REPORT NO. 91, VOLUME 46-- THURSDAY, MAY 10 2007

BIPARTISAN BICAMERAL GROUP TO WORK ON BIZ TAX PLAN

A bicameral, bipartisan group of eight legislators is being created to help draft a final business tax proposal, with the goal of reaching an agreement before the end of the month.

The workgroup was informally announced as the Senate and House tax committees held hearings on each other's business tax proposals Thursday, the kickoff to what could be relatively fast action on trying to resolve the issue of what the state's business tax will be beginning in 2008.

There had been some indication that the workgroup would meet over the weekend to jumpstart the resolution effort, but Senate Finance Committee Chair Sen. Nancy Cassis (R-Novi) said meetings over the weekend were unlikely, though discussions would begin next week.

If the workgroup can reach agreement, then it could negate the need for any kind of conference committee on a final package, Ms. Cassis said.

House Tax Policy Committee Chair Rep. Steve Bieda (D-Warren) will chair the four-member group from the House side, although the other members of the workgroup have not been announced yet.

Joining Ms. Cassis from the Senate side will be Sen. Jud Gilbert (R-Algonac), Sen. Mark Jansen (R-Gaines Township) and Sen. Buzz Thomas (D-Detroit).

During the hearings on Thursday, each chamber defended its own proposal as the best, while businesses shook out which proposals they thought would benefit them the most.

The Big Three automakers backed the House-passed proposals - HB 4367, HB 4369, HB 4370 and HB 4371 - with one executive saying the companies would see little benefit from the Senate-passed proposal - SB 94, SB 95 and SB 96.

But companies that are mainly distributors said the House plan would hurt them worse because they would be unable to take advantage of the many credits the House proposal includes.

Local government groups - the Michigan Municipal League, Michigan Association of Counties and the Michigan Townships Association - testified in opposition to the Senate package because it would reduce revenues to locals.   They said that while the House plan also targets commercial and industrial personal property, it makes up the local revenues with the Michigan Business Tax.

Chuck Hadden with the Michigan Manufacturers Association said that several factors went into their decision, but that their opposition also took into account the possibility of a plan passing.   He said the Senate plan was described to him as a "subverted value-added tax" much like the SBT that Republicans mainly abolished.   He also said several of his members come from company towns - Kellogg in Battle Creek, Dow in Midland, Gerber in Fremont, etc. - and they had issues with local revenues being taken away under the Senate bills.  

The House proposal is intended to be revenue neutral, compared to the SBT, while the Senate plan is to limit business tax revenues to $1.5 billion.   Ms. Cassis said the Senate plan would give tax cuts to about 90 percent of state businesses while the House plan would favor about 75 percent.

Mr. Bieda said that if the House plan also called for an overall cut, the proportions of winners to losers would be the same.

Senate Majority Leader Mike Bishop (R-Rochester) told reporters he was not opposed to a revenue neutral proposal, but that whatever tax was adopted had to be an engine to spur economic development in the state.

Gary Wolfram, a Hillsdale College economics professor and former State Board of Education member, said he would simplify the House proposal by eliminating many of its credits and lowering its overall tax rate.   Before the House panel he also questioned how much of the tax burden could be shouldered by out-of-state businesses.   He said while there was the possibility a company could see the House plan as a reason for coming to Michigan, businesses could simply stay out of Michigan and increase their prices for products sold in the state.   They could also stop selling their product in Michigan altogether as well, he suggested.

Ms. Cassis also challenged the essential fairness of the House proposal, saying that some of the largest firms that use the most state services would pay little tax while smaller companies would pay more tax relatively speaking.

The auto companies disputed that, with Rick Zablocki of General Motors saying that the companies will continue to have a significant tax liability even if the House proposal becomes law.

But Kurt Berryman of the Michigan Auto Dealers Association said that for his members the House plan would be a significant tax hike since most would be unable to take advantage of the credits in the package.

Marc Guidwin of Michigan Caterpillar said much the same.   Because his firm is a distributor of manufactured products, it would likely see a tax increase of as much as 15 percent under the House proposal.

Scott Hummel with the Michigan Association of Insurance Agents testified in support of the Senate plan, saying that while his members could see benefits to both proposals, those who come out losers would pay a significantly higher rate than they would under the Senate plan.

WORKGROUPS UNDERWAY ON BUDGET ISSUES

A bipartisan agreement has led to the creation of six separate workgroups that are to work over the weekend to reach agreement on a variety of issues to help resolve the 2006-07 budget.

Separately, Senate Majority Leader Mike Bishop (R-Rochester) said Thursday that resolution of the 2006-07 budget should be completed by Friday, May 18.  

With the workgroups and high level discussions going forward over the weekend, Mr. Bishop said he was committed to "closing the books by next week" without a tax increase.

May 18 is the date of the May Revenue Estimating Conference, which is expected to announce that the 2006-07 budget deficit is larger than originally anticipated.

Even so, a spokesperson for Mr. Bishop said the Senate leader believed that with the ongoing discussions between he, House Speaker Andy Dillon (D-Redford Twp.) and Governor Jennifer Granholm that a final resolution can be reached.

A spokesperson for Ms. Granholm said the desire to resolve the budget quickly was mutual, although she did not pin completing it by May 18.

Liz Boyd also said all sides agreed to create the workgroups that would look at prison reform, local government cost sharing, public employee health care savings, healthcare reform, education reform, regulatory reform and government efficiency.

In a statement, Mr. Bishop said SB 220, now in a conference committee that he is a part of, should be the framework for balancing the budget.   No conference committee meeting has been scheduled yet, but officials are working on setting a meeting up, said Matt Marsden.

But Mr. Bishop remains determined that the 2006-07 budget must be solved without a tax increase, and he called for lawmakers to agree to a series of governmental consolidations and reforms to help balance the budget.

Once the 2006-07 budget is resolved, then lawmakers can turn their attention to the 2007-08 fiscal year, he said.

BILLS COMING SHORTLY TO END ELECTRIC CHOICE

Though he said he was still planning to move deliberately on the legislation, Rep. Frank Accavitti (D-Eastpointe), chair of the House Energy and Technology Committee, told Gongwer News Service that draft bills will begin circulating in about a week that will eliminate customer choice at least for residential customers.   And he said bills introduced in the Senate to expand choice for those customers raised concerns.

Mr. Accavitti said the bills are still changing some from original plans based on testimony in recent hearings.   But he said the hearings still showed that choice is not working and, particularly for residential customers, is increasing energy costs.

"How can we continue to ask residential customers to be paying more dollars, which I think they most certainly are, so that a few commercial customers and a few industrial customers can have choice?" he said.

And he argued Senate bills introduced this week (SB 426, SB 427, SB 428) would further erode residential rate protections.   "I'm dismayed that certain protections that I think consumers have in keeping rates low are being thrown away for some very small and non-influential people," he said.   "I cant' believe we would be throwing away consumer protections to profiteers."

Mr. Accavitti said he is not yet ready to officially introduce his bills yet, though.   "I want to get an initial draft and have everybody take a look at it rather than just drop a blue back," he said.   That will allow various groups to make suggestions before the hearings process begins rather than being forced to take public positions before there can be negotiations.

And he said he has taken into account issues raised already.   "As the hearing process has gone on, we've heard things that we weren't aware of or hadn't anticipated," he said, and those things are being worked into the drafts.

UTILITY CHOICE BETTER FOR STATE, COMMITTEE TOLD

Establishment of competition in Michigan's electric market has lowered rates and helped consumers, the Senate Energy Policy and Public Utilities Committee was told Thursday.

Eric Schneidewind from Energy Michigan Incorporated said since PA 141 and PA 142 of 2000 were passed, electric revenues have increased and consumers have seen a savings of more than $493 million from freezes and competition.

Residential customers saw an immediate rate decrease of 5 percent, commercial customers saw freezes through 2004 and industrial customers through 2003 while new companies came to Michigan and built generating plants that helped reliability, Mr. Schneidewind said.

"Competition is better than regulation at ensuring customers get maximum benefits and the lowest price," Mr. Schneidewind said.

Michigan's rates are decreasing and the regional price differential has fallen from more than .8 cents per kilowatt hour to slightly more than .3 cents per kilowatt hour, Mr. Schneidewind said.

"Michigan's getting steadily more competitive and that's a good thing," Mr. Schneidewind said.   "The state ought to be commended for coming up with a reasonable balance between competition and choice."

Mr. Schneidewind with a choice system utility companies also benefit from securitization.

He also said schools, local governments, hospitals, and retailers are just some of the groups that have saved money through competition.

Mr. Schneidewind said the 21^st Century Plan, which calls for a repeal of customer choice to ensure utilities can invest in new power plants, doesn't allow an off-ramp for customers, meaning if utilities and current power plants don't perform, competitors still can't supply customers.

Sen. Dennis Olshove (D-Warren) asked if one single base load plant needed to be built by one company to help the state's energy needs.   Mr. Schneidewind said several smaller plants could also do the job.

Mr. Schneidewind's organization is supporting SB 426, 427 and 428, which would make it easier and less expensive for residential customers to go between electrical suppliers.

Mr. Schneidewind said the bills would make sure customers didn't have to pay for plants during their construction and would streamline the process for residential customers to choose other electrical suppliers.

Overall, competition provides the lowest cost power source, the lowest long-term finance rate and the lowest operating costs, Mr. Schneidewind said.

Nancy Moody, director of state government affairs for DTE Energy, who was at the meeting but didn't testify, said the company is looking forward to having the opportunity to rebut what was said about competition and prices.

"The facts are pretty substantial that around the nation, in deregulated states, they've had increases in rates that occurred at a much higher percentage than in regulated states," Ms. Moody said.

Committee Chair Sen. Bruce Patterson (R-Canton) pointed out that other deregulated states have seen rate increases faster than regulated states.

Mr. Schneidewind said competitors were interested in comparing Michigan to Midwestern states and pointed to Wisconsin, which is regulated where rates are increasing quickly.

Overall rates are decreasing in Michigan and that's important, he said.

SAK ASKS GRANHOLM TO REEXAMINE DIRECTIVE IMPACT ON VETERANS' HOME

Rep. Michael Sak (D-Grand Rapids) sent a letter to Governor Jennifer Granholm on Thursday asking that the Department of Military and Veterans Affairs reexamine the way it interpreted Executive Directive 2007-17, which affected the Grand Rapids Veterans' Home.

The directive places restrictions on purchases of non-essential supplies, materials, equipment, printing, or other products.   Mr. Sak said the department has determined that pertains to items funded through the "private - veteran's home post and posthumous funds" of the Grand Rapids facility.

"I am fully aware of the serious budget problems facing the State of Michigan which have obligated all of us to make sacrifices.   Nonetheless, we have the responsibility to ensure that our veterans, who have already made immeasurable sacrifices for the state and our nation, continue to receive the consideration that they so greatly deserve.   These funds are not attached to our challenged budget and should be utilized to provide services to these men and women that are not offered due to budget cuts," Mr. Sak wrote in the letter.

Brigadier General Carol Ann Fausone said the veterans' home events, including the carnival, are going forward as planned but that the department in light of all of the governor's directives is rescheduling people because they cannot use general fund monies to pay for overtime.   She said the department has not frozen the post's funds or taken away any of its funds.

PREMIUM HIKE PROTECTION BILL APPROVED BY INSURANCE PANEL

Insurance companies would be barred from increasing auto or homeowners' premiums during the duration of a policy unless information that determined the initial rate was factually wrong under legislation approved by the House Insurance Committee on Thursday.

HB 4674 specifies that once the premium is billed by an insurance company or agent and the insured pays that in whole or in part, the insurance provider could not ask for more money unless the information determining the rate was wrong.   The bill was amended by the committee to delete language referring to quotes given by insurers on those policies.

Rep. Tory Rocca (R-Sterling Heights), sponsor of the bill, said he ran across a situation in which he paid his homeowner's premium and his insurance company came back in the middle of the policy's duration to say they had given him too much of a discount for having his auto insurance policy also with the company and that the lawmaker therefore owed them more money.   He said in talking to more people about the bill, he found others who had encountered similar situations.

He said the bill would not preclude an insurer from increasing a premium if the individual elected to expand their coverage during their current policy period.

The bill was reported to the full chamber on an 11-5 vote, with the dissenting votes coming from Republicans.  

Insurance industry officials argued the bill, even with its removal of the quote portion, still removes the flexibility required between when a person applies for a policy and when the underwriter scrutinizes that information.   Scott Hummel with the Michigan Association of Insurance Agents testified as being neutral on the bill, though he said the definition of what "billed" means should be specified.

Pete Kuhnmuench, executive director of the Insurance Institute of Michigan, argued that while the bill was being brought up as a consumer protection measure, no one has complained to the Office of Financial and Insurance Services about having a premium increase during their policy period.

He said when these rare instances occur the changes are usually minor monetary adjustments.   He also said his organization would have to review the bill further as it is amended, but that they believe a statutory change is not needed and an individual and their insurer can work these situations out on a case-by-case basis.

And Jim Miller with the Michigan Insurance Coalition testified in opposition to the bill even as amended, questioning how it would affect the binding process and what the definition of "materially correct" means.   AAA also is opposed to the bill.

Ken Ross with OFIS testified in support of the bill, though he acknowledged it needs some refining amendments.   He said just because the agency hasn't had a complaint about these situations doesn't mean they don't occur.

Committee Chair Rep. Virgil Smith (D-Detroit) said the legislation would be worked on before it is taken up on the floor.

MICHIGAN PER CAPITA LEGISLATIVE COSTS 22^ND IN NATION

Michigan, the eighth largest state in the nation, has the sixth largest legislative budget, but ranks 22^nd overall in terms of per capita expenditures to maintain the Legislature, according to figures from the National Conference of State Legislatures.

State residents pay $9.56 per person for the cost of the Legislature during 2005, the NCSL figures showed.

Alaska, one of the smallest states in terms of population, paid the most in terms of per capita expenditures for its legislature, according to the figures.   It costs the 664,000 residents of Alaska $47.52 per person to maintain its legislatures.

Georgia was the lowest cost state in terms of per capita support of its legislature, costing just $3.22 per person.

The study looked at the overall budgets of each of the states as well as their legislative budgets along with population to calculate the per capita cost of maintaining each legislative body.

The results were widely disparate.   With Alaska, one of the smallest states, having the highest per capita costs to maintain its legislature, California, the largest state in terms of population with the largest overall budget and the largest legislative budget (three times that of Michigan) ranked 31^st in terms of per capita expenditures.   It costs each Californian $8.20 to maintain their legislature.

Another small state, both in size and population, Rhode Island, was second in terms of per capita costs, at $23.86 a person.   Pennsylvania, the sixth largest state in terms of population, came in third at $23.01.

Rounding out the top 10 was Maine at $18.05 per person, Hawaii at $16.77, Connecticut at $15.82, Arkansas at $15.75, Montana at $15.63, Nevada at $14.92 and North Dakota at $14.56.

Michigan had a total legislative budget of $96.755 million in 2005, according to the NCSL,

But among its Great Lakes neighbors Minnesota and New York were the only other states that had higher per capita costs for the Legislature than Michigan.   New York ranked 18^th at $10.72 per person, while Minnesota ranked 20^th at $9.92 per person.

Illinois ranked 37^th at $5.83 per person to maintain its legislature, while Indiana ranked 43^rd at $5.04 per person.   And Ohio was ranked 49^th in terms of total spending at $3.69 a person to finance its legislature.

OBJECTION TO NEFF CONFIRMATION DROPPED

The way has apparently been cleared for a U.S. Senate vote on confirmation of state Court of Appeals Judge Janet Neff's nomination to the U.S. District Court after Kansas Republican Sen. Sam Brownback said he would remove the block against the confirmation because she attended a same-sex commitment ceremony five years ago.

Mr. Brownback questioned Ms. Neff about the ceremony during a U.S. Senate hearing Thursday, a step he had said in December was required before he would cease blocking a vote on her confirmation. The nomination to the Western District of Michigan is also to be subjected to a roll-call (rather than voice) vote of the U.S. Senate, where the nomination is pending.

The Associated Press reported Ms. Neff declined to answer Mr. Brownback's question on whether she believes same-sex couples have a constitutional right to marry because the issue is a matter of pending litigation, but did say the ceremony at which she offered a homily was not a marriage. And, she said her record over 18 and a half years as a judge demonstrates she can apply the law fairly without consideration of her personal views.

Ms. Neff had addressed both of those points in a letter last year to Mr. Brownback, a presidential candidate who opposes same-sex marriages.

The Neff nomination was part of a compromise with Democrats last year to facilitate nominations from the state to federal judicial posts, and if confirmed by the U.S. Senate would open up a seat on the state Court of Appeals for appointment by Governor Jennifer Granholm.

S.E.M.C.O.G. ESTIMATES BENEFIT FROM COURTESY PATROL

The Detroit area saved $37 million from reduced travel time in 2006 because of the Department of Transportation's courtesy patrols in the region, the Southeast Michigan Council of Governments said in a report this week.

The program cost just more than $2.3 million for the year, paid with a mixture of federal and state transportation funds.   But estimates show it saved motorists about $37 million by helping to keep traffic flowing on the region's expressways, the report said.

The patrols, started in 1994, now operate 29 vans and 32 drivers to provide free road-side assistance 24 hours a day on most of the expressways in Macomb, Oakland and Wayne counties.   The vans can provide gasoline and other fluids, change tires and provide free towing for up to five miles.

The 51,656 stops the vans performed in 2006 saved an estimated 11.7 million hours of delay on the freeways by getting motorists back under way and helping to secure crash scenes.   The patrols also tag abandoned vehicles along the expressways.

The reduced delay also reduced air pollution in the region, the report said.   Estimates show there was 1,016 kilograms fewer nitrogen oxides and 15,675 kilograms less carbon monoxide in the region directly attributable to the patrols.

"Helping stranded motorists eases freeway congestion and, as a result, the freeways operate more efficiently," said Paul Tait, executive director of SEMCOG.   "The Freeway Courtesy Patrol is a win-win situation."

Bill Shreck, spokesperson for the Department of Transportation, said the program was not expected to be targeted for cuts as part of budget discussions.   "It should stay about the same because it safety related," he said.   "It actually saves us money."

FITCH RATINGS SHOW OPTIMISM FOR WASHTENAW COUNTY  

In spite of a continuous downturn in the state's economy, Washtenaw County shows promising economic opportunity, Fitch Ratings said this week, prompting the agency to give the county's $18 million tax notes its highest rating.

The notes will be used in part to fund the delinquent tax revolving fund, which reimburses cities for unpaid property taxes after the county assumes the responsibility for collecting the delinquent funds from residents.

Fitch gave the F1+ rating based on the county's history of collecting delinquent taxes at a rate of 96 percent, as well as its prudent budget operations and ability to bring in new investments, said a report released on Wednesday.

"The county has a strong and diversified tax base, growing 7.1 percent annually since 1997.   The presence of major educational institutions and health care and research facilities maintains the strong investment activity," Fitch said.

Ratings are also based on the average income of the residents living in the county, who in 2005 earned 125 percent of the state average and 122 percent of the national average.

CAPITAL NOTEBOOK

NOW THAT'S A COMMUTE: Rep. Andy Coulouris (D-Saginaw) has announced he will make the 85-mile trek from his district to Lansing on Monday to kick off Bike-to-Work Week.

"For at least one day, I won't have to deal with $3-a-gallon fuel.   The only kind of fuel I'll be worrying about will be what I have for breakfast," Mr. Coulouris said.   "I hope my commute brings awareness to the benefits of relying more on environmentally-friendly modes of transportation. Biking is also a great way to save money: it costs about $3,000 a year to maintain a car, and less than $300 a year to keep a bike going."

The first-term lawmaker estimates he will average 15 miles per hour, making his one-way commute six hours.  

JUDGES' C.C.W.: Current and former state court judges would be allowed to carry concealed weapons in no-carry zones under legislation introduced in the House on Thursday (HB 4744).  Sen. Roger Kahn (R-Saginaw) also supports the measure.

Under current statute, law enforcement, retired police officers in good standing, security officers working in a no-carry zone, licensed private investigators and detectives, and corrections officers, parole officers, reserve officers, motor carrier officers and Capitol security while on duty are allowed to have concealed weapons in no-carry zones.

"I recognize that Michigan judges make decisions affecting the lives of some very dangerous people and I won't have them be targets like others have been in the past," said sponsor Rep. Kenneth Horn (R-Frankenmuth).   "Just knowing that a judge could be carrying a licensed firearm will act as a deterrent for criminals."

FAR-FLUNG AUCTIONS:  The Department of Management and Budget is taking show on the road next week with the first surplus auction in the Traverse City area.   DMB has scheduled an auction for May 19 at the Northwest Michigan Fairgrounds near Traverse City.   The auction begins at 10 a.m., but goods will be out for viewing at 8 a.m. the day of the sale and 8 a.m. to 3 p.m. on May 18.

"We are holding the auction in Traverse City so that schools and governmental units can join with the State to sell their surplus property, get the best value for their resale dollars, and save auction costs," said Kevin Lancto, manager of the state's surplus program.

FLUORIDE PROGRAM:  Delta Dental of Michigan has provided the Department of Community Health with $250,000 for a fluoride varnish program for low-income children.   The Varnish! Michigan program is targeted to children in the Head Start and Early Head Start programs and is expected to reduce cavities among those 22,000 children by as much as 60 percent.

"Many of these children in this group have little to no access to dental care, and the unfortunate result is that by the time they reach third grade, one in four Michigan children have untreated dental disease," said Community Health Director Janet Olszewski.   "We know that most dental disease can be prevented, and we are grateful to Delta Dental for stepping forward with this generous contribution to make sure at-risk children throughout the state get the protection they need."

SUBSCRIBERS, PLEASE NOTE

The Michigan Report for Wednesday incorrectly stated the AFL-CIO supports the second parent adoption bill (HB 4259).  Michigan Pride At Work, a constituency group of the AFL-CIO, testified before the House Judiciary Committee in support of the bill.

The story also should have specified that under current law, a person who remarries may have their former spouse's parental rights terminated if a judge finds that the parent has had no contact with the child for more than two years and that he or she has not paid any child support.   The new spouse of that parent is then able to petition the court for adoption of the child.

The legislation would extend that right to an unmarried custodial parent's new partner.

Click the after a bill number to create a saved search and email alert for that bill.

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REPORT NO. 91, VOLUME 46-- THURSDAY, MAY 10 2007

Alan Miller, President  |  Larry Lee, Vice President  |  John Lindstrom, Editor  |  Christopher Klaver, Stephanie Korneffel, Breanna Camarillo, Staff Writers  |  Rebecca McNulty, Intern

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