House GOP Action Plan Points the Way to Real Reform

Repealing prevailing wage a top priority

The 2015-16 House Republican legislators have laid out a solid plan with many great ideas for legislative goals they want to accomplish. Many of these priorities would limit government interference in the economy, establish more freedom for citizens and align with long-time Mackinac Center goals.

Here are the most important economic policy proposals being put forth in the plan and why they would be good for the state.

  • Reforming Teacher Retirement System to Curtail Unfunded Liability: “Continued efforts to curtail long-term debt in Michigan’s largest unfunded liability warrant deliberation. Moving new teachers into a mandatory (rather than the current optional) 401(k) retirement system will be accomplished.”

Michigan’s teacher pension system has an unfunded liability of $25.8 billion, so large that 87 percent of the money going into the system now is to make up for past liabilities. Bipartisan groups of politicians have not put enough money into the system for years; this is bad for schools, educators and taxpayers. Closing the system to new employees makes the most sense for everyone.

  • Repealing Michigan's Prevailing Wage: “Prevailing wage laws hinder economic growth and create artificially high costs for building schools and government facilities, which work against job creation. From December 1994 to June 1997, prevailing wage laws were suspended because of a federal district court ruling. During that time, the U.S. Department of Labor reports 11,000 Michigan construction jobs were created. Ten states have repealed their prevailing wage laws, bringing the number to 18 states that do not have such laws on the books. The Michigan House will approve legislation to repeal this law.”

Economists across the spectrum agree that government price controls harm the economy. The current prevailing wage law costs schools and taxpayers hundreds of millions of dollars extra with little return on that investment. The cost of construction projects should be set by those bidding and those giving out the bid – not arbitrary mandates from Lansing.

  • Expanding School Choice: “Parents should have every opportunity to send their child to a school that best fits their needs. This can include charter schools, traditional public schools, home schools or even new ideas such as Education Savings Accounts, where parents of special-needs children are given private accounts with funds to use toward their child’s education. Also, course choice programs, where parents and students can tailor their curriculum to their individual needs, could be considered.”

Parents, not politicians in Lansing, should determine how their kids are educated. The best research shows that school choice is leading to better educational results in Michigan. Holding the line against those who want more central government control over education and expanding to give more options is important.

  • Reducing the Income Tax: “In 2007, as part of the legislative deal to avoid a government shutdown, Gov. Granholm signed into law an increase in the income tax from 3.9 percent to 4.35 percent. That legislation also included a phased-in reduction over a period of eight years such that, by 2015, the income-tax rate would be restored to 3.9 percent. In 2011, facing a $1.5 billion structural budget deficit, the Legislature froze the personal income tax at 4.25 percent. A reduction of the state personal income tax that is properly budgeted and accounted for remains the House Republicans' single most important tax-relief measure.”

Lansing backslid on a 2007 “promise” to roll back an income tax increase, once again reminding citizens that there is rarely such a thing as a “temporary” increase in government. Michigan’s budget is increasing hundreds of millions of dollars every year – the state can afford to be less of a burden on its citizens.

  • State Film Subsidy: “For fiscal year 2012, the state received only a 38-cent-per-dollar, two-year return on investment on film subsidies. The film subsidy program is a poor investment of taxpayer dollars. It cost taxpayers $193,333 for each job created in 2009, and there are fewer film jobs in the state overall than there were before the program started. House Republicans will explore requiring a royalty payback of the subsidy if the film grosses over a certain box office revenue figure, limiting reimbursements for out-of-state expenditures and personnel, and simply terminating the program altogether.”

It’s difficult to believe politicians when they talk about being fiscally responsible when they continue the film incentive program, probably the worst “economic development” return on investment in state government. This disastrous program should be ended once and for all.

  • Michigan’s Alcohol Laws: “Various improvements to Michigan’s Liquor Control Code have been made to open new markets and provide for limited self-distribution of alcohol by suppliers. Michigan now has the fifth-largest craft brewery market in the nation thanks in large part to these reforms. We must continue efforts to reform outdated laws and licensing regulations that hinder economic opportunities for Michigan suppliers. Ensuring that the refilling of growlers at licensed establishments is permitted by regulators is paramount, as well as reviewing opportunities for direct shipping of alcohol and unnecessary regulations affecting distilleries.”

Michigan’s liquor laws are left over from the Prohibition era and essentially require price collusion and distribution monopolies. There is no evidence that those, or other numerous silly laws related to alcohol in the state, contribute to public health and safety.

  • Civil Asset Forfeiture: “Under current law, there is little transparency or accountability on the taking of private property by law enforcement. The public should know how much property the state has taken and how it is disposed of, especially when there is not an accompanying criminal conviction. If the state isn’t willing to go through the trouble of prosecuting a person for a crime, then one must question if the state should be able to take that person's property.”

The House came up short last session on a bill that would require greater transparency for when government seizes the property of its citizens. But Michigan should go further, joining other states in preventing law enforcement from taking money and property without a criminal conviction.

  • New Transportation Services: “As new transportation services like Uber and Lyft emerge, legislation is needed to welcome entrepreneurial opportunities. We can provide uniform and predictable pathways to conduct business in Michigan and provide employment opportunities for Michigan residents.”

Ride-sharing benefits consumers, particularly the poor. These laws are fought by current entrenched interests, but there are no good reasons the legislature shouldn’t embrace innovation by freeing up how people want to travel.

  • Occupational Licensure: “In 2012, the Office of Regulatory Reinvention (ORR) released recommendations on occupational licensing. Included in the report were recommendations that various occupations be deregulated. Many of these suggested policy changes were realized last session. However, there remain certain occupations that were not deregulated and Michigan remains at a competitive disadvantage with neighboring states. Further efforts to deregulate licensed professions is necessary.”

The Legislature did good bipartisan work in rolling back some low-level licensing laws last term. But ultimately, all areas where licensing is not proven to result in greater health and safety for society should be gotten rid of.

  • Land Banks: “Michigan’s land banks face various problems across the state with sustaining the costs of the programs through property sales and development. Some county land banks have circumvented the tax foreclosure process to “cherry pick” better properties from the treasurer before they could be offered to the general public at auction. This practice shortchanges the private sector while perhaps robbing taxpayers of increased sale prices achieved through auction. Statutory reforms to make land banks more accountable will be adopted.”

Land banks in the state are cutting ahead of private investors, cherry-picking prime property, and making crony deals that are bad for taxpayers. The market does a better job determining what property is worth. At the very least, the 40 lands banks in Michigan should not be able to take over property that isn’t blighted.

  • Eliminating Local Ordinances That Hinder Job Creation: “Municipal ordinances governing wages and benefits known as ‘sick pay ordinances’ institute rules and regulations on local employers in providing sick pay to their employees. Many job providers are fearful such local actions hinder job creation. Legislative efforts will be taken to ensure local ordinances are not more restrictive than state standards.”

Local governments pass all kinds of bad laws that limit the freedom of citizens and lead to tremendous economic harm. It’s a good idea in many cases for the state to set consistent statutes.

  • School Accountability: “Parents deserve better tools to make informed decisions about which schools are best equipped to educate their children based on their child's needs and the school's academic success. Michigan uses a confusing color-coded school-accountability system. A change to letter grades, while also adding a transparency dashboard for schools, will be advanced.”

The current school rating system is flawed, essentially just measuring the poverty-level of schools and causing educators to lose their jobs almost arbitrarily. It should be changed.

  • Allowing Energy Companies to Use Out-Of-State Renewable Energy to Meet Michigan’s RPS Mandate: “Michigan’s Renewable Portfolio Standard (RPS) requires that clean energy derived from renewables (e.g. wind, solar, etc.) be located in the state of Michigan. A court found this mandate to be unconstitutional. However, this opinion is not binding and a change of the current law is necessary to allow energy companies to count out-of-state renewable energy to meet Michigan’s 10 percent RPS mandate.”

Michigan’s renewable energy mandate and mandated monopoly are a double-whammy of bad economic policy for the state and both should be repealed. But at the very least, companies and citizens should be allowed to buy energy across state lines just like they do other products. Since a federal judge ruled Michigan’s law unconstitutional, the legislature should do this before it is pushed through by a court.

The plan also mentions reviewing criminal sentencing guidelines, dealing with the liabilities of local governments, increasing the transparency and accountability of local “economic development” tools, establishing a better teacher evaluation system, limiting and sunsetting regulatory rules and reforming automobile insurance rules. These would all be good changes as well.

Overall, the action plan is filled with bold reforms that lower the cost of doing business by encouraging competition. That’s good for citizens and the economy. The legislature should take them up.

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.