Legislative Report as of December 17, 2021
The first year of the 2021-2 Michigan Legislative Session has come to a close, and the House and Senate went out with a bang. On the last session day of the year, the Legislature sent Governor Whitmer a large package of economic development bills aimed at attracting and retaining large business operations in Michigan. They also passed a series of budget supplemental bills that use a portion of the remaining federal COVID-relief dollars combined with surplus state funds to distribute money to a variety of state and local projects.
Speaking of COVID-19, although cases and hospitalization numbers stemming from the pandemic remain high, the loudest rhetoric in Lansing continues to come from individuals opposed to mandatory masking and vaccinations. While public health leaders continue to urge individuals to get vaccinated (and the majority of Michiganders have done so), and despite the fact that vaccine requirements remain popular with the general public, legislative leaders in Lansing continue to give deference to the vocal minority who decry vaccination. Michigan remains on the low-end of vaccination rates in the US, which could very well be driving our high hospitalization rates.
More on these issues and others below.
Civil Service Commission Set to Approve Pay Increases
On December 15, the Michigan Civil Service Commission will meet and is expected to approve contractual agreements with represented Michigan workers. Those agreements will also extend to nonexclusively represented employees. If the Commission approves the agreement, it will represent the largest single-year pay increase for state workers in decades.
The agreement includes a 5% pay increase taking effect in October of 2022. The new agreement will also set Juneteenth as a state holiday. The agreement was negotiated over the past year by unions representing state civil service employees.
While the pay increase is good news for state workers, many state agencies continue to struggle to attract workers to fill existing vacancies. This is especially problematic in the Department of Corrections and the Department of Health and Human Services which are struggling with critical shortages of corrections officers, nurses, protective services workers and maintenance workers. This is symptomatic of a broader workforce crisis in both the public and private sector. The wage increase for state workers will help, but it may not be enough to move the needle to fill vacancies.
Legislature Set to Pass Large Economic Development Package
Earlier this year, Ford Motor Company made the announcement that they would locate their next-generation electric vehicle manufacturing centers in Kentucky and Tennessee. This came as a shock and disappointment for Michigan officials in the public and private sector who had expected Ford to continue to expand its operations in Southeast Michigan. These investments total over $11 billion and are expected to create over 10,000 manufacturing jobs.
Part of the reason Ford chose Kentucky and Tennessee for its new investments stems from the broad incentive packages those two states offered. Part of the economic development plan includes a $250 million forgivable loan that Ford could avoid paying back if they meet goals for investments and jobs. Governor Whitmer and Michigan lawmakers began discussing plans to improve Michigan’s own economic development programs soon after the Ford announcement.
On December 14, those plans came to fruition with a package of legislation that would greatly increase incentives the Michigan Economic Development Corporation could offer businesses who agree to expand in the state. The bipartisan package includes House Bills 5602-5604, and Senate Bills 769-771. The bills would create the Michigan Strategic Site Readiness Fund and the Critical Industry Fund. The Legislature will appropriate approximately $1 billion as an initial payment into these two funds. These programs would provide grants to eligible businesses and local units of government for purposes of paying for expenses such as land acquisition, infrastructure improvements, worker training and other costs. According to many news reports, one of the first recipients of these grant programs will likely be General Motors which itself is considering building a $2.5 billion battery plant in the Lansing area.
The bills have received bipartisan support with both business and labor organizations urging their passage. However, they have also received bipartisan opposition, with conservative and liberal lawmakers finding common ground in their concerns about the bills. Republican and Democratic legislative leaders, along with the Whitmer administration, have touted the package as necessary for Michigan to be able to compete with other states to retain crucial investment and economic growth opportunities for Michigan communities. At the same time, some conservative voices have attacked the bills as being anti-free market by picking winners and losers among businesses; and some more progressive lawmakers have cautioned against the amount of tax dollars that will be lost for public services by subsidizing wealthy corporations.
This last warning is a meaningful concern for public employees who could see state revenues (and therefore the ability to provide good paying jobs to state workers) be reduced. In a perfect world, businesses would make their decisions on locating new investments based on reasons other than which government can hand out the most cash. Policy makers opposed to economic incentive legislation like this call it a “race to the bottom,” where in the end governments might win new community investments, but due to tax incentives and payouts, will not be able to provide for the increase in needed services that accompany those investments. Those who support these bills agree that the need for them is unfortunate, but that unilaterally disarming in Michigan when other states are enticing employers to relocate away from Michigan is foolhardy.
As this article is being written, the bills are set to pass and will most certainly be signed into law by Governor Whitmer. Time will tell which side was right.
Legislature Passes Additional Funding to Various Programs as Last Act of 2021
While the biggest news for state spending comes from the $1 billion being appropriated to fund the economic development legislative package (see above article), the House and Senate are also passing bills on their last session day in 2021 for a number of other priorities. Some of the funds reflect closing the state’s Fiscal Year 2020-21 books, while the bulk will go into the current fiscal year formulae.
The Department of State Police will receive an additional $140 million to reflect unanticipated emergency disaster response and mitigation costs from 2020 and 2021. It will also receive $4.4 million for the previous year and for the current year (totaling $8.8 million) to fund the Criminal Justice Information Center.
Other funding for the 2020-21 fiscal year includes $3.5 million to the Department of Natural Resources for snowmobile trail maintenance, and $190,000 to the Department of Agriculture to support the Horse Racing Advisory Commission.
For the current fiscal year, the Legislature adds over $700 million in state and federal dollars. The largest share will go to the Department of Health and Human Services which will receive $279 million in added funds. Much of those will go to COVID-19 related programs, as well as large block grants for Substance Use Disorder and Mental Health services ($47 million and $20 million, respectively). The largest single new line item in the DHHS budget will be a $150 million grant for school safety.
The Department of Labor and Economic Opportunity will receive $140 million to be passed through to aid with emergency rental assistance payments. The department will also receive $10 million for the Office of Global Michigan, $9 million to support the North American International Auto Show, and various other one-time grants.
The Department of Transportation will receive $193 million in American Rescue Plan dollars, with the bulk of it going toward airports and rural public transit. The Department of Technology, Management, and Budget will receive $5 million for Coronavirus Response Activities, and $1.7 million for warehousing of personal protective equipment.