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Big Votes Coming Up In the Legislature

Health care exchange, teacher pension reform and personal property tax repeal all on the agenda

When state lawmakers head back to Lansing on Aug. 15 they'll have significant issues to tackle, most notably whether to create a health care exchange to comply with Obamacare provisions.

But they'll also have to address teacher retirement reforms and Gov. Rick Snyder's interest in eliminating the personal property tax, which primarily hits business equipment.

The health care exchange will take center stage with Senate Bill 693 likely generating most of the media's attention.

Chances are, the House won't touch the exchange issue, which will be a story itself.

Under the Patient Protection and Affordable Care Act, commonly called Obamacare, states are allowed to establish health care insurance exchanges. If they don't, the federal government would step in and do it instead.

Gov. Snyder has strongly advocated that Michigan establish an exchange because he says the state would be better off creating its own program rather than being at the mercy of a federal government program.

Those opposed to taking steps toward establishing a state exchange argue that Obamacare should be resisted in every way.

In 2011, the GOP-controlled Senate passed legislation to create a health care exchange, but the Republican-controlled state House has refused to pass the legislation. The fact that House members face an election this year could explain the reason behind the inaction.

Initially, the House wanted to wait and see what the U.S. Supreme Court had to say about the constitutionality of Obamacare. Now, the House is waiting to see the outcome of the November election. This is basically the same stance most Republican state lawmakers have taken across the country.

"I'd say the odds are very strongly against them doing it,” Bill Ballenger, editor of Inside Michigan Politics said about creating an exchange. "You never want to say there's absolutely no chance. There's always a thin sliver of a possibility. Things can happen that you don't expect but I think most people would say it's just not going to happen this summer.

"The House would still have time to position things to move quickly after the election if it's necessary," he said.

There has been some talk in Lansing that on Aug. 15 the House might approve a $9.8 million appropriation in federal funding tied to the exchange. The argument for doing so would be that if the appropriation was just for planning purposes, approving it would not be committing to do an exchange.

However, House Republicans might not want to be perceived as budging an inch on the health care exchange issue, even if it was for planning purposes only. Last week, after holding hearings on the health exchange issue, House members asked the Snyder administration for more details on how the $9.8 million would be spent. Some GOP lawmakers are skeptical about claims that there would be no strings attached to approval of the appropriation.

Teacher Retirement Reform

Another topic that could be addressed quickly when the legislature returns is the movement of the teacher retirement reform bill. The key to this issue is whether the state continues to offer a defined-benefit system to new employees or changes to a defined-contribution system offering 401(k)-style plans.

Faced with financial realities, private-sector employers began switching to defined contribution systems long ago. Most Michigan government workers switched to these types of programs in the late 1990s but teachers were excluded. Now the state's teacher pension program is underfunded by more than $22 billion.

This year, the Senate passed legislation (SB 1040) that would have switched the teacher retirement plan to defined contribution, but some House Republicans resisted. Gov. Snyder sided with the House, arguing that transition costs are an obstacle to making an immediate change.

Negotiations between the administration, the House and the Senate have been ongoing for weeks.

Personal Property Tax Elimination

Also on the agenda could be eliminating Michigan's Personal Property Tax (PPT), which Gov. Snyder proposed when he was on the campaign trail in 2010. Proponents for getting rid of the tax argue that it is an obstacle to attracting reinvestment and new investment to Michigan.

Whenever there's talk of eliminating the PPT, local governments and unions object. They don't want to lose the tax revenue personal property taxes bring to communities.

This year, the Snyder administration and the Senate introduced legislation to phase out the PPT. It includes a funding mechanism to reimburse local entities for a portion of the lost revenues. Replacement funds would come from dollars freed up by the expiration of business tax credits. During the legislative process, lawmakers amended the legislation to delay the phase-out if replacement funds don't materialize.

However, the PPT, which is primarily a tax on business equipment, is not an issue that easily attracts the interest of many voters. Local government and union lobbying kept the issue from moving forward in the spring and it seems likely that the next chance it has to be considered will be after the election.

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See also:

GOP-Led House Passes New ‘Tax’ On Private Contract Workers To Pay For Retirement System Liabilities

The Legislature Must Fix Teacher Pensions the Right Way

Commentary: Shifting School Employees to a 401(k) Is the Most Important Thing

Official Calls Obamacare Implementation “A Mess”

Commentary: Two Reforms to Really Fix Health Care

What the Obamacare Decision Means for You

Commentary: Health Care Exchange Issue Won't Go Away

Commentary: Productivity Leads To Prosperity - Eliminating tax on business tools and equipment will benefit, not hinder, the economy

Personal Property Tax Phase-Out Matters For Michigan - Replacement revenue to come from expired tax credits

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