Legislative Report as of 7/29/2020

The Michigan Legislature worked through the last two weeks in July, and plans to be in session for at least parts of August.  They completed work on a deal to balance the current year budget, and are now working toward preparing the FY 20-21 budget.  They also passed legislation that would provide immunity from liability for health centers and nursing homes for any negligence related to the COVID-19 pandemic, and will likely be working to extend that immunity to all businesses with another round of legislation in August.  The Civil Service Commission also adopted a rule with the sole goal of undermining state employee unions.  More on these issues below. 
 
 
Governor and Legislature Finalize Deal to Fix Current Year Budget Holes
 
On July 22 and 23, the Michigan Legislature passed a pair of bills to bring the current year budget into balance.  House Bill 5265 and Senate Bill 373 were part of an overall agreement between Legislative leaders and Governor Whitmer to close the combined $2.2 billion gap in the State General Fund and the Michigan School Aid Fund.  In addition to the two bills, the agreement encompasses other mechanisms including an Executive Order (EO 2020 – 155) and a Transfer Letter from the Department of Treasury.  The deal uses a variety of revenues, lapsed funds, work projects, and cuts to put the budget back into balance – at least for the current fiscal year.  Work on next year’s budget, which begins on October 1, continues.
 
The bulk of the $2.2 billion shortfall was made up with the remainder of leftover federal funds from the CARES Act. This money is dedicated to costs associated with COVID-19, but the deal anticipates that the spending being replaced by CARES Act dollars will fit into that criteria.  The specifics of the agreement are as follows:
 
Executive Order 2020 – 155:
The Governor made Executive Order cuts to General Fund expenditures totaling $619 million, but $475 million of those cuts are backfilled with CARES Act funds.
 
Transfer Letter:
The following restricted funds had money transferred out to the General Fund, totaling $165.6 million:

• MI Craft Beverage Council Fund
• Scrap Tire Regulatory Fund
• Solid Waste Management Fund – Staff Account
• Certificate of Need
• Juror Compensation Fund
• 21st Century Jobs Fund
• Film Promotion Fund
• Sex Offenders Legislation Fund
• Transportation Economic Development Fund
• Convention Facility Development Fund
• Land Reutilization Fund

 
HB 5265:
 
HB 5265 contained cuts and appropriations that could not be handled through the executive order or transfer process.  To that end, while it reduced appropriations by $538 million, about half was negated by federal Medicaid match (FMAP) savings and CARES Act reallocation.  Much of the rest was backfilled by the above restricted fund transfers and lapsed money that was not spent.  It increased spending on revenue sharing by $53 million overall, made $1.3 billion in caseload adjustments, increased SNAP funds by $600 million, and includes $53 million for teacher hazard pay.
 
SB 373:
 
SB 373 made adjustments to the School Aid Fund, cutting $456 million in total, and adding $712 million in CARES Act funds and $561 million in GF and Budget Stabilization Funds (the state “Rainy Day Fund”).  Overall, education received a $136 million increase after dealing with the $1.1 billion deficit.
 
 
Civil Service Commission Adopts Union-Busting Rule
 
On July 13, the Michigan Civil Service Commission adopted a rule that will change the way state employee unions may collect membership dues.  The rule stipulates that union members will in the future have to reauthorize payroll deduction of union dues on an annual basis.  This rule follows the national anti-union playbook by adding additional red tape and administrative burdens to collective bargaining units while providing no value to state employees or the general public.
 
This ruling is predicated on the offensive presumption that union members are stupid.  The proponents of the rule, like Civil Service Commission member and former Speaker of the House Jase Bolger, stated that “workers should be free to make their choice” before voting to approve the new rule.  What Mr. Bolger failed to explain is why he thinks union members do not already know that they have this choice.  Even prior to Michigan’s so-called “Right to Work” law that Mr. Bolger helped shepherd through the Legislature in 2012, state employees had a choice whether to join a union or not.  Right to Work allowed those who opted out of being a union member to avoid paying any costs related to the collective bargaining and grievance procedures that they still benefit from. 
 
This rule assumes that state workers are so ignorant that they need to be reminded on an annual basis that they can leave the union.  It will force state employee unions to essentially re-enroll all of their members on an annual basis, expending needless energy and resources to do so.  By claiming that state workers are too stupid to make their own decisions, the backers of this rule are able to place an extra burden on state worker unions.  The rule is as offensive as it is insidious.  If it were truly about offering a “choice” to state workers, the rule would require that non-union workers also be offered a choice annually to join the collective bargaining unit.  This idea, unsurprisingly, was never mentioned by the backers of this rule.
 
Michigan Corrections Organization President Byron Osborn gave an excellent statement to the Commission prior to their vote.  "The Civil Service Commission has strayed so far from its original intended purpose of preventing favoritism and cronyism in state service," Ms. Osborn said. "It is now a panel of activists who, instead of looking for ways to lift up the work of civil servants, engineer ways to defund us and silence us. Today's change, like right-to-work and previous Civil Service rule changes, are simple union-busting."
 
The Commission passed the rule on a 3-1 vote, with Commission Chair Janet McClelland casting the sole “no” vote.
 
 
Legislature Hopes to Present Next Year’s Budget to Governor in Early September
 
Earlier this year, the Legislature was on track to complete the FY 20-21 budget well before their self-imposed July 1 deadline.  Then the pandemic hit.  The bottom fell out of the economy and the Legislature’s ability to work normally, and state lawmakers have been managing one crisis after another since March.  Fiscal efforts were focused on allocating federal funds and balancing gaps in the current year budget. 
 
Now that the FY 19-20 budget is settled (see above article), the attention of the State Budget Office and members of the House and Senate Appropriations Committees are squarely on FY 20-21.  Unfortunately, there still remain major variables and unknowns to sort out before the September 30 budget deadline is upon us.  Will the federal government pass another relief package?  Will the August Revenue Estimating Conference differ largely from the May conference?  Will the state be able to further reopen the economy or be forced to close more things down?  The level of uncertainty is making it nearly impossible for the Legislative and Executive branches to settle on one set of assumptions and targets.
 
This means that it is likely the Legislature will be unable to reach an agreement on a final budget until early September at the earliest.  By then, we will have a better idea of the state of the economy; we will know whether or not the federal government provided more assistance to states and local governments; and we will hopefully have a better picture of the spread of the pandemic.  Even so, it is very likely that Governor Whitmer and the Michigan Legislature will need to make continuous adjustments to the budget throughout the next fiscal year in response to changing revenue numbers and funding needs.  In short, this wild ride will likely continue well into FY 20-21, and possibly beyond.
 
 
Governor Vetoes Whistleblower Protection Legislation
 
On July 8, Governor Whitmer vetoed Senate Bill 686; a bill seeking to provide additional protections for state employees who communicate with state legislators.  The bill, which passed unanimously in the Michigan House and Senate, was vetoed by the Governor because – according to her legal advisors – it violates both the Separation of Powers and Civil Service Commission provisions of the Michigan State Constitution.  In late July, the Michigan Senate attempted to override the Governor’s veto, but were unsuccessful when Democratic legislators refused to override the veto of Governor Whitmer.
 
The bill sponsor, Senator Tom Barrett (R-Potterville), stated that the Democratic Senators gave into “fear” when casting “no” votes on the override motion.  Senator Curtis Hertel (D-East Lansing), responded that he had attempted to work out compromise language with the bill sponsor that would have passed constitutional muster, but that he had been rebuffed.  The goal of the bill is certainly beneficial for state workers, so we can hope that some sort of compromise can still be reached.    
 
The issue itself is not new.  For many years, the Legislature has used the appropriations process to attempt to insert extra protections like those contained in SB 686 into budget boilerplate.  Governor Snyder routinely classified those sections as “unenforceable” claiming – much like Governor Whitmer is now – that they violated the constitution.  Senate Bill 686 is the first attempt to take that budget language and write it directly into a new statute.
 
Governor Whitmer’s veto message stated that, in addition to the bill’s constitutional problem, it was unnecessary because the state already has a Whistleblower Protection Act that applies to state employees.  Moreover, specific Civil Service rules provide some protections to state workers who come forward to report on wrongdoing.  However, after experiences in recent years regarding the Flint water crisis and issues relating to State Veteran’s homes, state workers can never have too much protection when they decide to speak to lawmakers. 
 
For now, it appears that those protections will not come from SB 686.  Hopefully, Michigan lawmakers and the Governor can reach an agreement on how to best protect state workers who speak out without infringing on the Michigan constitution.