taken the lead role is lobbying the Legislature and has been integrally involved in both the legislative and public debate. In February 2011, the Michigan Chamber received a formal request from the Lt. Governor that the Michigan Chamber support passage of legislation to facilitate construction of a New International Trade Crossing.

At the time of receiving the Lt. Governor’s request, no legislation existed; however, it was understood that the proposal was to be for a new bridge to be built through cooperation of the State of Michigan and the Canadian government. The location of the new bridge is to be a few miles south of the Ambassador Bridge, touching ground in the Brighton Beach area of Windsor and the Delray neighborhood of Detroit. The Michigan Chamber has also received a request from the Ambassador Bridge Company – a member in good standing – to oppose any legislation that would allow for construction of a new bridge developed through governmental action in direct competition with the current Ambassador Bridge. Michigan Chamber staff indicated to both proponents and opponents that the Chamber would consider the issue once a bill was drafted and officially introduced.

Despite the Governor’s call for action and frequent discussion of a new bridge among Lansing insiders, legislation was not introduced until June 7, 2011. The main bill of a two-bill package, is Senate Bill 410, which is sponsored by Senate Majority Leader Randy Richardville. SB 410 would create the Michigan Governmental Authority for a new International Trade Crossing within the Michigan Department of Transportation. The Authority would be responsible for coordinating the construction of the bridge on behalf of the State of Michigan.  The second bill is SB 411, which is technical in nature to facilitate the receipt and expenditure of funds to build the bridge.

Currently, bridge proponents estimate the total cost of the project to be $3.8 billion; however, proponents’ state that Michigan’s costs would be covered by the Canadian government through a loan that would be repaid will toll revenue. Chamber staff has been told that Senator Richardville introduced the legislation as a courtesy to the Governor to facilitate further discussion of a new bridge because other legislators had either decided not to support the issue or made a determination that they wanted to avoid the controversy relating to bill sponsorship. 

Earlier this summer, the Senate Committee on Economic Development conducted a couple hearings on the general issue of the bridge, allowing both proponents and opponents to voice their opinions. The hearings were well attended by both the general public and legislators.  Legislators on the committee were inquisitive, although they communicated frustration at the lack of concrete answers for their questions. Much of the debate centered on data points generated by experts on both sides of the debate that seemingly told two very different stories. On more than one occasion, exasperated senators said they didn’t know who to believe and that more investigation and subsequent hearings would be needed. Chamber staff has been informed that if SB 410 is brought to a vote it would be after several more committee hearings were conducted this session to allow for more due diligence. 

Proponents of SB 410 assert the need for another crossing based upon their projections of increased crossing demand over the next several decades. As for location, they believe the proposed Delray site is better positioned to allow for connection to freeways, specifically the Canadian Highway 401. 

Opponents of the new bridge contend that traffic levels are at historic lows and have been in steady decline for over a decade; in fact, they cite reports that show current traffic equating to less than half of the volumes recorded in the 1990’s. Opponents cite these traffic studies to rebut the proponent’s stance that current traffic loss is just a result of the most recent economic challenges facing Michigan and the entire US. Another major point of contention for opponents, including numerous legislators, is the belief that building the proposed bridge would wrongfully result in government competition with the private sector. As proof, opponents point to the proponents’ own prospectus which reveals that, in order to be viable, the new bridge will be dependent upon taking significant business away from the Ambassador Bridge (stated to be 45%).

Since the beginning of this debate, it has become more contentious and it appears that support in the Legislature is unclear. Recently, the Lt. Governor has indicated that this legislation may not be required to build a new bridge, as several other options supplying the appropriate authority to facilitate construction are available. Although it was noted that the legislation is not required, the other options were not detailed since the administration’s preference at this point is to pass a bill. In November, Governor Snyder is scheduled to deliver a Special Message on Transportation and Infrastructure during which we hope to get further clarification regarding the status of this issue and if it will be rolled into a bigger package or left as a standalone issue.

At this time, the fate of SB 410 is still uncertain. It appears that many Republican legislators would prefer that this issue be set aside because it has become very controversial and hyper political. If a vote were taken today, legislative leaders in both chambers advise that proponents are probably short of the votes needed for passage. This is not to suggest that a deal couldn’t be constructed to achieve passage, but it appears that such an endeavor would be a long and complicated process. Many legislators that Chamber staff has spoken with concede they would prefer the issue not be taken up so they can focus on other agenda items. 

One thing that does appear certain is that the courts will become involved before any shovels are put in the ground on a new bridge. This appears likely regardless of whether legislation is passed or the Governor utilizes some other authority. 

The Michigan Chamber supports the development of a cost-effective, statewide plan to invest wisely in Michigan’s transportation infrastructure. To accomplish this goal, the Chamber urges the Legislature and Administration to: retain a user fee-based system of financing where the cost of service relates to the benefit received; more vigorously pursue innovative public-private partnerships including toll roads; and the promotion of more open and competitive bidding for state contracts through repeal of the state’s costly Prevailing Wage Act.

The Chamber recognizes that bonding for infrastructure, such as roads, water, sewer, streets, airports, is a legitimate function of government. However, the Chamber strongly believes that creating jobs is primarily the role of the private sector. The State of Michigan cannot borrow or spend its way to economic prosperity. The Chamber supports retaining the 155-year old provision in the current State Constitution that wisely prevents state government from making direct equity investments in individual, for-profit companies. We have serious reservations about any proposal to bond for jobs that would involve state government incurring long-term debt for short-term operating expenses or using state funds to pick winners and losers by making high-risk equity investments in private, for-profit firms in new or emerging technologies.

The Michigan Chamber of Commerce reaffirms its support for a fair and balanced unemployment insurance (UI) system that provides an adequate level of benefits to employees who are temporarily unemployed through no fault of their own at a cost to employers that is affordable and competitive with other states. The Chamber supports enactment of cost-saving reform measures such as a establishing a one-week waiting period; strengthening requalification requirements for claimants who voluntarily quit or are discharged for misconduct; strengthening seeking work requirements; and lowering the minimum UI tax rate for employers who have had no benefits charged to their account for five years or more.

The Michigan Chamber of Commerce is opposed to any legislation that would reestablish the costly practice of automatic annual UI benefit increases. We believe the legislature should act on any increases in benefits as may be deemed necessary. Increases in UI benefits should be carefully targeted to help working families by increasing dependency allowances.

Preserving the financial solvency of Michigan’s UI trust fund should continue to be a top priority for the legislature and the administration. Benefit levels and eligibility standards should be considered in the context of maintaining a solvent trust fund, and an equitable tax burden on employers that encourages investment and job creation in Michigan.

The Michigan Chamber of Commerce supports legislation to amend the Workers' Disability Compensation Act in response to recent court decisions in the following ways:

• to state that mental disability claims arising from lawful, nondiscriminatory, good faith personnel actions shall not be compensable,
• establishing a specific period of time during which an offer of favored work must remain available when the employee has unreasonably refused the offer,
• and specifying that an employee may be terminated for non-compliance with the employer's rules, regulations, and procedures during the first 100 weeks of reasonable employment, without triggering a presumption that workers' compensation benefits should resume.

Background

In March 2000, the Michigan Supreme Court issued two opinions [McJunkin v Cellasto Plastic Corporation] [Perez v Keeler Brass Company] pertaining to situations when an employee sustains an injury at work and refuses offers of reasonable employment (sometimes referred to as favored work), but at a later date agrees to perform the work that had been refused. In a third related decision [Russell v Whirlpool Financial Corporation], the Court also addressed the issue of termination from reasonable employment. Because these cases were consolidated by the Court, they are commonly referred to as the "workers' compensation trilogy." All three cases were decided unanimously.

In McJunkin, the Court concluded that an employee with a work related disability who first unreasonably refuses an offer of reasonable employment, but later agrees to accept the employment, is entitled to workers' compensation benefits even if the job that had been offered no longer exists. The Court said there is no authority for permanent forfeiture of benefits as the result of an employee's temporary refusal of reasonable employment. The Court set no limit on the length of time an employee could refuse reasonable employment before changing his/her mind. Impact for employers: there is no closure on workers' compensation claims in which the injured worker has refused reasonable work. Even years later, the worker could decide to accept a previously rejected offer and begin collecting benefits again prospectively.

In Perez, the Supreme Court held that if an employee with a work-related disability voluntarily quits reasonable employment, then moves out of the state, then years later returns to the state and offers to work again, the employee is entitled to resume receiving workers' compensation benefits if the employer does not allow the employee to return to work. Impact for employers: The employee would not be entitled to workers' compensation benefits during the time period when he or she had voluntarily quit reasonable work. However, the employee would be again entitled to receive benefits prospectively when he or she offers to return to work after any period of time has elapsed.

In Russell, the Court ruled that if an employer terminates for any reason an employee who has performed favored work for less than 100 weeks following an injury, that employee is again entitled to collect workers' compensation benefits. Impact for employers: if an employee is discharged for just cause, i.e., employee misconduct, absenteeism, the employee would still be entitled to wage loss benefits. This applies a very different standard for employees on favored work than for other employees. The plain language in Section 301(5)e of the Workers' Disability Compensation Act does say, "for any reason." This is the only section where that language appears, other sections say ":through no fault of his or her own." The Michigan Chamber has long identified this section as a potential problem which merits legislative reform.

All three decisions spell out the specific language in the workers' compensation statute that led to these results. For example, again in Perez, Justice Young says,

"... the quoted statutory provisions establish the law in this area. The Legislature chose the words of the statute, and we are bound by them." (emphasis added)

In Russell, Justice Cavanagh said,

"Subsection 301(5) does not grant the employer the right to terminate the employee's ability to return to work. In fact, subsection 301(5)(e) provides that an employee who loses his favored work position 'for whatever reason' shall continue to receive benefits. The plain language of subsection 301(5)(e) considers the possibility that an employee on favored work might lose a job for "just cause." When the employee has been employed pursuant to subsection 301(5)(e) for less than 100 weeks, the Legislature has decided that benefit availability continues."  (emphasis added)

Again, in McJunkin, Justice Kelly writes,

"The Legislature worked a subsequent change or development in the law when it codified the favored work doctrine as the reasonable employment doctrine...The primary goal of judicial interpretation is to ascertain and give effect to the intent of the Legislature...as case law must accurately reflect the legislative enactment on which it is based, (the Court of Appeals decision in) Russell must be abandoned." (emphasis added)

Clearly, the Supreme Court is telling job providers that legislative change is necessary to address the critical issues relating to reasonable employment.

It is also important to note a fourth significant decision released less than three weeks after the trilogy of cases. The fourth case, Calovecchi v State of Michigan, deals with the issue of mental injuries in the workers' compensation system. It also was unanimous.

In Calovecchi, the Supreme Court ruled that compensation is not precluded under the Workers' Disability Compensation Act for mental injuries caused by acts of discipline that do not sever the employment relationship. Writing for the Court, Justice Corrigan said,

"Defendant contends that our failure to extend Robinson to preclude the payment of compensation for mental injuries caused by acts of discipline (and other employer actions) that do not sever the employment relationship would have the 'unfortunate result' of encourag[ing] employers to terminate the employment relationship rather than to impose less severe discipline. This prediction may or may not come true. These policy questions are properly directed toward the Legislature rather than to this Court. Our duty is to construe the text of the statute before us, not to reach the policy result we judges think preferable."  (emphasis added)

The Michigan Chamber has been actively involved in the efforts to clarify the mental injury provisions of the workers' compensation act for nearly five years.

During the last legislative session, two bills were introduced to address these concerns, but neither moved through the process before adjournment. During the current session, one bill - House Bill 4512 (Kuipers) - has been introduced and referred to the House Committee on Employment Relations, Training & Safety.

The Michigan Chamber of Commerce supports legislation to amend the Workers' Disability Compensation Act in response to recent court decisions in the following ways:

• to state  that mental disability claims arising from lawful, nondiscriminatory, good faith personnel actions  shall not be compensable,
• establishing a specific period of time during which an offer of favored work must remain available when the employee has unreasonably refused the offer,
• and specifying that an employee may be terminated for non-compliance with the employer=s rules, regulations, and procedures during the first 100 weeks of reasonable employment, without triggering a presumption that workers= compensation benefits should resume.

Background

In March 2000, the Michigan Supreme Court issued two opinions [McJunkin v Cellasto Plastic Corporation] [Perez v Keeler Brass Company] pertaining  to situations when an employee sustains an injury at work and refuses offers of reasonable employment (sometimes referred to as favored work), but at a later date agrees to perform the work that had been refused.  In a third related decision [Russell v Whirlpool Financial Corporation], the Court also addressed the issue of termination from reasonable employment.  Because these cases were consolidated by the Court, they are commonly referred to as the "workers' compensation trilogy."  All three cases were decided unanimously.

In McJunkin, the Court concluded that an employee with a work-related disability who first unreasonably refuses an offer of reasonable employment, but later agrees to accept the employment, is entitled to workers' compensation benefits even if the job that had been offered no longer exists.  The Court said there is no authority for permanent forfeiture of benefits as the result of an employee's  temporary refusal of reasonable employment.  The Court set no limit on the length of time an employee could refuse reasonable employment before changing his/her mind.  Impact for employers: there is no closure on workers' compensation claims in which the injured worker has refused reasonable work.  Even years later,  the worker could decide to accept a previously rejected offer and begin collecting benefits again prospectively.

In Perez, the Supreme Court held that if an employee with a work-related disability voluntarily quits reasonable employment, then moves out of the state, then years later returns to the state and offers to work again, the employee is entitled to resume receiving workers' compensation benefits if the employer does not allow the employee to return to work. Impact for employers: The employee would not be entitled to workers' compensation benefits during the time period when he or she had voluntarily quit reasonable work.  However, the employee would be again entitled to receive benefits prospectively when he or she offers to return to work after any period of time has elapsed.

In Russell, the Court ruled that if an employer terminates for any reason an employee who has performed favored work for less than 100 weeks following an injury, that employee is again entitled to collect workers' compensation benefits. Impact for employers: if an employee is discharged for just cause, i.e.:  employee misconduct, absenteeism, the employee  would still be entitled to wage loss benefits. This applies a very different standard for employees on favored work than for other employees. The plain language in Section 301(5)e of the Workers' Disability Compensation Act does say, "for any reason." This is the only section where that language appears, other sections say "through no fault of his or her own."  The Michigan Chamber has long identified this section as a potential problem which merits legislative reform.

All three decisions spell out the specific language in the workers' compensation statute that led to these results. For example, again in Perez, Justice Young says,

"... the quoted statutory provisions establish the law in this area. The Legislature chose the words of the statute, and we are bound by them."   (Emphasis added)

In Russell, Justice Cavanagh said,

"Subsection 301(5) does not grant the employer the right to terminate the employee's ability to return to work.  In fact, subsection 301(5)(e) provides that an employee who loses his favored work position - for whatever reason - shall continue to receive benefits. The plain language of subsection 301(5)(e) considers the possibility that an employee on favored work might lose a job for 'just cause.' When the employee has been employed pursuant to subsection 301(5)(e) for less than 100 weeks, the Legislature has decided that benefit availability continues." (Emphasis added)

Again, in McJunkin, Justice Kelly writes,

"The Legislature worked a subsequent change or development in the law when it codified the favored work doctrine as the reasonable employment doctrine  . . .  The primary goal of judicial interpretation is to ascertain and give effect to the intent of the Legislature  . . .  as case law must accurately reflect the legislative enactment on which it is based, (the Court of Appeals decision in) Russell must be abandoned." (Emphasis added)

Clearly, the Supreme Court is telling job providers that legislative change is necessary to address the critical issues relating to reasonable employment.

It is also important to note a fourth significant decision released less than three weeks after the trilogy of cases.  The fourth case, Calovecchi v State of Michigan, deals with the issue of mental injuries in the workers' compensation system. It also was unanimous.
 
In Calovecchi, the Supreme Court ruled that compensation is not precluded under the Workers' Disability Compensation Act for mental injuries caused by acts of discipline that do not sever the employment relationship.  Writing for the Court, Justice Corrigan said,

"Defendant contends that our failure to extend Robinson to preclude the payment of compensation for mental injuries caused by acts of discipline (and other employer actions) that do not sever the employment relationship would have the 'unfortunate result' of encourag[ing] employers to terminate the employment relationship rather than to impose less severe discipline.  This prediction may or may not come true.  These policy questions are properly directed toward the Legislature rather than to this Court.  Our duty is to construe the text of the statute before us, not to reach the policy result we judges think preferable." (Emphasis added)

The Michigan Chamber has been actively involved in the efforts to clarify the mental injury provisions of the workers' compensation act for nearly five years.

During the last legislative session, two bills were introduced to address these concerns, but neither moved through the process before adjournment.  During the current session one bill, House Bill 4512 (Kuipers) has been introduced and referred to the House Committee on Employment Relations, Training & Safety.

The Michigan Chamber of Commerce supports the proposed amendment to the Michigan Constitution of 1963 sponsored by the state legislature under House Joint Resolution E that will be on the August 6, 2002 statewide primary election ballot for voter approval.

The proposed amendment would amend Section 12 to Article IV, to provide that the state officers compensation commission’s determination of certain salaries and expense allowances become effective only upon approval by the legislature for the following legislative session.