MAGE Legislative Report as of 9/8/2020

The Michigan Legislature, after making alterations to the current year budget to close holes created by the global pandemic, is now working to present next year’s budget to Governor Whitmer by the September 30 deadline.  The traditional budget process has been almost completely derailed this year as the COVID-19 virus has not only wreaked havoc on the economy, but has also made the normal conduct of legislative business much more difficult.  After last year’s debate over road funding that nearly led to a government shutdown, we had hoped for a more orderly process in 2020.  Obviously, 2020 had other ideas.
 
More on the budget process and other issues affecting state workers is below.
 
 
Latest Revenue Estimates Bring Rare Good News in a Challenging Year
 
Back in May, soon after the height of the COVID-19 outbreak in Michigan, the House and Senate Fiscal Agencies along with the Michigan Department of Treasury met to lay out a revenue forecast.  The economic outlook was extremely grim, with unemployment over 20% and most Michigan businesses still shuttered due to the pandemic.  At that time, the revenue estimators predicted a $3 billion shortfall in the 2020 budget, and an additional $3 billion shortfall expected in 2021.  Michigan had not faced that massive a budget crisis since the Great Depression.
 
Fortunately, assistance from the federal government via the CARES Act provided approximately $3 billion in relief funds aimed at addressing the COVID-19 pandemic.  While there were strings on how those dollars could be spent, over the summer the Michigan Legislature and Governor Whitmer explored ways to creatively use those moneys to help shore up the expected revenue shortfall.  This resulted in a plan adopted in late July that prevented any major programmatic or staff cuts in state government.
 
On August 24, the House and Senate Fiscal Agencies met again with the Department of Treasury for another revenue estimating conference.  Quite surprisingly, they found that the state had weathered the economic impact of COVID-19 much better than had been expected.  The revenue loss for the current 2020 budget was revised to be approximately $900 million – still a massive loss – but nothing compared to the $3 billion predicted back in May.  The estimates for 2021 were also much improved, with an expected shortfall of $1.7 billion rather than $3 billion. 
 
What this means for the upcoming 2021 budget is that – because of the use of federal dollars to plug gaps in the current year budget (gaps which it turned out were not nearly as bad as predicted) – by carrying over the excess funds, the state will be going into next year with an on-paper shortfall of somewhere in the ballpark of $300 million.  Moreover, use of federal dollars for the School Aid fund in 2020 will result in a surplus in that fund of approximately $200 million.  To sum up, the state is looking much better than predicted in terms of cash flow for 2021.
 
What remains, however, will be a structural deficit over the next two years well over the $1 billion level.  Even though the Michigan economy has fared much better than expected, there are still too many unknowns as to how long this pandemic will be with us to make solid predictions on future revenues.  The good news is that, at least for now, 2021 will be an easier budget year than we thought, and it could even become better if additional federal aid becomes available. 
 
 
Michigan Corrections Union Calls for New Leadership at MDOC
 
The Michigan Corrections Organization, which represents over 6,000 members in the Michigan Department of Corrections, sent a letter to MDOC Director Heidi Washington on August 27 expressing dissatisfaction with her performance.  The MCO alleges that Ms. Washington’s leadership has been consistently poor in regard to staff discipline, staffing levels and transparency within the department.  This is not the first time MCO has complained about Ms. Washington’s leadership.  A similar letter was sent in 2018 citing a dysfunctional leadership style.  MCO states that these issues have become even more heightened relating to the department’s response to the COVID-19 pandemic.
 
Initially appointed as director by Governor Snyder, Ms. Washington was one of the few department heads retained in their position by Governor Whitmer.  In response to news breaking about the letter, Governor Whitmer’s communication team issued a press release praising Director Washington for her leadership in promoting programs to reduce recidivism.  The Governor’s staff also indicated that they will continue to work with MCO leaders and other correctional staff representatives to ensure that staff and inmates are protected during the COVID-19 pandemic. 
 
 
State Worker Unions File Lawsuit over Civil Service Rule Change
 
A coalition of organizations representing state employees has filed suit in federal court over a recent change to Civil Service Rules that requires state workers to reaffirm their intention to be part of a union on an annual basis.  The suit alleges that the rule fails to abide by current contractual agreements between the state and state employee unions, and therefore violates the Michigan constitution’s prohibition against impairing existing contracts.  The suit also claims that the rule change violates state workers’ rights to free association guaranteed by the 14th amendment of the US constitution.
 
The rule was adopted by a 3-1 vote earlier this year.  It requires state workers to re-affirm in writing every year their desire to continue to be part of a state employee union, as well as their permission for the union to deduct dues from their paycheck.  The rule has been seen by most observers as a thinly veiled attack on collective bargaining rights as it places further administrative burdens on unions with no plausible benefit to state workers or the public.  The case has been assigned to US District Judge George Steeh, and at this time there is no timetable for when the court will hear the case.