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Dec 2012
11
December 11, 2012

From the Capitol - December 2012

LAME DUCK SESSION UPDATE
 
Here's an  update on activity in the Michigan House and Senate over the last 10 days.

Michigan, the state recognized as the birthplace of the modern labor movement in America, will soon become the 24th Right-to-Work state. This afternoon, the Republican-controlled state legislature passed Right-to-Work legislation, which will allow workers in a collective bargaining unit the choice of opting in or out of union membership.

Under the legislation, which applies to public- and private-sector unions (with the exception of police and firefighter unions), an employee will no longer be required to join a union and pay dues as a condition of employment.  Senate Bill 116 and House Bill 4003, labeled Freedom to Work by supporters, is now on its way to Republican Governor Rick Snyder’s desk. The Governor has said he plans to sign the legislation. Passage of the legislation occurred as organized labor conducted one of the largest protest demonstrations seen by the Capitol City.

The Governor and legislative leadership agreed to exempt police and firefighter unions over concern about Public Act 312 of 1969, which calls for binding arbitration to prevent a strike.  In addition, the Governor and legislative leaders were concerned about the potential for dissention within the ranks of those who risk their lives for public safety. Critics of the legislation and of the carve out for police and firefighters say Public Act 312 has nothing to do with joining a union or paying dues and that there are other union members in different occupations who also risk their lives for public safety but are not exempted.

BCBS  Legistation Sent to Governor:

SB 1293 and 1294 were substituted by the Michigan House of Representatives and won approval in the House by a vote of 61-49 and in the Senate by 28-10.  These bills allow for a conversion of Blue Cross & Blue Shield of Michigan (BCBS/M), the largest commercial health insurer (70% market share), from a benevolent public trust to a not-for-profit mutual insurance company.

According to the legislation, BCBS/M’s board is empowered to convert to a mutual company, but with such conversion:
  • It loses its state tax exemption (estimated at $100 million annually)
  • It must pay up to $1.5 billion over 18 years into a yet-to-be-created foundation
Critics of the conversion demanded a valuation as to the true worth of the assets since conversion would mean a change in ownership from the general public to policyholders.  The Legislature compromised, allowing the conversion but keeping ownership of assets with the public.

Senior groups opposed the legislation because it will mean a drastic reduction in the Medigap subsidy BCBS/M pays as part of its current social mission as a public trust.  In an attempt to rectify that concern, the Legislature approved an amendment requiring BCBS/M to contribute $120 million over five years toward the subsidy. But that’s still not enough to satisfy AARP and others.

Competitors were opposed unless and until prohibitions against the insurance giant’s use of “Most Favored Nation” clauses were included and the practice of cost shifting to other health insurance entities for undercompensated care was restricted. In some form, both provisions were included, which amounted to a major win for competitors. The Governor has said he will sign the bills before the end of the year..

Another economic/tax policy agenda item of the Governor and Republican legislative leadership is likely to be enacted this week.  In an effort to attract and keep manufacturing business in Michigan, the Governor and Legislature have been trying to find ways to repeal the personal property tax, which nearly everyone regards as an onerous and hard-to-administer tax.  The problem is local governments, to a greater or lesser extent, have become reliant on the tax to help fund services. 

As passed by the Senate, SBs 1065 – 1072 would repeal the personal property tax on industrial property and on commercial personal property of $40,000 or less.  However, the revenue lost by local units would be required to be reimbursed through an annual legislative appropriation.  If the legislative reimbursement to local units was not forthcoming, the personal property tax would be re-imposed.
 
Then came the proposal put forth by Lt. Governor Brian Calley. In addition to repealing the industrial personal property tax, the Lt. Governor’s proposal creates an authority to distribute funds to reimburse local government, allow local units of government to levy an “essential services” assessment for police, fire and jail services on those facilities that have received tax relief and, by constitutional amendment, dedicate 1 to 1.5 cents of the 6-cent use tax imposed on Internet and catalog sales.
 
Local governmental agencies, from libraries to cities to counties, don’t like this version because dedication of the use tax could be enacted only by amending the state constitution, requiring statewide voter approval.  If it does not receive voter approval, the personal property tax would still be repealed, leaving locals “holding the bag.”  Nevertheless, the House Tax Policy Committee approved the proposals and sent them to the full House for approval.  As the bills are exchanged between Houses, look for completion of the package by Thursday of this week.

Claims Tax Dead For Now:

The Legislature imposed a 1% claims tax on paid medical claims in 2011 in order for the state to meet its obligation for federal matching funds for the Medicaid program. The claims tax was supposed to raise $400 million as Michigan’s Medicaid match for federal funds. The federal funds amount to another $800 million. The problem is the tax fell short of the $400 million needed by approximately $130 million.  SB 1359 was introduced in an attempt to fill the shortfall.

It gives the Department of Treasury the ability to adjust the 1% rate until the “base need” of $400 million is achieved.  When the bill received a hearing before the Senate Appropriations Committee, it was met with stiff resistance from the business community, so much so that it now appears the bill will die this session.  Department of Community Health officials are looking at alternatives, including expanding the list of claims and/or providers to be taxed.
 
Regional Transit Authority Legislation Nears Completion:

Two of the four bills establishing and enabling a southeast Michigan transit authority to operate passed both Houses of the Legislature last week.  SBs 909 and 911, establishing the authority and authorizing an additional assessment on motor vehicle registration fees if approved by voters in the Authority region, passed the House last week by a vote of 59-50.  SBs 912 and 967, the two other bills in the package, are on third reading on the House floor and should win approval this week. These bills would make local zoning ordinances subject to the Authority and allow the Michigan Department of Transportation or local road agencies to enter into agreements to operate the system.
 
Lighting Authority for Detroit Closer to Passage:

A three-bill package that removed the City of Detroit from the responsibility of public lighting for Detroit city streets is closer to full approval, but still has a ways to go. HB 5688, which establishes the Authority, and HB 5705, which requires the City of Detroit to pay an amount annually to the Authority, have won approval in the Senate and are now on the House floor.  SB 970 would increase local income tax revenue in the City of Detroit and restrict the distribution of that revenue.  Last week, the Senate was able to pass the bill by a narrow 20-18 margin. The bill was then sent to the House and referred to the Tax Policy Committee. As of now, that Committee is not scheduled to meet to consider the bill, but a floor motion to discharge it may occur.
 

What started out as a four bill package to revise Michigan’s medical malpractice laws passed the Senate last week and was sent to the House, but without the cornerstone and most controversial piece.  SBs 1115 through 1118 would:
  • Require coordination of future economic damages by collateral source payments
  • Establish criteria for an expert witness who is not a licensed health professional
  • Limit the period of time for bringing a medical malpractice action on behalf of a deceased person
SB 1116, which drew most of the opposition, was left behind in the Senate. It would have established a standard of care termed the “physician judgment rule,” which is essentially the physician’s exercise of professional judgment.  The plaintiffs’ bar and patient advocates argued that such a standard would make it nearly impossible to sustain a cause of action.  This threatened to take down the entire package.  In the end, physician groups opted for “something is better than nothing” and backed off on passage of SB 1116.  The other three bills are scheduled for a hearing before the House Judiciary Committee this week with House approval expected.
 
No-Fault Insurance Changes Not Likely:

A bill that would significantly change Michigan’s no-fault auto insurance has lingered on the House floor for a month and, as of now, looks like it will stay there.  HB 4936 would take Michigan from a state that mandates unlimited medical and rehabilitation benefits to one that gives an insured the choice of maximums for such coverage. The maximums are $500,000, $1 million or $5 million. To date, the plaintiffs’ bar has joined forces with health-care interests to stall the bill.  As of now, it looks as if the bill will die at the end of session.  It’s likely that another effort will be made next session.
 
Education Bills Still Up in the Air:

Companion House and Senate Bills (HB 6004 and SB 1358) would establish the Education Achievement Authority (EAA), which  would oversee and regulate a separate statewide school district. The EAA would include schools with student achievement in the lowest 5% of Michigan schools for three straight years.

Late last week, sponsors of the bills were negotiating with school groups regarding the EAA’s exemption from certain laws required of other school districts and concerns about teachers' retirement. With time running short, there is a concern that the constitutional five-day rule will become a factor. The five-day rule says that a bill passed by one House must initially be possession of the other House for at least five days before passage. Just in case, legislative staff is looking for alternative vehicle bills that have already hurdled the five-day rule.  It will be close, but there should be movement this week. 
 
Emergency Manager BIll is Moving Along:

With the repeal of Michigan’s new emergency manager law (PA 4 of 2011), state and local governments were left with fewer options as to how to deal with a financial crisis. However, a bill is being teed up that could provide options. Senate Bill 865 was introduced late last year, authorizing the Governor to, among other things, appoint a receivership transition advisory board both before and after a financial emergency. Last week the House of Representatives discharged the bill from Committee, substituted it and placed it on second reading. The House substitute would give local governments the option of entering into a consent agreement, having an emergency manager appointed, entering into mediation or declaring bankruptcy. The House is expected to pass the bill this week and send it to the Senate for concurrence.

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