Volume XXXI - Issue 38 September 20, 2019

FIRST BUDGETS REPORTED – With the deadline for budget approval only 10 days away, legislators began reporting budgets out of their respective Conference Committees with the School Aid/K12 budget passing both chambers yesterday. MHSA has had extensive discussions with legislative and budget leaders and our understanding is that all budgets will be sent to Governor next week for her consideration. We expect Governor Whitmer to use her line item veto power to veto numerous items in the proposals but retain enough of the budgets for the state to remain open at the end of the fiscal year, which is Monday, September 30th.

Once the 2019-20 Fiscal Year begins October 1, the Governor and Legislature will continue budget talks, and work to pass supplementals restoring the Governor’s priorities left out of the enacted budgets. They will also aim to settle any differences on items that were vetoed by the Governor. As of Thursday, the following budgets were reported from Conference Committees and are poised for adoption next week:

Michigan Department of Health and Human Services (DHHS): One of the most anticipated budgets each budget season, the DHHS budget was approved 5-0 by the Conference Committee, with one Committee member abstaining. Under Senate Bill 139, proposed funds for Fiscal Year (FY) 2019-20 is $26.4 billion, an increase from current year totals of $25.5 billion. The largest allocation within the budget itself is for Medicaid, totaling $13.7 billion for expenditures. However, for the Healthy Medicaid expansion section, a $94.5 million increase is proposed, to total $4.08 billion. For the state’s 10 prepaid inpatient health plans, the budget would equal $211.4 million, as proposed earlier this year by Governor Gretchen Whitmer and maintained by legislators. Food assistance programs and public assistance funding would see decreases. The bill also includes language that the three groups under Section 298, the state’s integration of Medicaid payments for mental and physical health pilot programs, would be allowed to have contracts with “other behavioral health service providers” (meaning they would not be restricted to partnering with the local community health groups).

Michigan Department of Corrections (MDOC): Along a party line vote of 4-2, Republicans passed the MDOC budget in Conference Committee on Thursday. The budget proposal, House Bill 4231, proposes FY 2019-20 funding to total $2,026,123,400, a slight increase over current the FY allocation of $2,019,056,200.

Judiciary: Conference Committee members quickly approved House Bill 4238, calling for the FY 2019- 20 Judiciary budget to total $311 million (an increase over the current FY allocation which is $304 million).

Michigan Department of Education: Under House Bill 4232, Conference Committee members approved a $419.8 million budget for MDE, an increase from current year amounts of $406.1 million. The budget allocates $104.9 million to three separate funding reserves ($314.9 million total) to only be accessed when a legislative transfer request is issued by the State Budget Office and approved by the Legislature.

K12/School Aid: Following a sudden announcement by House Minority Leader Christine Greig (D- Farmington Hills) early Thursday that House Democrats had brokered a deal with House Republicans on a K12/School Aid budget, the bill passed both the House and Senate and is headed to Governor Gretchen Whitmer. Under House Bill 4242, proposed monies for Fiscal Year 2019-20 total $15.2 billion (current FY allocation is $14.8 billion). The vote counts in each chamber reflected splintered philosophies and/or approaches in handling the School Aid budget among the two Democratic caucuses. Overall, the budget passed the House 91-18 and the Senate 21-17 (all Democratic Senate members voted no). The budget adds $30 million for special education and makes boilerplate changes relating to at-risk students, the shared time program, and partnership districts.

Michigan Department of Transportation (MDOT): An additional $400 million in funding for roads was included in the Conference Committee passed MDOT budget on Thursday, something Governor Gretchen Whitmer has openly opposed. The budget was reported from the Committee on a 4-2 vote. Ms. Whitmer has not been a part of the Legislature’s Conference Committee negotiations and has already opined the $400 million one-time expenditure (of General Fund monies) without a long-term fix would not adequately address the actual issue of roads and infrastructure. The $400 million proposed is in addition to the already allocated $468 million (as required under the 2015 roads plan) for road repairs, Republican members noted. The budget also includes $418,200 for the Detroit/Wayne Country Port Authority and $7.7 million for transit systems. Overall, the FY 2019-20 budget totals $5.39 billion, up from the current FY allocation of $5.01 billion.

Michigan Department of Insurance and Financial Services (DIFS): For FY 2019-20, Conference Committee members approved a $68.9 million DIFS budget, an increase from current FY spending of $67.9 million. The budget assumes a larger workforce to cover changes in the Insurance Code (auto no- fault) and the bill was passed 4-0, with two legislators abstaining from voting on Senate Bill 141.

General Government: Overall, as proposed under Senate Bill 138, the General Government budget would total $5.26 billion for FY 2019-20, a slight cut from the $5.27 billion from current year. Within the proposal, as passed out of the Conference Committee on a 4-2 party line vote, the new citizen redistricting commission would be moved from the Michigan Department of State to the Legislature and its funding would be cut by $1.3 million to $3.36 million. Cities, villages and townships would see an increase in funding however, totaling $256.02 million, and multiple state departments would see General Fund cuts. The new Michigan Department of Labor and Economic Opportunity (LEO) would see a 13 percent cut from the current year, DHHS would see a cut of $195,000 for legal services, and the Michigan Department of Technology, Management and Budget (DTMB) would see an 18.4 percent cut.

Michigan Department of Licensing and Regulatory Affairs (LARA): Governor Gretchen Whitmer got what she asked for in the LARA budget: an additional $6 million and 300 new staff positions following the passage of Proposal 1 last election year (the legalization of recreational marijuana). Conference Committee members approved the LARA budget via House Bill 4239 on a vote of 6-0 on Thursday. The overall budget totals $566.3 million for FY 2019-20, a significant increase from current FY totals of $552.3 million. Also included in the budget is $20,000 for the Bureau of Fire Services for likely upcoming regulations on firefighting foam (which contains poly and perfluoroalkyl substances (PFAS)); $600,000 for the state’s urban search and rescue team; and $520,000 in federal monies for a refugee services database within the Office for New Americans.

Michigan Department of Agriculture and Rural Development (MDARD): As proposed via House Bill 4229, the MDARD budget would include $4 million for food and agriculture business expansion and attraction efforts as part of an overall budget of $112.6 million. The current FY budget is $112.2 million.

ROAD FUNDING PROPOSALS INTRODUCED – With budgets (finally) beginning to move through the House and Senate, legislators, outside of leadership, are beginning to kick the tires (pun intended) on road funding ideas.

On Thursday, House members introduced House Bills 4965, 4966 and 4971 with the bills calling for a reconfiguration of the current road funding/spending mechanism to ensure the most at-need roads and areas are serviced first. Under HB 4965, funds distributed to a county for construction, preservation or acquisition would be subject to the county’s asset management plan instead of the Public Act (PA) 51 of 1951 (the current road funding plan).

The bill also states that any monies from the Michigan Transportation Fund (MTF) can be spent as follows: on county local roads only if the funds are matched, or for bridge construction on local county roads. Up to 75 percent of the monies from the MTF can be used for repairs as well, but in cases of emergency, that percentage can be exceeded.

As written in HB 4966, if an asset management plan is approved, distributed funds under the MTF would be required to be spent either as dictated by said plan or in an emergency. The final bill in the package, HB 4971 seeks to significantly alter portions of PA 51 and reinforce sections of PA 325 of 2018 as it relates to the soon-to-be implemented Transportation Asset Management Council (TAMC). The TAMC goes into effect October 1 of 2020 and would be required to annually review asset management plans submitted by local road agencies.

The bills remain in the House Transportation Committee.

WHITMER ORDERS RECYCLING DIRECTIVE – State departments will be required to implement a recycling program to track the amount each department is recycling, according to Executive Directive 2019-16 issued by Governor Gretchen Whitmer on Tuesday.

If agency leaders do not believe a program is feasible, they will need to receive sign-off from their department directors. The Directive does include exemptions for certain buildings including if the facility is small, serves as livable quarters, is a utility structure, or does not have access to nearby recycling services.

The Directive comes shortly after $1.23 million in recycling grants were awarded to Lower Peninsula communities and continues the attempt to reach the Whitmer Administration’s goal of increasing Michigan’s recycling rates to match or move past other states’ rates.

The Michigan Department of Technology, Management and Budget (DTMB) will report on the departmental programs and capabilities twice annually and will review the current status of Michigan’s recycling program, along with the Michigan Department of Environment, Great Lakes and Energy (EGLE). EGLE and DTMB officials will also work to identify, develop, and implement policies and procedures aimed at expanding and improving the current program and its use by the state’s employees, including a targeted campaign focusing on the “how” and “why” of recycling.

Commenting on the Directive, Governor Whitmer stated, “When we implement more sustainable practices like recycling in state government, we can create jobs, combat climate change, and protect public health. This executive directive will help us solidify our state as a bold leader in sustainability and environmental protection.”

ADDITIONAL FEE SUNSETS EXTENDED – Following the passage of multiple fee sunset extensions at the end of August, legislative members continued down the list this week approving the extension of more fees, ensuring roughly $12 million continues to fund various state programs.

Under Senate Bill 530, as reported to the full Senate for consideration on Wednesday, fees for air pollution would be increased within the Natural Resources and Environmental Protection Act from the current rate of $51.15 per ton of emissions to $53 per ton and extended to October 1, 2023 instead of October 1 of this year.

Other bills reported out of the Senate Appropriations Committee addressing the issue of fee sunsets included House Bills 4850, 4853, 4857, 4858, and 4889-4893 and include: license and license renewal fees for psychiatric hospitals and units; commercial look-up fees for various boating, off-road vehicle, and snowmobile records; groundwater discharge; expedited sewer permits; and solid waste surcharge, among others.

Each extension passed the Committee on a 18-0 vote. On Thursday, the Senate continued its expeditious and bipartisan work on the House bills, passing all of the extensions unanimously.

ROAD COMMISSION UNFUNDED LIABILITY: CAN GRANTS HELP? – Members of the House Local Government and Municipal Finance Committee discussed potential solutions for getting county road commissions out of the unfunded liability hole on Wednesday. Two bills were up for discussion during the committee hearing, House Bills 4447 and 4448, though votes for both were very different.

Under HB 4447, county road commissions with underfunded pension or retiree healthcare systems would be allowed to receive matching grants from the state to reduce the liability. The grants, however, would not come without a price: the commissions would be required to then close the systems to all new hires.

One major concern for those in opposition to the bill is the source of funding for the grants, something that was not made apparent in the legislation. Those in support opine the bill provides a voluntary opportunity for commissions to seek help with the unfunded liability issue that plagues so many local governments.

To qualify for the proposed matching grants, the bill states, a commission’s retiree health care system must be less than 40 percent funded, or its pension system must be less than 60 percent funded. The bill passed through the committee on party lines, 7-5, with one Republican member abstaining.

The other bill in the package, HB 4448, calls for the allowance of county boards of commissioners to levy taxes in order to pay for the unfunded liability of a county road commission retirement system, and received unanimous support, passing the committee 13-0. Both bills are headed to the House Ways and Means Committee for consideration.

ELECTIONS

• Dave Dudenhofer, current Republican Chair for the 13th Congressional District, announced his campaign for the District in 2020, which is currently held by U.S. Representative Rashida Tlaib (D-Detroit)

ODDS & ENDS

• According to a report from , tax expenditures created an estimated loss of $41.886 billion for the current 2018-19 Fiscal Year • According to both the House and Senate Fiscal Agencies (HFA, SFA), the School Aid Fund saw higher than expected revenues for August: $58.9 million more than forecasted by HFA and $106.1 million more than forecasted by SFA • Under a 10-bill package introduced by Senate Republicans, regulations are outlined for a proposal for the use of toll roads on interstate highways and bridges in the state to increase road infrastructure revenues (Senate Bills 515-524) • Michigan State Budget Director Chris Kolb notified 30,000 state employees on Monday they would be laid off if no budget deal is reached by October 1 • U.S. District Judge Paul Maloney ruled on Monday federal law does not preempt state law when it comes to the bonded transfer of wine • Michigan has been chosen as one of seven states to join the inaugural Attainment Academy, in which the states will work together to educate one another on best practices to close educational equity gaps • House Democrats introduced House Resolutions 156-161 recently, in which the state calls upon the federal government to back what is known as the “Great lakes 2020 Presidential Agenda”. The “Agenda” calls for increased funding for infrastructure and restoration, among other critical projects for the Great Lakes • According to recent U.S. Census estimates, 839 of Michigan’s 1,773 cities, townships and villages have opted out of having recreational marijuana businesses in their boundaries • Detroit Mayor Mike Duggan officially requested a ballot initiative be placed before voters in March of 2020 that would give the City of Detroit the allowance to sell up to $250 million in bonds to remove residential blight from all Detroit neighborhoods by 2025. Mr. Duggan presented the initiative to the City Council recently • The Michigan Department of Treasury announced on Monday approximately 288,000 Michigan households who received Home Heating Credits in 2018 will receive an additional, one-time payment of $22 this month • Michigan, along with Florida and Pennsylvania, has been selected by Priorities USA as a voter mobilization site for local elections this year. The digital campaign announced it will spend roughly $4 million to carry out its mission • Under House Bills 4960 and 4961, as discussed by the House Regulatory Reform Committee recently, alcohol suppliers would be prohibited from requiring wholesalers to provide financial records related to other brands sold by the wholesalers, and to spend a certain amount of resources on marketing or promoting brands sold by said supplier • Michigan has been named as one of two dozen states in settlement talks with Purdue Pharmaceuticals, following the company’s bankruptcy filing on Sunday • Michigan is set to receive $4,639,247 from a settlement with Equifax for a 2017 data breach • According to data from the U.S. Department of Labor, 42 percent of unemployment benefits paid out to Michigan residents from July 1, 2015 through June 30, 2018 were improper • The Criminal Justice Policy Commission will cease to exist as of September 30 this year, as both House and Senate leadership have opted to not take up legislation extending the Commission’s sunset • Members of the House Tax Policy Committee reported House Bill 4125 on Wednesday. The bill, now headed to the House Appropriations Committee, calls for the reversal of a controversial bill from last year’s Lame Duck session that reduced gross income tax collections (before they are deposited into the School Aid Fund) from 23.81 percent to 22.45 percent • According to the Michigan Department of Technology, Management and Budget (DTMB), seasonally adjusted unemployment decreased in Michigan in August to 4.2 percent, a 0.1 percent decrease from July of this year and a 0.3 percent increase from August of 2018 • New Oakland County Executive David Coulter announced former legislator Rudy Hobbs and former Michigan Department of Technology, Management and Budget (DTMB) employee Sean Carlson as new Deputy Oakland County Executives • House Bills 4254-4260 and 4265 overwhelmingly passed the House Families, Children and Seniors Committee on Wednesday, with the bills seeking to protect elderly residents from abuse and embezzlement • House Bills 4916-4918, legislation creating the Sports Betting Act to allow sports betting in the state, were reported out of the House Regulatory Reform Committee on Tuesday and sent to the House Ways and Means Committee for consideration. The package of bills joins others seeking to allow online betting and fantasy gaming • Members of the Certificate of Need (CON) Commission unanimously approved the requirement that facilities receive a special accreditation before being allowed to offer “immune effector cell therapy” used for cancer treatment • Under House Bills 4370 and 4371, as passed by the House on votes of 106-3 and 105-4 respectively, medical professionals who perform sensitive procedures, must document the practice and maintain those records for 15 years. The bills were introduced following the Larry Nassar sexual assault scandal • The Michigan Department of State Police (MSP) announced the launch of a free mobile application that allows users to follow the MSP post that covers their respective area for breaking news and information reports • According to an early forecast form the Research Seminar in Quantitative Economics released on Thursday, the U.S. economy will slow but should not fall into a recession (assuming the U.S. Federal Reserve reduces interest rates at least once more this year)