Capitol News

January 2015

Thanks to Walt Sorg for writing the December Serenade Capitol News article during my absence for a trip to southeast Asia. He did a great job!

Walt’s report covered the period up to December 8; the lame duck session was scheduled to end December 18. The big issue dominating the session was concocting a “Roads Fix”, i.e. finding new revenue to dedicate to state and local road, bridge and infrastructure improvements. Since much of the Republican caucus in both houses opposes any tax increase and some even oppose user fee increases, Democratic votes were needed to hammer out a bi-partisan agreement. This was especially true since one of the proposals would take a two-thirds legislative vote to put a sales tax increase on the ballot. The sales tax was last raised in 1994 combined with education funding/property tax reform. To gain some individual Republican and Democratic legislator’s votes, many bills were passed or buried on matters having nothing to do with roads funding.

Last fall most Democrats and a few Republicans campaigned on elimination or modification of the pension tax. When I returned to the USA late Wednesday, December 15 and began reviewing legislative news on the internet, I noticed that a lot of items were being discussed as part of the Roads Fix, but the pension tax was not among them. If the pension tax was used to gain senior votes for candidates, it seemed to me it should be in the mix on the Roads Fix. Michigan SERA Coordinating Council Chair Bob Kopasz and I conferred and decided to write to the Governor and Legislative leaders, urging that if they wanted seniors support for the sales tax increase, relief from the pension tax was needed.

It took a 21-hour session on the last day of lame duck to pass all the measures in the Roads Fix. Unfortunately, modification of the pension tax was not part of it and there was no independent movement on the several bills modifying the pension tax. Ultimately 224 bills were passed during the nine session days of lame duck.

The “Roads Fix”

According to the House Fiscal Agency explanation of House Joint Resolution UU (the “Roads Fix”), voters will be asked to amend the State Constitution on Tuesday, May 5, 2015 to:

  • Exempt sales of gasoline and diesel motor fuel from the state general retail sales tax after October 1, 2015.
  • Increase the maximum sales and use tax by 1 percentage point (from 6% to 7%).
  • Dedicate 60% of the first 5% of the sales tax and an amount equal to 12.3% of the first 5% of the use tax to the School Aid Fund, which amounts to about $300 million. (The sales tax earmark currently applies to the first 4% of the tax; the use tax earmark would effectively be an upward adjustment to the existing earmark of one-third of revenue from the tax.)
  • Provide for the School Aid Fund to be used exclusively for aid to school districts, public community colleges, public career and technical educations programs, scholarships for students attending either public community colleges or public career and technical educations programs, and school employees’ retirement systems, as provided by law. (This effectively removes aid to public universities as an allowable use for the fund; the current language references “higher education” generically.)
  • Dedicate 15% of the first 5% of the sales tax to be used for revenue sharing with townships, cities, and villages, which amounts to over $90 million. (This earmark currently applies to the first 4% of the tax.)

The following bills are tie-barred to House Joint Resolution UU, meaning they would not take effect unless voters approve the amendment to the State Constitution.

  • House Bill 4539 would amend the General Sales Tax Act to exempt gasoline and diesel fuel from the sales tax after October 1, 2015, and provide for a 1% increase on the 4% portion of the total rate.
  • House Bill 5492 would amend the Use Tax Act to exempt gasoline and diesel fuels from the use tax after October 1, 2015, increase the 4% portion of the rate to 5%, and alter the distribution of use tax revenue. In the bill, the distribution would change to approximately 62.64% for the General Fund (currently 2/3), and 37.36% for the School Aid Fund (currently 1/3), as a result of earmarking 12.3% of the first 5% of the tax to the School Aid Fund. The remaining changes simply substitute the 7% rate for the 6% rate where appropriate.
  • House Bill 5477 would, among other changes, amend the Motor Fuel Tax Act by converting the current fixed taxes of 19 cents per gallon for gasoline and 15 cents per gallon for diesel fuel into a tax calculated based on 14.9% of the average wholesale prices of gasoline and diesel, effective October 1, 2015.
  • House Bill 5493 would amend the Motor Fuel Carrier Tax Act such that beginning October 1, 2015, the per-gallon tax rates for motor fuels are the same as specified in Section 8 (1) of the Motor Fuel Tax Act. Alternative fuels (a term defined in the bill) would be subject to the same treatment as in Section 152 of the Motor Fuel Tax Act.
  • Senate Bill 847 would amend the Income Tax Act to increase the Earned Income Tax Credit (EITC) from 6% to 20% of the federal EITC, beginning with the 2016 tax year at a cost of over $250 million to state revenues. The EITC is a refundable income tax credit for low- to moderate-income working individuals and families. To qualify for the federal EITC, a taxpayer must meet certain requirements and file a tax return, even if he or she did not earn enough income to be obligated to file a return. Senate Bill 847 would also increase the amounts of the homestead property tax credit for senior citizens and disabled taxpayers whose total household resources are between $3,001 and $6,000.
  • House Bill 4251 and House Bill 5167 would establish requirements related to competitive bidding and performance-based systems for state and local road construction projects.
  • House Bill 4630 would implement increases in certain truck registration fees and increase vehicle registration tax revenue through eliminating the “depreciation” of ad valorem tax rates for passenger cars, vans, and light trucks. In other words, as your vehicle depreciates, your registration fee will not go down.
  • House Bill 5460 would establish requirements related to road construction project warranties.
  • Bottom line: With voter approval of the sales tax increase, all these bills would increase state revenue by $1.7 billion including $1.2 billion per year for road agencies (39.1% to the State Trunkline Fund, 39.1% to county road commissions, and 21.8% to cities and villages), except that for FY 2015-16 an estimated $800 million of this revenue would be dedicated for pay-down of transportation-related debt and for FY 2016-17 an estimated $400 million would be dedicated for that purpose; $300 million to the School Aid Fund; $130 million to the Comprehensive Transportation Fund (CTF), for public transportation purposes; and $95 million for constitutional revenue sharing payments to cities, villages, and townships.

    Legislation related to collection of tax on internet sales (Senate Bills 658 and 659) was included in the deal but is not tied to voter approval of the proposed constitutional amendment.

    Failure of the voters to pass the sales tax increase will send the Governor and Legislature back to the drawing board.

    Civil Service Commission Actions

    Civil Service Commissioner Charles Blockett’s 8-year term expired on December 31, 2014. Before his retirement in 1997, he was a Bureau Director in the Department of Civil Service and then ran a successful national human resources consulting firm. Governor Jennifer Granholm appointed him to the Commission as an independent (no party affiliation). He was a reliable supporter of fairness to employees and professional management of the state’s personnel system. Governor Snyder has appointed the recently retired Acting State Personnel Director and Chief Deputy Director Janet McClelland as an independent to the unpaid position vacancy on the CSC with a term expiring at the end of 2022. The Commission has jurisdiction over state employee retiree health care benefits among other important duties.

    The CSC has appointed former Michigan Court of Appeals Judge William Whitbeck to a vacancy on the three-member CSC Employment Relations Board created by the resignation of Marie Waalkes. Whitbeck, 73 and prohibited from running for reelection due to his age, recently retired two years early from the Court of Appeals, thus allowing the Governor to appoint Michael Gadola, the governor’s legal counsel, to the Court of Appeals. Whitbeck had long been a leading policy official and Republican insider before being named to the Court of Appeals in 1997. The ERB considers and make recommendations concerning appeals of non-exclusively represented employee (NERE) Step-3 grievance decisions; technical review decisions; labor relations decisions; and other administrative decisions when authorized by the CSC rules or regulations. It also serves as an impasse panel to resolve collective bargaining disputes and as the coordinated compensation panel for NERE pay proposals.

    Increased Senior Living Facility Protections

    Unheralded in the news but unanimously approved during lame duck by both houses and signed into law on December 30, the “Continuing Care Community Disclosure Act” (Senate Bill 886, PA 448 of 2014) replaces the Living Care Disclosure Act and provides for the prohibition of fraudulent practices and regulation of the offer and sale of life interests and long-term leases in the 26 continuing care communities in Michigan. This includes retirement communities, homes for the aged, adult foster care facilities, independent living, nursing homes, home care agencies and hospices. The new law is meant to recognize the changing nature of senior care and permit unencumbered movement of members of a continuing care community between areas of the community that are subject to different licensure categories. It also protects seniors by clarifying their rights, ensuring access to all common areas and regulating refunds if a resident moves out, passes away or cancels their purchase. CCCs must register with the Department of Licensing and Regulatory Affairs.

    SERA Recent News — If you are a SERA member, you are eligible to receive SERA 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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