Capitol News

July 2013

Michigan legislators may have wanted a leisurely two-month summer vacation from politics, but Governor Snyder had other priorities, namely, Medicaid expansion.

Medicaid Expansion/Healthy Michigan

The Governor included savings of $206 million due to Medicaid expansion in his budget for FY 2013-14. The savings would result from the shifting of state-funded indigent mental health care services to an expanded federally-funded Medicaid program enabled by the federal Affordable Care Act (Obamacare). However, the Legislature did not include Medicaid expansion in the budget that the Governor eventually signed, forcing the issue into separate legislation.

The House eventually passed a Medicaid expansion bill, HB 4714, with a 76-31 vote after a 10-hour session on June 13 as 28 Republicans joined 47 Democrats and one Independent in support. Thirty Republicans voted No, dramatizing the split in the Republican Party over the issue.

The legislation, dubbed Healthy Michigan, would expand Medicaid eligibility to 325,000 adults less than 65 years of age in FY 2013-14 and 470,000 people thereafter whose incomes are up to 133 percent of the federal poverty level. In 2014, 133 percent of the FPL will be about $15,500 for a single adult and about $26,500 for a family of three. It is estimated that 46 percent of the uninsured are in this income range. Due to lack of insurance, this group uses emergency rooms extensively where federal laws require that care be provided regardless of ability to pay. Hospitals, in turn, shift the costs of uncompensated care onto all other insured individuals. The estimate of uncompensated care in Michigan hospitals is just under a billion dollars a year.

Since the Medicaid expansion will be 100 percent federally funded over the first three years, with the match rate dropping to 90 percent by calendar year 2020 and thereafter, Medicaid expansion would bring at least a billion federal dollars into the Michigan economy. Small businesses, large businesses, health care insurers, the health care community, religious groups, advocates for women, children, the poor and disabled all supported Medicaid expansion. What is not to like about it?

A majority of the Michigan Senate Republican Caucus apparently found a lot not to like about Medicaid expansion, namely that it is an expensive enlargement of the federal government. A Tea Party coalition sent the Governor a letter threatening to pull their support of him for backing Medicaid expansion; three Senators were told they would face a primary challenger over the issue.

The Governor returned early from an Israel trade mission to lobby personally for the measure but to no avail. The Senate adjourned on June 20 without taking up the matter. The Governor then went on the road to recalcitrant Senators’ districts to urge constituents to contact their Senators. Robocalls into some districts were arranged; Webinars, teleconferences, email blasts, tweets, and Facebook postings were all part of the campaign of the Republican accountant-in-chief to convince his fellow Republicans that Medicaid expansion made good financial sense and was the right thing to do. Senate Majority Leader Randy Richardville appointed a bi-partisan Healthy Michigan work group to investigate further options. Due to the federal waivers needed, a decision by the end of summer is necessary.

Pension Tax/Homestead Property Tax Credit Amendment Bills

Since the beginning of the legislative session in January, six bills have been introduced to repeal or modify the pension tax or Homestead Property Tax Credit. None of the bills have received a hearing or a vote yet.

HB 4827, the most recent offering, was introduced by Rep. Patrick Somerville (R) on June 12, 2013, to revise the tax exemptions for pension income. The bill would authorize a pension income tax deduction for a person born after 1952 who is retired before July 1, 2014, exempting from tax up to $15,000 in pension income for a single return and $30,000 for a joint return. Under the 2011 tax overhaul, older individuals get a partial or complete pension income exemption but those born after 1952 do not. The bill has been referred to the House Committee on Tax Policy. According to the sponsor’s staff, the bill is intended to help younger retirees who had no forewarning about a pension tax before they retired. Due to the dates in the bill, it would also effectively encourage those born after 1952 to retire before July 2014. The Fiscal Agency has not yet estimated a cost of this proposed tax change.

HB 4565 was introduced by Rep. Collene Lamonte (D) on April 16, 2013, to reverse the senior citizen portion of the 2011 income tax overhaul and business tax cut that limited eligibility for a credit against property taxes imposed on a person’s primary residence. The bill has been referred to the House Committee on Tax Policy.

HB 4564 was introduced by Rep. Theresa Abed (D) on April 16, 2013, to repeal the pension tax. The bill has been referred to the House Committee on Tax Policy.

SB 280 was introduced by Sen. Rick Jones and four other Republicans on March 20, 2013, to repeal the pension tax, and restore the senior homestead property tax credit. The bill was referred to the Senate Committee on Finance. When Senator Steve Bieda (D) attempted to discharge the bill, Senate Republicans moved to postpone discharge of the bill until Saturday, December 28, 2013, the last day of session.

SB 145 was introduced by Sen. Bert Johnson (D) on February 5, 2013, to repeal the pension tax. The bill was referred to the Senate Committee on Finance. Like SB 280, a motion to discharge was postponed until December 28, 2013.

HB 4130 introduced by Rep. Joseph Graves (R) on January 29, 2013, to repeal the pension tax. It was referred to the House Committee on Tax Policy.

Other Issues

Rehiring retired Corrections Officers — The Michigan House approved HB 4664 to amend the State Employees Retirement Act to remove the September 30, 2013 sunset date for DOC to rehire up to 250 corrections officers in custodial positions without a negative impact on their pensions. The Senate amended the bill to extend the sunset date to September 30, 2015. The bill has been returned to the House for concurrence, which is expected. About 50 officers retire every month and DOC cannot hire and train enough to replace them, forcing high expenditures for overtime pay of current employees.

DIA Art Collection — Michigan’s Attorney General has issued an opinion that the Detroit Institute of Arts collection cannot be sold to satisfy Detroit debtors. “(T)he art collection of the Detroit Institute of Arts is held by the City of Detroit in charitable trust for the people of Michigan, and no piece in the collection may thus be sold, conveyed, or transferred to satisfy City debts or obligations,” wrote AG Bill Schuette.

In his opinion, Schuette cited a 1997 Operating Agreement between the Founders Society (the nonprofit that operates the museum) and the city. In it, the Founders Society has the right to acquire and dispose of artwork. However, proceeds from any sale must be used solely to purchase other works of art for the art collection. A bill to protect the Detroit Institute of Arts’ holdings from sale due to the city of Detroit financial emergency passed the Senate earlier.

Fireworks — Last year’s reform of the Fireworks Safety Act resulted in round-the-clock noise in many communities. It was modified in June to allow local units of government to regulate the use of consumer fireworks during night hours on the day before, day of, and day after a national holiday. The former law disallowed local units of government to enact ordinances regulating fireworks for the three-day period surrounding a national holiday leading to many complaints of fireworks at all hours of the day and night.

4 Percent Pension Contribution Lawsuit — PA 264 of 2011 amended the State Employees Retirement Act to require current defined benefit active employees to contribute 4 percent of their pay to the pension fund or go into the defined contribution 401(k) program. The Coalition of State Unions challenged the law as unconstitutional because the Civil Service Commission did not approve the decrease in pay. The Coalition received a favorable opinion from the Ingham County Circuit Court last September. On June 12 a three-judge panel of the Michigan Court of Appeals heard oral arguments from the Coalition and the Attorney General’s Office. The Coalition argued the pension is part of compensation and the change would affect the conditions of employment, both of which should be determined by the CSC under the Michigan Constitution. In a similar 2011 case regarding a required 3 percent contribution for retiree health care benefits, the legislation was held unconstitutional because it was not approved by the CSC. The AG said this case was different because the 2011 case was over a mandate whereas under PA 264, employees have a choice between contributing and switching to a 401(k). The decision should be out in the coming months.

Non-union State Employees May Get Damages — In an unpublished decision released June 21, the Court of Appeals held that the Office of the State Employer reneged on a contractual obligation to support a 3 percent pay increase for non-union state employees. Under an agreement reached in 2008, non-union state employees were supposed to receive a 1 percent raise in fiscal year 2009-10 and a 3 percent raise in 2010-11. OSE supported the first raise, but opposed the second when it came before the Civil Service Commission. The Court of Claims found the OSE breached its contract with the Michigan Association of Governmental Employees in not supporting the consent agreement, and the Court of Appeals affirmed, sending the case back to the Court of Claims for determination of damages for breach of contract.

Recent News — If you are a SERA member, you are eligible to receive Recent News, a periodic e-mail about breaking news and media stories of interest to state employees and retirees. Write to giving your name and chapter.

Editor’s note: Mary Pollock is the Lansing SERA Chapter and SERA Council’s Legislative Representative. She may be contacted at 1200 Prescott Drive, East Lansing, MI 48823-2446; Phone 517-351-7292; E-mail

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