Legislative Report - May 2022
The Michigan Legislature has passed both House and Senate responses to the Governor’s budget proposal, and the final negotiations on the FY 2022-23 appropriations bills are expected to take place over the next four to six weeks. The pending Consensus Revenue Estimating Conference is taking place on May 21, and it is expected to show another increase in revenue estimates. Just how large an impact this will have on state spending is yet to be determined, but the new numbers will certainly factor into ongoing budget negotiations. Indeed, it has already sparked new proposals from the Governor and the Legislature on how to spend this surplus.
Legislation making changes to rules for retired MPSERS members who return to work has also seen action in the House and Senate. The bills would remove many of the myriad criteria that MPSERS retirants must meet in order to come back to work in a school setting while continuing to receive pension benefits. More on these and other issues below.
State Revenues Projected to Increase Substantially
Early reports from the pending Consensus Revenue Estimating Conference hint that policy makers will receive more good news about Michigan’s fiscal situation. The House Fiscal Agency released projections prior to the conference showing that they estimate an increase in revenues over earlier projections in the current year budget totaling $2.78 billion. They also predict that revenues in the next fiscal year will exceed previous expectations by $2.24 billion. These eye-popping predictions have generated multiple proposals on how to spend it, ranging from sweeping tax cuts and one-time tax rebates to major infrastructure projects and debt reduction.
Most recently, the Michigan House and Senate worked to push through a $2.5 billion tax cut that would absorb the increased revenues. The proposal would include a reduction in the Michigan Income Tax from 4.25% to 4%, a $500 per child tax credit (reduced to $250 per child in future years), an $1,800 increase in the personal exemption, an increase in the Earned Income Tax Credit, and an exemption for senior citizens that would total $21,800 for a single filer and $43,600 for joint filers.
As a counterpoint, Governor Whitmer called for a one-time $500 per tax rebate that would be payable to taxpayers immediately.
Proponents of the Legislature’s proposal stated that it would provide long-term relief for Michigan citizens and help address the “pension tax” created by the previous Snyder administration. Supporters of the Governor’s plan countered that her’s was more responsible by treating potentially one-time revenue with one-time expenses, rather than running the risk of creating future budget deficits as the Legislative plan would. They also noted that the Governor’s plan would get money into taxpayers’ hands the fastest. This battle will likely become center stage in the ongoing budget negotiations.
Legislature Moves Budget Bills Forward Setting Stage for Final Negotiations
The Michigan House and Michigan Senate have both passed their versions of the 2022-3 appropriations bills, and are maneuvering them into position for final passage. There are some large differences not only between the Legislature’s and the Governor’s proposals, but even between the House and Senate in some instances. The conventional wisdom in Lansing is that many of these first draft budgets are starting points for negotiations, and they are expected to change markedly before the final agreement is signed.
In recent years, the Michigan Legislature has adopted a method of passing budgets that has drastically reduced the amount of input that can be received from the public and even much of the Legislature itself. This process is once again takin place this year, as earlier this month the House and Senate each passed their own versions of appropriations bills. They then rejected each-other’s proposals. The next step in the process is to place each of these rejected bills into conference committees that are made up of three House members and three Senate members. These conference committees will then distill every budget bill into two massive “omnibus” bills – one for K-12 Schools and one for all other state spending.
The decisions on what goes into these omnibus bills are made by a small fraction of the House and Senate, and generally come down to agreements between the Appropriations Committee Chairs and the leadership of each chamber. This small group of lawmakers will negotiate with the Governor’s budget staff to develop a final agreement. At that point, the House and Senate will take up the massive omnibus bills and every lawmaker must either vote “yes” or “no” on the entirety. Gone are the days when individual legislators could offer amendments on the floor and see them debated in the public eye. The current process leaves the resolution of these differences to a tiny number of elected officials and their staff, with most of the work being done behind closed doors away from public scrutiny.
Some examples of the major differences this year include:
The Michigan Department of Corrections budget, where the House added over $30 million to provide recruitment and retention bonuses for corrections officers, but also estimated savings of nearly $60 million based on prisoner population decreases. The Governor and the Senate did not include these changes.
The Governor’s proposal for the Department of Health and Human Services budget included $22 million for two new behavioral health units at Hawthorne Center, and a new satellite facility for the Center for Forensic Psychiatry. The House and Senate did not fund this proposal.
The Governor proposed $500 million to be used for premium pay for “front-line” workers who performed in-person work during the pandemic. The House and Senate did not include this proposal.
These are just some of the major items of difference that will be negotiated over the next month as lawmakers hurry to complete the process by July.
Battle Brews over Remote Work for State Employees
Since the beginning of the COVID-19 pandemic, many state workers have shifted to working from home at least part of the time. This has led to concerns from some lawmakers over whether or not state workers are receiving proper supervision and how remote work has impacted productivity. The Michigan Legislature is also receiving numerous complaints from business owners in downtown Lansing who claim that remote work for state employees is costing them dearly.
The Michigan House added provisions in several of their versions of the FY 22-23 budget bills (see article above) that would require state workers who were not working remotely prior to the COVID-19 pandemic to return to in-person work by October 1. Representative Sarah Lightner (R-Springport), a leading proponent of the provision, expressed concerns about a potential lack of accountability for state workers working remotely.
The provisions were opposed by House and Senate Democrats, who argued that the Legislature has no authority to determine state employee working conditions. It is likely that these provisions are unenforceable under Civil Service rules, but the debate will no doubt rage on as lawmakers argue over remote work.