As the Legislature moves towards a potential summer recess, a number of keys issues have dominated the political landscape –

Auto Insurance Reform

Most of the recent work in Lansing has centered on the House and Senate movement of auto no-fault insurance reform proposals (HB 4397 and SB 1). The Senate made the first move with their plan, while the House’s plan moved shortly thereafter and included several more consumer-focused provisions. The Governor has publicly stated opposition to both proposals but has entered into negotiations with the Speaker and Senate Majority Leader, pushing all other discussions…including the budget…into the backseat.  Adding pressure to these negotiations is the recent announcement of a citizen initiative ballot proposal backed by Dan Gilbert.

Revenue Estimating Conference & State Budget

Despite the bottleneck around no-fault reform, the Consensus Revenue Estimating Conference between the Administration and legislative fiscal agencies took place. The Treasurer, House Fiscal Agency, and Senate Fiscal Agency directors met and agreed to the revenue numbers that will be used to finalize the current budget year and finish building the coming FY19-20 fiscal year budget. The overall numbers remained fairly stable from what was agreed to at the January revenue conference. The current budget (FY18-19) is coming in ahead of what was estimated in January for General Fund by about $151 million.  That trend continues for the coming budget, with about $59 million more than expected in January for the FY19-20 GF/GP budget.

School Aid revenues, with a significant portion coming from Sales Tax proceeds, is coming in lower than was expected in January for both the current year (down $68 million) and the coming year (down $87 million).

This slow down in expected Sales Tax revenue is also estimated to reduce the expected increase for Constitutional Revenue Sharing in next year’s budget.  Where January’s revenue estimate had predicted 3.2% growth for Constitutional payments to local units of government, last week’s consensus agreement now pegs next year’s payments at only a 1.7% growth rate.

On a combined basis, total revenues are up for the current year ($83 million) and down slightly for next year’s budget ($28 million). These numbers will now form the basis of negotiations for the FY19-20 budget which we hope are completed prior to the summer recess.  If a deal is struck on no-fault reform, the focus will then turn to road funding, as the Governor has declared new road money as a requirement for her support of a final budget.

As both the House and Senate position their respective budget versions for passage over to the opposite chamber, the two legislative chambers made significant changes to the Governor’s original proposed budget to account for not including any new revenue for road funding or the related shift back to K-12 schools of School Aid Fund dollars that are currently being used to support the Higher Education and Community College budgets.  The differing General Government budgets containing Revenue Sharing, fall in line with that overall theme, with many line items being changed from the Governor’s proposed budget.  The House version of revenue sharing, HB 4234, lowered the Governor’s recommendation for statutory revenue sharing down from a proposed 3% increase to 2.3% (approx $5.9 million) and adds in a requirement that any increased funds from that 2.3% must be used on outstanding pension liabilities for any community with a pension system funded at less than 60%.  The Senate General Government budget, SB 138, removes the proposed 3% increase to statutory revenue sharing entirely, maintaining those payments at current year levels.  The Senate proposal does include the Governor’s suggested policy change to the current Financially Distressed CVT grant program, changing the program name and expanding the uses of those grants to include public safety, blight removal, and other community revitalization projects.  The Senate also included a new $1 million grant program to fund local assessor training enhancements, following much of the discussion from last year’s assessing reform proposal.

Short-term Rentals

The State Affairs team is also engaging in a new workgroup on the two competing short-term rental zoning preemption proposals with the various stakeholder groups. The sponsors of the two different proposals (HB 4046 and HBs 4554–4563)  have laid out an aggressive schedule of meetings over the coming weeks, attempting to balance the competing interests of preserving local zoning and private property rights. Outside of the workgroup, our staff continue to meet with a broad group of legislators in the House and the Senate, focusing on those legislators assigned to the committees where these bills have been assigned.

Road Funding

League staff presented to the House Transportation Committee last week, as part of that committee’s weekly focus on educating committee members about the overall road funding situation in Michigan.  Last week’s hearing focused on how cities and villages are funded through PA 51 and the other components of the existing funding formula.

All discussions around any upcoming negotiations on road funding seem to be hinging on the outcome of the current no-fault reform debate and the pending release of an alternate plan from the Senate that could be released

PFAS

We also participated in a workgroup meeting on House Bills 4389, 4390, and 4391 sponsored by Reps. Yaroch and Allor. This legislation is related to the use of PFAS as a suppression chemical used for firefighting and the subsequent training required to use such chemicals.  This is likely the first of many different examinations of PFAS and its various uses and potential hazards.

Online Sales Tax / Wayfair

The House Tax Policy committee initiated hearings this week on a package of bills designed to ensure that Michigan’s sales and use tax laws align correctly with the US Supreme Court’s recent Wayfair decision, allowing states to collect sales  and use taxes from online transactions.  The package of bills currently being considered (HBs 4540-4543) ensures that Michigan’s law is consistent with the court’s decision and covers purchases directly from an online retailer and from third party transactions conducted through a “marketplace facilitator”, like those conducted through Amazon.com.

Chris Hackbarth is the League’s director of state & federal affairs. He can be reached at 517-908-0304 and [email protected].