PAADVISORY February 19, 2010 LEGISLATORS START WORK ON STATE BUDGET PROPOSALS House and Senate appropriations committee members met throughout the week to start work on analyzing Governor Granholm’s budget proposal. The Governor has told the legislature she wants the budget completed and on her desk by July 1 in preparation for the fiscal year that begins on October 1. Legislators have said that raising taxes to generate more revenue is off the table at this time and they are looking at cuts, reductions, and improved efficiencies to make up the nearly $1.7 billion revenue shortfall in the budget proposal. The budget relies upon a continued, but uncertain, flow of federal funds into the state coffers. The Senate was not in session during the week so that appropriations committees would have an open calendar to schedule meetings. The House held its regular floor session during the week but still allowed time for its appropriators to meet, sometimes jointly with Senate counterparts. The message throughout the appropriations meetings was consistent – the state does not have revenue to fully fund needed programs and changes in operation are necessary. The Department of Human Services has asked for additional funds for operations and staff but legislators warned the department officials that resources are not available. The Department of Community Health budget will need a state match for federal funds. The Governor has said the state revenue should be partially generated through a new tax on physicians, but legislators rejected the proposal last year and leaders have expressed doubt that the new tax would be approved this year. Senate Subcommittee Chair Roger Kahn (R-Saginaw) said the DCH budget was “pretty tenuous” relying upon federal funds and the physician’s tax. Education leaders heard from legislators that funds are not available to adequately fund K-12 programs and the Governor’s proposal to add a new sales tax on services to pay for the programs was not supported by the legislators. Community college presidents told legislators that state mandates to freeze tuition or cut wages and health care of faculty and staff create new challenges to negotiate other efficiencies and needed program changes. Corrections officials told the appropriations committees that despite an increase in early releases of prisoners, their department budget needs more revenue because of the increased operational expenses. The legislature returns to its regular schedule next week with session on Tuesday, Wednesday and Thursday. Appropriations and other standing committees are expected to hold regular meetings up until a two-week spring recess in late March and early April. A summary of Governor Granholm’s budget recommendations are included at the end of this week’s newsletter. GOVERNOR PROPOSES OPENING STATE HEALTH CARE TO LOCAL UNITS Governor Granholm on Wednesday proposed opening state health care plans to local governments and education units though issuing Executive Directive 2010-1. Her proposal clears the way for local units of government and other public entities such as school districts, community colleges and universities to participate in State of “A state health care benefit plan recently negotiated with a number of state employee groups reduces the state’s cost of providing health care coverage to every newly hired state employee by 21.3 percent,” the Governor said. “By offering other public employers and their employees the option of participating in this new state health care benefit plan we are in essence allowing them to reduce their costs too.” The executive directive gives the Department of Management and Budget and the Office of the State Employers until June 30 “to identify and remove any barriers to participation” in the state’s health care benefit plans by the local units. Local units of government include cities, villages, township and counties. All of the state’s health care benefit plans would be open to participation, including the state’s PPO plan, health maintenance organization plans, prescription drug coverage programs, dental care plans and vision care plans. NEW SERVICES TAX PLAN FACES OPPOSITION BY LEGISLATIVE LEADERS The legislative quadrant, comprised of the four leaders in the Senate and House, said Tuesday that the proposed new sales tax on services will face considerable opposition in the legislature. The new tax is a component of Governor Granholm’s proposed budget to fund state operations in 2011. The service tax proposal was brought up Wednesday when appropriations committee members discussing the School Aid Fund budget said they were doubtful that the revenue would be available to help fund K-12 education programs. The legislature adopted, then repealed, a sales tax on limited services two years ago. The Governor’s current proposal would lower sales tax from 6 to 5.5 percent, but add all consumer services, with limited exclusions, to the tax base. The exceptions would be for health care and social assistance, education, new construction, real estate and insurance commission and business to business transactions. “I think we need tax reform but I’m not looking to extending sales tax to services as a solution to the budget,” House Speaker Andy Dillon (D-Redford) said in the quadrant’s panel discussion at the Michigan Society of Association Executives annual meeting. House Minority Leader Kevin Elsenheimer (R-Kewadin), Senate Majority Leader Mike Bishop (R-Rochester), and Senate Minority Leader Mike Prusi (D-Ishpeming) agreed that the votes aren’t currently available for passing the tax on services. TRANSPORTATION LEADERS TELL LEGISLATORS NEW FUNDING NEEDED House and Senate transportation appropriations committee members heard this week from government and industry officials that the current level of funding, will not provide adequate revenue for the needed repairs and construction of the state’s highway system. Department of Transportation Director Kirk Steudle told legislators that without matching federal dollars to add to the state funding, the state’s transportation system will continue to worsen and construction and maintenance jobs will disappear. “The road system is going to deteriorate,” Director Steudle told a joint meeting of the House and Senate Appropriations Transportation Subcommittees. “What we are spending will not hold the system together.” Separately, at their annual meeting in Lansing this week the Public Transit Association said the public transportation system “is in a crisis” due to the dwindling financial resources spent on the state’s highway infrastructure. Mass transit programs rely upon a sound highway infrastructure to provide its services, the transit officials said. Director Steudle told legislators that the state is working with federal officials to have the needed financial match requirement waived so that A transportation group is launching an online petition to show legislators that the public wants state government to adequately fund the road repair programs in the state. The Michigan Transportation Team, which includes the Michigan Transportation and Infrastructure Association, is launching the petition program at www.drivemi.com. House transportation committee members are scheduling hearings throughout the state to gain local input on needed road and highway programs. STATE, FEDERAL LEADERS CALL FOR ACTION AGAINST ASIAN CARP State and federal leaders in Governor Granholm attended a White House “Carp Summit” last week, U.S. Representative Dave Camp (R-Midland) and Senator Debbie Stabenow introduced federal CARP ACT legislation and Michigan Attorney General Mike Cox has filed a renewed motion with the U.S. Supreme Court that seeks the closure of the Members of the Michigan Senate announced they will hold legislative committee hearings to highlight the impact that Asian carp and other invasive species will continue to have on the “It’s our responsibility as legislators to protect our natural resources,” said Sen. Jim Barcia ( Attorney General Cox, members of the THIRD CONGRESSIONAL RACE OPEN AS CANDIDATE FIELD UNCERTAIN The announcement last week that Congressman Vern Ehlers (R-Grand Rapids) would not seek re-election to Instead, the major news is who has announced they are not running. Ken Sikkema, former state Senate Majority Leader and state representative from the district, said Wednesday he would not be seeking the Republican nomination. State Senators Bill Hardiman (R-Kentwood) and Mark Jansen ( Secretary of State Terri Lynn Land said she is not a candidate for the congressional seat. She is term limited from running again for SOS, but has been named by GOP gubernatorial candidate Michael Bouchard as his choice for lieutenant governor, if he wins the election. First term State Rep. Justin Amash (R-Kentwood) is a declared candidate for the Third Congressional seat. Other candidates from the private sector in the Mr. Sikkema narrowly lost to Mr. Ehlers in his first election to the congressional seat. He said that running again now for the seat would be too disruptive to his family. “After a thorough review of what changes in my life would need to be made in order to run a winning campaign, I have decided to not run for the congressional seat being vacated by Vern Ehlers, an outstanding public servant,” Mr. Sikkema said in a statement. “I cherish the opportunity to have served in the legislature and the privilege of being the Senate Majority Leader. However, my return to the private sector has been fulfilling. My work at Public Sector Consultants allows me the opportunity to employ my experience as a legislator and still contribute to the debate on the great issues facing the state of Governor Granholm’s budget recommendation for Fiscal Year 2010-11 (all figures in thousands)
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