Not Pretty: 2013 Legislative Roundup

In contrast to the remarkable string of potentially transformational reforms enacted by the previous Legislature in 2011 and 2012, 2013 offered signs of a political class returning to its "business as usual" ways.

Some "reversion to the mean" is normal, because major reform tends to come in waves. Plus, many current lawmakers are eager to get the next reform wave rolling. Still, positive reforms signed into law in 2013 were scarce, so we'll begin with the bad news:

Obamacare Medicaid expansion: Maybe its members will amaze us with an awesome 2014, but it's likely this Legislature will be remembered most for enacting Michigan's largest welfare state expansion since the 1960s. Perhaps they believed the law's promise that, "If you like the 90 percent federal Medicaid match rate starting in 2020, you can keep it."

Fee increases: Gov. Rick Snyder's executive budget proposed a broad array of fee hikes. Many were adopted, including higher levies for hunting and fishing licenses, off-road vehicle licenses, landfill tipping fees, mandated environmental permit fees, vital record copy fees and more. One new law increases fees on hospitals and clinics to fund an obsolete regulatory regime that rations new medical technology and facilities.

Jail for blight infractions: A 2003 law allowed cities to enforce blight ordinances through "administrative hearings bureaus," which sidestepped more costly judicial proceedings because the only penalties were civil fines. New 2013 laws remove the velvet glove from the enforcement fist by authorizing jail, wage garnishments and more for property owners who fail to pay these fines.

Authorities run amok: Across the nation a shadow government is growing — local and state districts, zones and authorities with the power to borrow, tax and spend, most of them run by unelected political appointees. Michigan has hundreds of these and new laws expand the scope of at least two types: Water Resource Improvement Authorities and Business Improvement Zones. Also, a Kent County Convention Facility Authority will be allowed to subsidize sports facilities, possibly including a stadium or arena.

Expand Michigan's "Fannie Mae": The federal Fannie Mae was instrumental in inflating the subprime housing bubble whose collapse contributed to the Great Recession. Under a new law, this state's own backer of housing-related debt, the Michigan State Housing Development Authority, is empowered to not just subsidize real estate developers, but also to acquire an ownership interest in them. Pending legislation would also let MSHDA maintain a higher level of debt.

Prison guard double dipping: When government promises pension benefits to employees who retire in their 50s, many do. This leaves some departments short of experienced staffers, which is serious when the shortage is of prison guards. To mitigate the generous retirement age, the Legislature has extended another unsound practice by allowing some of these retired guards to double dip, simultaneously getting checks for work and monthly pension checks.

Blue Cross Blue Shield "slush fund": Blue Cross Blue Shield of Michigan's role as the state's insurer of last resort for individuals with pre-existing conditions ends under Obamacare. So do the nonprofit insurer's extensive tax breaks under a new law finalized in 2013. In the course of overhauling the tax and regulatory regimes under which the Blues operate, the legislation turns over $1.56 billion from BCBS to a Michigan Health Endowment Fund, with political appointees doling out the money over 18 years for programs that essentially expand the medical welfare state.

Undo National Guard pension reform: A 2010 reform ended a scheme granting generous state pensions to the Michigan National Guard's top brass based on very limited service (reportedly, annual benefits ranged from $78,000 to $133,000 for between 1.5 years and 13 years of service). Using the usual excuse of "good help is hard to find" in government, the current Legislature passed a new law that largely undoes that reform.

The Good:

Indigent defense: Providing competent counsel to indigent individuals charged with criminal offenses is a core function government simply must get right, because the alternative is locking up innocent people just because they can't afford a good lawyer. A complex new funding and state oversight system promises to avoid such injustices with better, more consistent representation.

Dissolve fiscally failed school districts: Rather than the common practice of rewarding government failures by sending more money, this Legislature wisely dissolved two failed districts (Buena Vista in Saginaw County and Inkster in Wayne County) and assigned their students (and tax revenues) to surrounding districts. (Converting them into charter public schools would have been better.)

Unemployment insurance reform: Most people support unemployment benefits funded by payroll taxes imposed on employers, but avoiding fraud and abuse in the system is an ongoing challenge. This Legislature took it on by passing a complex package of bills that respond to an accumulation of schemes to improperly scam the system.

Rein in Department of Environmental Quality "wetlands" enforcement. A new law reins in regulatory abuse by prohibiting the DEQ from imposing state wetland restrictions more stringent that federal ones, requiring permit denials to document their rationale and authority, and more.

More good items:

  • Senate Bill 100 eases the state's anti-consumer liquor control regulations a millimeter by letting winemakers who jump through extensive hoops and pay steep fees sell a few bottles at farm markets. Modest bills easing destructive restrictions on microbrewers are advancing, but the political power of special interest beneficiaries of the status quo means nothing is guaranteed until the ink is dry on the governor's signature.
  • House Bill 4123 extends immunity from liability to propane gas companies and employees for injury or death to a customer who tampers with the equipment.
  • House Bill 4768 prohibits state environmental enforcers from imposing limits on sodium in groundwater discharges that are more restrictive than authorized by the Legislature.

The Ambiguous:

Blue Cross Blue Shield regulation, part 2: The Blue Cross Blue Shield "slush fund" cited above was just one piece of a broad overhaul of regulations governing this nonprofit corporation, which dominates Michigan's health insurance landscape with a reported 70 percent market share. The changes — many of which BCBS has sought for decades — may be highly consequential for residents, but it will be years before their effects are fully known. It probably would have been better to put this politically powerful entity on the auction block and return to the people the billions of dollars generated by selling it to a private insurance company.

Vehicle purchase "sales tax on the difference": For years, new car dealers have lobbied for a law that deducts the value of a trade-in vehicle for purposes of calculating sales tax paid on the purchase of a new one. This year, the dealers finally got their wish, subject to an unrealistically long 24-year phase-in period, and a mischievous provision suspending the phase-in if the Obamacare Medicaid expansion is ever rescinded.

Gov. Snyder had previously said he opposed such boutique tax breaks, but signed the bill anyway. On the good side, this eventually will save car buyers more than $200 million annually. However, if legislators think the state can free up $200 million (eventually) for a tax cut, Mackinac Center for Public Policy analysts (and almost any economist) can provide a long list of measures likely to do far more good for overall economic growth in this state.

As I said, it wasn't pretty inside the Lansing beltway last year. Here's hoping 2014 brings better.


Jack McHugh is the senior legislative analyst for the Mackinac Center for Public Policy, a research and educational institute headquartered in Midland, Mich. Permission to reprint in whole or in part is hereby granted, provided that the author and the Center are properly cited.

Michigan Capitol Confidential is the news source produced by the Mackinac Center for Public Policy. Michigan Capitol Confidential reports with a free-market news perspective.