MIRS provides comprehensive news and analysis of state government delivered in written reports detailing the activities of the House, Senate, Judicial and Executive branches of Michigan state government.
Michigan News And Capitol Report, Week Ending Fri., Jan. 11, 2019
State Revenues To Tick Up $264M This Year, $225M More Next Year
But the agreement reached Friday at the Consensus Revenue Estimating Conference (CREC) still amounts to a $245.2 million decrease in General Fund (GF) dollars from FY 2018, meaning the decrease from FY 2018 to FY 2019 ended up being less than expected.
The principals at CREC decided the GF estimates Friday were $288.6 million more than expected in the May 2018 estimates. As for the School Aid Fund (SAF), it still increased from FY 2018 to FY 2019, but $23.9 million less than expected.
The consensus on total FY 2019 GF revenue was $10.7 billion and $13.5 billion for the SAF.
For next budget year, FY 2020, there was $199.1 million more for GF and $25.9 million more for SAF than previously estimated, for a net increase estimate of $225 million more in FY 2020.
But state Budget Director Chris Kolb described the numbers approved Friday as "pretty flat." He also said spending commitments the Legislature has tied money to -- like the growing contribution of GF dollars to roads -- need to be taken into account as well.
Asked about getting rid of the "pension tax" -- restoring the tax exemption on all government employee pension income -- and if it would be concerning to lose more state revenue, given the projections, Kolb said, "I don't need a calculator to answer that one."
And asked if a road-funding plan would be incorporated into Whitmer's first budget, Kolb said, "We're working with the Governor to make sure that her priorities are reflected in the budget."
Kolb said the state constitution gives a new governor an extra 30 days to come up with a budget, meaning the Whitmer administration has 60 days from the first day of session to come up with a recommendation, giving her until March 10.
"We're going to take as many of those days to do it," Kolb said.
State Treasurer Rachael Eubanks said there would be continued growth through FY 2021, albeit at a more modest rate. In a press release, Eubanks attributed GF estimates going up due to higher projected growth in individual and corporate income taxes.
Income tax payments were projected upward for FY 2019, compared to the May estimates, and so were use tax and business tax revenue projections, according to the state.
Kolb pointed out the state's GF revenue stream is roughly the same now as it was in 2001 -- right around $10 billion.
"General Fund revenues have remained flat over a long period of time, and so we have a fundamental problem of constrained resources and additional funding needed to address real problems for Michigan’s residents," Kolb said in a statement.
In terms of the revenue limit the state is subjected to, the state will be $10.4 billion below the limit in FY 2019, and that's expected to rise to $11.9 billion below the limit in FY 2021.
For the initial estimates on FY 2021 numbers, the CREC principals projected GF dollars go up $134.8 million, or $10.8 billion, and SAF was projected at increasing $337.7 million to $14.2 billion.
For FYs 2022 and 2023, combined GF and SAF growth was projected at 2.9 percent in 2022 and 2.8 percent in 2023.
Sen. Jim Stamas (R-Midland), chair of the Senate Appropriations Committee, said Friday in a statement it's "good news that Michigan’s economy is growing and is expected to continue to grow" and that the "economic and fiscal forecast illustrates that we must continue making smart budget decisions that meet our challenges and keep our state on solid financial footing."
Bill Banning 'Dark Store Loophole' Returns
HB 4025, would prohibit the use of self-imposed deed restrictions to lower the value of such stores and direct the Tax Tribunal to use three methods of appraisal when considering assessment appeals.
New Rep. Julie Brixie (D-Meridian Twp.) is a co-sponsor of the legislation and LaFave said he expects she'll be introducing a companion bill shortly.
The bill is a re-introduction of legislation offered last session by former Rep. David Maturen. That bill never got a committee hearing, but an earlier attempt passed the House only to die in the Senate.
"The dark store is an ingenious tax cut that dark stores’ lawyers figured out and, in my opinion, has manipulated the Tax Tribunal into getting their taxes lowered," LaFave said.
"Like everybody would like to do, myself included, I would love not paying taxes. Unfortunately, I'm not a multi-billion dollar corporation with a ton of lawyers able to argue at the Tax Tribunal that my home is worth less than it actually is."
LaFave argues that deed restrictions are being used to artificially lower the valuation of a property.
"If we were to sell it, we are going to put these deed restrictions on it that limit the building's use to something other than the highest and best use. If a Menards went out of business, they would put in something that said it can't be a sporting goods store, it can't be a grocery store, all of the highest and best uses. So, you are left with a church or a personal dwelling. Obviously, that is a terrible use of that giant million-dollar building," he explained.
He also contended the Tribunal is currently using only the comparables method of appraisal to calculate the value of the building. That's inappropriate, he said, because few big box store sell, and those that do are being sold because they aren't profitable.
HB 4025 would direct the Tribunal to also use a cost approach, considering how much was paid for the land and building, and a rental approach, how much the building could command were it rented out.
"Homeowners have to use all three appraisal methods when they get their buildings assessed. Small mom-and-pop shops use all three appraisal methods and blend them together appropriately when they get their taxes done," he said.
Although the Tribunal has ruled in the Menards case once, that ruling was appealed and the Court of Appeals remanded it to be reheard by the Tribunal. That was appealed to the Michigan Supreme Court, which declined the case. The case is expected to be taken up again by the Tribunal in early this year.
The Michigan Chamber of Commerce's director of tax policy, however, said any changes to the law would "upend the longstanding valuation principles established over the last century."
"Any change in the law to diminish the rights of a taxpayer to appeal the estimated value of one's property should be met with immense opposition," said the Chamber's Dan Papineau.
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Speaker Says Auto Insurance Rates 'Holding Back Our State'
Michigan has had the nation's highest auto insurance rates for the fifth straight year in 2018, according to Insure.com. Chatfield it called "unacceptable."
Chatfield voiced the need for reforms to break that trend only moments after Senate Majority Leader Mike Shirkey (R-ClarkLake) told his chamber that "we have the obligation to reform auto insurance."
The solution, Chatfield said, "cannot be dictated by the insurance industry, and the solution cannot be dictated by health care executive."
"The simple truth is that any real solution must make car insurance more affordable and meet the needs of drivers all across our state, no matter where they live," he said as he addressed this session's House lawmakers following their ceremonial swearing in Wednesday.
The Insurance Alliance of Michigan (IAM) issued a news release applauding the leaders' statements, with new Executive Director Tricia Kinley saying the group will work with leaders on both sides of the political aisle to forge a solution.
At least one member already has a bill on matter in the hopper. Rep. Beau LaFave (R-Iron Mountain) is giving legislators the option of putting forward a 2020 ballot proposal that includes benefit choice, a new hospital fee schedule and a mandatory rate cut.
His plan gives drivers the option to continue with unlimited lifetime coverage with a 10 percent cut, a $500,000 benefits cap with a 20 percent cut and a $250,000 benefits cap with a 40 percent rate cut. Hospitals would need to use the worker compensation fee schedule for car accident victims.
Sen. Erika Geiss (D-Taylor), Sen. Paul Wojno (D-Warren), Sen. Marshall Bullock (D-Detroit) and Rep. Lisa Stone (D-Warren) were among the Democrats who referenced insurance reform in their news releases Wednesday as being a top priority.
Chatfield was unanimously elected Speaker after being nominated by Rep. Bronna Kahle (R-Adrian), and seconded by Rep. Christine Greig (D-Farmington Hills). Both praised his bipartisan credentials as they made the nomination.
Chatfield responded with strongly bipartisan comments in his speech.
"I have a question for everyone sitting here in this Chamber. How do we successfully tackle these issues and solve the challenges facing our constituents without addressing the more systematic problem of extreme partisanship that is plaguing D.C. and our institutions nationwide? How do we move the state forward without a willingness to cooperate with one another?" Chatfield said.
"We are not Washington, D.C., and let's ensure we don't become it. While they're plagued with an inability to cooperate and be civil with one another, we will show them how to lead," he said.
Chatfield promised to work not only with Shirkey, but new Gov. Gretchen Whitmer.
"Though we are in different political parties, the success of Gov. Whitmer means the success of the state of Michigan. And I will work every single day for that success," he said.
The new Speaker named several other issues high on his agenda, including funding for infrastructure "with the proper oversight channels in place that can guarantee safe roads and clean drinking water."
Noting that Michigan "ranks dead last among all states in government transparency," Chatfield promised to "put an end to this dark-age in Michigan politics."
Wednesday, a bi-partisan group of House Republicans and Democrats introduced a 10-bill Freedom of Information Act (ACT) expansion package that mirrors the work the House did last year on the topic in that it creates a Legislative Open Records Act (LORA).
And he called for additional reforms of the criminal justice system "to ensure we're providing real opportunities for those re-entering our society and that we are not over-criminalizing our citizens."
Chatfield closed with a final note of unity.
"Whether Republican or Democrat, we're all on Team Michigan in this House," he said. "Partisanship should only have its place on Election Day, and we should leave it at the door when we enter this chamber. It's time to govern."
McCormack Elected Chief; Viviano Named Chief Pro Tem
McCormack's election marks the first time in state history that the Governor, Attorney General, Secretary of State, and Chief Justice are all women. Michigan is the only state in the nation with women in all four leadership posts.
"Michigan's courts must be accessible to all, engaged with the communities they serve, independent of political pressure, and efficient in making the best use of public resources," McCormack said in a statement. "My goal is to build on past achievements while redoubling our efforts to help Michigan's judiciary become more responsive to the public we serve."
GOP Justice David Viviano will serve as chief justice pro tem – a newly created post. He will focus on court technology and administrative reforms to improve service and responsiveness to the public.
McCormack, a Democrat first elected to the Court in 2012 following her service on the faculty of the University of Michigan Law School, succeeds Chief Justice Stephen Markman and is the sixth woman to serve as chief justice.
"I am grateful to former Chief Justice Markman for his leadership," McCormack said. "He worked diligently for the people who rely on our courts, and we are all thankful for his service."
The court remains a 4-3 majority of Republican-nominated justices, although Viviano and fellow GOP Justice Beth Clement have joined with McCormack and Justice Richard Bernstein to make up a majority on some high-profile cases.
The Democratic-nominated justices, including new Justice Megan K. Cavanagh, came to the bench via an election while Clement, Viviano and Zahra were appointed by former Gov. Rick Snyder. Markman was appointed by then-Gov. John Engler.
McCormack highlighted several key initiatives that will help Michigan courts be more accessible, engaged, independent, and efficient. She wants to use technology to increase access, improve service, and make the judiciary more efficient. She's wants more in the way of statewide e-filing, online dispute resolutions, and easy-to-use web-based tools to support self-represented litigants.
Other initiatives include: Reform of pretrial practices so that bail decisions guard individual rights, protect public safety, and reduce the cost of incarceration; and problem-solving courts that emphasize treatment, rigorous monitoring, and community support to help defendants tackle problems such as substance abuse, dramatically reducing repeat offenses and making neighborhoods safer.
Retired Chief Justice Robert P. Young Jr. said McCormack worked "very closely with me and no one was more committed to reforming the judiciary to become more service-focused."
Young added: "She is an energetic and inspired leader. I look forward to watching her move Michigan's judiciary forward to better serve its people."