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.