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Bridges4Kids LogoGranholm Setting June 15 Date for Tax Vote, Warns of School Cuts
Gongwer News Service, June 1, 2004
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The political stakes over the current-year budget deficit were stepped up Tuesday as Governor Jennifer Granholm gave the Legislature two weeks to complete action on her proposed increases in cigarette and liquor taxes and sent a warning to schools that they will be hit with a $50.1 million cut in state aid in July if the tax plan fails. Republicans legislative leaders said the governor's options are too narrow and unfairly dump the deficit burden on schools.

Ms. Granholm, in a letter to Senate Majority Leader Ken Sikkema (R-Wyoming) and House Speaker Rick Johnson (R-LeRoy), acknowledged the $28 per pupil cut would be "particularly devastating" to schools, which end their fiscal years June 30.

"I encourage the Legislature in the strongest possible terms to resolve the '05 budget deficit by June 15," Ms. Granholm told reporters. That would allow collection of increased taxes to start as she proposed July 1 and officials said each day of delay would cost the state $966,000.

"We are near the end," the governor said of the timeframe to resolve a deficit of $250 million-$300 million. Otherwise, she said education and health care will bear the brunt of the budget problem. "We are left with very few alternatives."

Mr. Sikkema and Mr. Johnson said last week after the House grudgingly approved a modified cigarette tax bill (HB 5632) that its ultimate fate was tied to an agreement with the governor on the GOP's economic development package referred to as JOBS II.

The cigarette tax measure - which removed a proposed tax increase on other forms of tobacco and allowed wholesalers/retailers to pay taxes on two weeks of inventory at the current tax rate - would raise about $67 million this year rather than the $97 million the Granholm administration sought. House leaders have given little hope for the liquor tax increase (HB 4865) - worth about $10 million this year - after it went down to a crushing House defeat in April.

Aside from schools, Ms. Granholm said the revenues are needed to avoid cuts in the Medicaid program, where she said options are limited in dealing with higher than expected caseloads. That could mean cuts in reimbursement rates to providers such as hospitals and physicians, officials said.

A budget target-setting meeting with legislative leaders and Budget Director Mary Lannoye is scheduled for 3 p.m. Wednesday and Ms. Granholm said it is her "fervent belief" that legislators would like to see the situation resolved without cutting education and health.

The governor said she supports working with the Legislature on job creation bills for a long-term strategy, but said it is "irresponsible" to tie those measures to the current-year budget fix. She had vetoed a series of GOP-sponsored measures - most of which had received strong Democratic support - on Friday as she pointed to technical flaws or failure to actually create jobs.

But Mr. Sikkema said neither side can dictate terms of the negotiations and suggested the governor was seeking a political advantage through the budget crisis. Aides said he does not view the June 15 date as a drop-dead target and that schools could be reimbursed if in fact they do suffer cuts.

Mr. Sikkema also is proposing the administration and legislators craft a solution of revenues and cuts to cover both the current year and upcoming year, as well as dealing with long-term economic development issues.

"We are not interested in political brinkmanship. We are interested in working with the governor to solve this two-fold problem facing the budget, that of a short-term shortfall and a long-term issue of creating jobs in Michigan," Mr. Sikkema said. "The approach Republicans support is no different than how the governor and Legislature worked together in December to balance the budget and provide businesses a tax incentive to help them provide healthcare benefits to their employees."

Johnson spokesperson Keith Ledbetter said the general fund could be used to bail out the school aid fund and that more attention should be placed on cutting other programs. He also said the governor should be more open to compromises.

"She shouldn't hold schools and kids' education hostage just because she doesn't get exactly the plan she wants," he said, noting the final plan is yet to be developed during Senate consideration and a likely conference committee. "She has to work with the Legislature and we with her. What's disconcerting among Republicans is why does she have to have the budget balanced on tax increases rather than spending cuts."

House Republicans had passed $266 million in spending cuts for the 2004-05 fiscal year and Mr. Sikkema will on Wednesday present to his caucus $1.047 billion in cuts that would be needed in 2004-05 if no new revenues are approved.

Those demonstrate a scenario if the budget were to be balanced solely with budget reductions, Sikkema spokesperson Bill Nowling said. "That means closing prisons, cutting school aid, hitting higher education with another 6 percent cut and cutting Medicaid.

Mr. Sikkema had asked staff to look at how the budget could be balanced if no new revenues are added, but Mr. Nowling quickly added, "He thinks this is bad policy to go this route. But we have a lot of people in this town who think we can balance the budget with no revenue and no cuts and that ain't going to happen."

Mr. Ledbetter said there is a willingness by the GOP to look at more cuts this year if the only other option is cuts to education which would be unfairly hurt if they had to absorb reductions in state aid this late in their fiscal years.

"Instead of cutting state employees, they are suggesting we cut school employees, cut education for kids," he said.

The governor said her budget-balancing proposal already included $150 million in cuts, a figure that included savings from debt refinancing, an accounting change affecting payroll, repeal of an unused tax credit, using federal funds to replace some general funds and a change in retirement system costs charged to agencies without affecting the system.

Ms. Lannoye said the state is hamstrung in its options for the current year, noting the employee concession agreements barred layoffs.

The notice of a $28 per pupil proration cut in school aid is the second notice the state has sent this year to schools, which were pared by $84 per pupil in January. Ms. Granholm then declared in February that she would not cut education again.

Michigan Association of School Administrators Executive Director Michael Flanagan said several hundred districts that could have relied on a fund balance in years past to deal with a new cut in state aid no longer have that option because those funds have been depleted. "I don't know how you deal with another $28 at the end of the year," he said. "It's just too late."

Mr. Flanagan said the move would force many districts into deficit, which would trigger a deficit-reduction process and impair their bond ratings.

Justin King, executive director of the Michigan Association of School Boards, said the cut would put districts "in deep trouble". He said the state needs to examine its tax structure to avoid this kind of recurring problem.

The governor also renewed her criticism of the House-passed bill for the provision allowing two weeks worth of higher tax revenue to be retained by wholesalers and retailers. "The House took a first step by passing a version of the cigarette tax, but they put $35 million in the hands of tobacco interests rather than in the hands of public schools," Ms. Granholm said. "I can't justify that."

Polly Reber, president of the Michigan Distributors and Vendors Association, objected to characterizing the provision as a windfall for tobacco, saying it would lessen the burden on small business and keep some jobs in Michigan that would otherwise be lost as legal tobacco sales fall by anywhere from 15 percent to 45 percent.

The problem is particularly acute for businesses in areas bordering other states, and Ms. Reber said the money would will "allow retailers and wholesalers to perhaps survive, lessen the blow and hopefully the surrounding states will increase their excise taxes so we can be competitive."

House OKs Higher Limit on Work Hours for Teens
Gongwer News Service, June 1, 2004

Some teenagers would be allowed to work greater hours under a bill on its way to Governor Jennifer Granholm.

Sixteen- and 17-year-olds currently can have a week with a combined 48 hours of school and work, which effectively leaves about 18 hours available for work during the school year. The bill (SB 320) would instead allow such teenagers to work up to 22 hours per week and dump the combined cap on school/work hours.

The bill would not affect regulations on 16- and 17-year-olds that prevent them from working more than six days in one week or 10 hours in one day.

Supporters of the bill, including a large number of business groups, say the combined cap presents a burden for businesses, which must determine how many hours each of their student employees of the affected age can work. This issue can be particularly tricky for businesses that employ students from a variety of school districts, which can have varying hours, they say.

"It's a win-win for employers and students by making it easier to track the number of work hours students put in and eliminates any confusion when employing students from different districts over how many hours each is enrolled in school and, therefore, allowed to work," said Rob Gifford, executive director of the Michigan Restaurant Association, in a prepared statement.

But opponents, led by organized labor, say the bill would detract from what should be a student's focus on school, not work.

And Governor Jennifer Granholm opposes the legislation. Granholm press secretary Liz Boyd would not flatly promise a gubernatorial veto, but strongly suggested one. "We believe students should be spending their time studying and being in school as opposed to working longer hours," she said.

A sizeable bloc of Democrats joined most Republicans in passing the bill on a 75-31 vote. That's two more votes than necessary to override a possible Granholm veto, but it's unlikely Democrats would pick this piece of legislation as the rallying point for a rare override.

One Health Care Plan for All Teachers
MIRS, June 1, 2004

Some southeast Michigan school superintendents are calling on the state to provide one health care provider for all school employees around the state, thus ending the current system whereby each district negotiates its own health care coverage.

The Detroit Metro Bureau, which operates in cooperation with Wayne State University, has adopted a resolution that said, "What we are advocating is that the health care negotiation process be removed from the local school district which is powerless to address the escalation in costs that will eventually cripple all health care plans for school employees throughout Michigan!"

The controversial plan, according to group leaders, is not a plot to end coverage provided by MESSA, which is the health insurance arm of the Michigan Education Association (MEA).

"I'm not targeting the MEA," explained Dr. Tom McLENNAN, the executive director of the Metro Bureau. "Frankly, I don't care who gets the statewide contract," he goes on.

By placing State of Michigan negotiators in charge of finding an "all-inclusive statutory plan" that would give the state a "stronger position to control escalating costs" the resolution states.

The group fears that ever increasing health care costs averaging between 10 percent and 25 percent each year will eventually bring school districts to their knees financially. The group argues a unified system will lead to savings on prescriptions while providing a "state-of-the-art monitoring program to assure appropriate expenditures."

The school leaders in the resolution say they are not seeking a free ride on health care costs and if a one-bid system is implemented, "school districts anticipate that each district's Foundation Grant will be reduced" by their present health care cost per pupil.

The Metro Bureau has formed a work group that is fine-tuning this proposal. Former Insurance Commissioner Frank Fitzgerald is a member and the talks are under the auspices of the Clark Hill legal firm in Okemos.

The chair of the Senate Appropriations Committee, Sen. Shirley JOHNSON (R-Troy), is interested in this unified approach to health care costs and is aware of the organizations suggestion.

The critical issue of how this new system would be funded is not addressed in the document obtained by MIRS.

Newest ISD Bill Staying Put
MIRS, June 1, 2004

Today, House Government Operations Committee Chair Jim KOETJE (R-Walker) told his fellow committee members that he was not ready to take up HB 5962, his bill to give voters the ability to limit the powers of larger Intermediate School Districts (ISDs).

Koetje introduced HB 5962 last week and it was on the agenda for today's Government Operations' Committee hearing today.

Under the bill, ISDs that do not include a school district with 75,000 students or more, would be required to place a ballot issue on the June 2005 school election asking voters whether they want to cease ISD operations and divert all ISD tax revenue to constituent districts.

MIRS asked Koetje today if his bill should be considered as part of the overall ISD package of bills that emerged from the ISD review subcommittee chaired by Rep. Ruth JOHNSON (R-Holly).

"No," Koetje said. "They are aware of this, but they haven't worked on it with me. If it lies with anyone, the fault lies with me."

Koetje said he introduced the bill because he believes local voters should have the chance to vote on the possibility of shifting education dollars to possibly more efficient uses.

"Let the voters decide," Koetje said. "If they decide to keep their ISDs as is, that's alright with me."

Based on the fact that there was not enough support in the House to pass a version of HB 4338 that would have given local voters a means of choosing whether or not their local ISD board should be selected by popular vote (See MIRS March 17 edition), it would seem that the future of HB 5962 is bleak.

Ultimately, back on St. Patrick's Day, the House passed a very watered-down version of HB 4338 which some observers argued had little or no teeth in it.

Since that bill passed the House, Johnson has followed up with legislation, the so-called ISD transparency bills (See MIRS May 7) designed to bring more accountability to ISDs in the wake of the Oakland ISD scandals of the past couple of years.

Some see Koetje's bill as a potential stick that ISD reformers might want to play at some point if negotiations on some of the other ISD legislation becomes bogged down. However, such a stick wouldn't be of any use unless it was believed that the votes would materialize to back it up.

Michigan Medicaid Long Term Care Task Force Named
MIRS, June 1, 2004

Today, Gov. Jennifer GRANHOLM announced that she has appointed the members of a task force specifically designed to improve Michigan's long-term care service network.

"The Michigan Medicaid Long Term Care (LTC) task force will set short-term goals for the next three to five years and develop long-term solutions for the next two decades," Granholm said. "The work of this task force will be vitally important as we seek to improve community-based care for seniors, eliminate unnecessary regulatory barriers, and lessen the enormous pressure on the state's Medicaid budget."

The 21-member LTC task force, chaired by RoAnne CHANEY of the Michigan Disability Rights Coalition, will include:

- Wardeh (Rose) ALCODRAY-KHALIFA, Oakwood Healthcare, Inc./Amer-Arab Nurse Association
- Gerald BETTERS, Pinecrest Medical Care Facility
- Reginald CARTER, Health Care Association of Michigan
- Sen. Deborah CHERRY (D-Burton)
- Mark CODY, Michigan Protection and Advocacy Service
- Thomas CZERWINSKI, Area Agency on Aging of Western Michigan
- Rep. Matthew GILLARD (D-Alpena)
- Sharon GIRE, Director of the Office of Services to the Aging
- Sen. Beverly HAMMERSTROM (R-Temperance)
- Martin HARDY, Greater Grace Temple
- Dohn HOYLE, Executive Director, Washtenaw Association of Community Advocacy
- Yolanda McKINNEY, Caring Hearts Home Care
- Jennifer MENDEZ, Professor, Wayne State University
- Marsha MOERS, Cap Area Center for Independent Living
- Janet OLSZEWSKI, Director of the Michigan Department of Community Health
- Rep. Rick SHAFFER (R-Three Rivers)
- Susan STEINKE, Community Operations for AARP Michigan
- Joe SUTTON, Sutton Advisors
- Marianne UDOW, Director of the Department of Human Services
- Tony WONG, Michigan Association for Centers for Independent Living

Granholm has charged the Medicaid LTC task force with:

- Reviewing reports and the efficiency and effectiveness of the current mechanisms and funding for the provision of Medicaid long-term care services in Michigan.

- Examining and reporting on the current quality of Medicaid long-term care services and making recommendations for improving home-based and community-based long-term care services.

- Analyzing and reporting on the relationship between state and federal Medicaid long-term care funding and its sustainability over the long term.

- Identifying and recommending benchmarks for measuring successes in the provision of Medicaid long-term care services and for expanding options for home-based and community-based long-term care services.

- Making recommendations to effectively reduce barriers to the creation of and access to an efficient and effective system of a continuum of home-based, community-based, and institutional long-term care services.

The LTC task force was created by Executive Order on April 2. The task force is required to issue an interim report on its activities, including preliminary recommendations, by October 1, 2004, and must issue a final report no later than April 1, 2005.

"Our system of long-term care in Michigan is often fragmented and over-reliant on nursing home services," said Janet OLSZEWSKI, Director of the Department of Community Health. "Creation of this task force comes at an opportune and unique moment. In the next 20 years, our long-term care system also will be taxed as a result of 'baby boomer' retirements."


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