New legislative opportunities will come with the fall elections for the Michigan House, Senate, and governorship. Read the Mackinac Center's policy recommendations for the next Legislature and governor below.
Until last year, when an economic slowdown deteriorated into a full-blown
recession, Michigan was widely acknowledged to be in a position that seemed
impossible barely a decade earlier. The Great Lakes State was enjoying record
low rates of unemployment, a thriving economy, growing educational
opportunities, and a sense of accomplishment and high spirits. After years of a
"Rust Belt" reputation, Michigan was riding high on its favorable image as a
hospitable place to raise a family and start a business.
But even before this recession, all was not perfect. Many Michigan families
still struggled with high tax bills and poor schools. A much-improved
environment could still use a boost from regulatory and other reforms. Michigan
is definitely better off today than it was a short decade ago, but much can yet
be done to make it even better. Schools can improve, taxes can be lowered,
workers can assume greater control over their paychecks, and government can get
smarter at the same time that it gets less intrusive.
New legislative opportunities will soon come with this year's elections for the
Michigan House, Senate, and governorship. In this report, the Mackinac Center
for Public Policy offers dozens of specific ideas for the Legislature and the
governor-current officeholders as well as those who will take office in January
2003-to consider in crafting state policy for the next term and beyond.
The report is divided into eight sections: Strengthening Property Rights
Protection, Improving Environmental Protection, Encouraging Telecommunications
Technology, Reforming Labor Law to Protect Worker Rights, Improving Education
for Michigan Children, Spurring Economic Growth and Development, and Enhancing
the Transportation Infrastructure, plus a miscellaneous section at the end. The
recommendations do not represent the final word, but rather a starting point for
positive public policy change. The Mackinac Center for Public Policy will
continue in the coming months to elaborate on these proposals and suggest others
for a better, freer, and more prosperous Michigan for all citizens.
Until last year, when an economic slowdown deteriorated into a full-blown
recession, Michigan was widely acknowledged to be in a position that seemed
impossible barely a decade earlier. The Great Lakes State was enjoying record
low rates of unemployment, a thriving economy, growing educational
opportunities, and a sense of accomplishment and high spirits. After years of a
"Rust Belt" reputation, Michigan was riding high on its favorable image as a
hospitable place to raise a family and start a business.
But even before this recession, all was not perfect. Many Michigan families
still struggled with high tax bills and poor schools. A much-improved
environment could still use a boost from regulatory and other reforms. Michigan
is definitely better off today than it was a short decade ago, but much can yet
be done to make it even better. Schools can improve, taxes can be lowered,
workers can assume greater control over their paychecks, and government can get
smarter at the same time that it gets less intrusive.
New legislative opportunities will soon come with major changes in the House,
Senate, and governorship. How those responsibilities are met will tell us
whether the voters elected statesmen or just another batch of politicians. The
kind of leadership we at the Mackinac Center for Public Policy hope to see from
Lansing in 2002 and beyond is defined by adherence to the principle enunciated
by Thomas Jefferson in his first inaugural address with these words:
. . . a wise and frugal government, which shall restrain men from injuring one another, shall leave them otherwise free to regulate their own pursuits of industry and improvement, and shall not take from the mouth of labor the bread it has earned. This is the sum of good government . . . .
In accordance with this Jeffersonian principle, the Legislature and the governor should evaluate each item in the state budget, asking 10 key questions:
Does the item weaken communities by assuming a responsibility best left to private families, charities, or firms?
Does the item duplicate what other state agencies or the federal government are doing in that area?
Does the item primarily benefit a single favored constituency or region rather than the state as a whole?
Are direct users or beneficiaries of the service paying a reasonable amount of the cost?
Does the item create or expand an "entitlement" that cannot be reasonably withdrawn if necessary or advisable in the future?
Has the item received significantly more money in recent years but not used that money in the most effective way?
Has the item been funded in the past by deceptive or inappropriate legislative or executive actions?
Does the item use taxpayer funds for political advocacy or to discriminate against racial or ethnic groups?
Does the item discourage self-help and personal independence unnecessarily or encourage reliance upon government?
Does the item yield benefits commensurate with costs?
In evaluating the larger picture-the proper role of state and local government and the measures necessary to improve the quality of life and enhance the liberties of Michigan citizens-the Legislature and the governor should ask what government must do or not do in key areas to
strengthen control over schools by the most "local" entity of all-Michigan parents;
assure that neither businesses nor unions take unfair advantage of workers;
strengthen the viability, independence, and responsibility of the family unit;
lighten the burden imposed upon citizens by the cost of government; and
In the sections that follow, the Mackinac Center for Public Policy offers 77 specific ideas for the new Legislature and the governor to act upon. The recommendations in this report represent not the final word, but rather a starting point for positive public policy change. The Mackinac Center for Public Policy will continue in the coming months to elaborate on these proposals and suggest others for a better Michigan.
America's Founding Fathers recognized the essential link between property rights and individual liberty when they drafted the Constitution of the United States and incorporated numerous measures intended to enshrine the protection of those rights. Michigan's constitution likewise provides for a considerable degree of property rights protection. However, court interpretations and various laws and regulations have undermined these all-important rights. The following recommendations will help to rectify the current deplorable situation and make Michigan a leader in citizens' rights to own and use their property.
1. Restrict governmental "takings" of private property.
Both the U.S. and Michigan constitutions call for "just compensation" when
private property is taken by government for public use. But court
interpretations of various laws and regulations have seriously undermined this
principle. Property owners are usually awarded compensation by the courts only
if the government prohibits all economically viable use of the entire
parcel of property. Furthermore, the standard for what constitutes "public use"
has been significantly weakened to allow the taking of private property for
economic development.
The systematic violation of property rights must be halted by requiring fair
compensation whenever the value of private property is diminished in whole or in
part by governmental action. Takings must further be strictly limited to true
public uses. In a study entitled "Reforming the Law of Takings in Michigan," the
Mackinac Center for Public Policy proposed specific actions to achieve these
objectives through executive order, statute, or constitutional amendment.
For further information, please see
www.mackinac.org/11.
2. Require a property rights impact assessment for all major regulations.
An executive order issued by Gov. John Engler in 1995 requires new regulations
to undergo cost-benefit analysis. This forces regulators to more carefully
consider the rationality of proposed rules. The impact of regulation on private
property should likewise be analyzed to ensure that government actions do not
constitute an unwarranted taking of private property.
3. Limit state land holdings.
Some 20 percent of Michigan's total land area-or about 8.1 million acres-is now
"owned" and managed by federal, state, and local governments, and the amount is
growing. The continued acquisition of land strains government's abilities to
properly maintain public property while also stifling the growth of Michigan's
private recreation and natural resources industries. This year alone, for
example, officials overseeing the Natural Resources Trust Fund have targeted
land acquisitions and other projects totaling $37 million. This ongoing land
grab artificially inflates property prices beyond the means of many private
buyers, and few entrepreneurs can compete against state-subsidized recreation
facilities.
To limit the growth of government land holdings, the Legislature should require
that new land acquisitions by the Departments of Natural Resources, Management
and Budget and Transportation be offset by the sale of other publicly held
property. A policy of "no net loss of private property" would help to ensure
that state government prioritizes its purchases and provides better stewardship
of public lands.
4. Reform asset forfeiture laws.
In a single recent year in Michigan, law enforcement agents applied so-called
asset forfeiture laws in nearly 10,000 cases to seize more than $14 million in
private property, including homes, cars, and cash. In many instances, no charges
were ever filed against the property owners, and no finding of guilt was ever
determined in a court of law. In civil forfeiture cases, law enforcement
officials need do little more than meet a low threshold of evidence indicating
that the property in question was involved in a crime. The actual owner of the
property may not even be aware of the alleged crime before the government seizes
his property. Most police agencies profit from at least some of the forfeiture
proceeds, raising conflict-of-interest concerns.
Congressman John Conyers notes that forfeiture law is intended to empower police
to confiscate the property of major lawbreakers, but in actual fact it "mostly
ensnares the modest homes, cars, and hard-earned cash of ordinary, law-abiding
people." He has secured approval for some changes in federal forfeiture law, but
more needs to be done.
Lawmakers must reform both state and federal forfeiture laws with three
objectives in mind:
End the twin practices of allowing law enforcement agencies to profit from the sale of the assets they seize and paying informants to help build forfeiture cases;
Require government to prove that property is directly connected to illegal activity before it can be seized (and the amount of property seized must be proportionate to the crime committed by its owner);
Strengthen language in forfeiture statutes to ensure that property owners who have not participated in, or acquiesced to, a crime committed with their property are not punished by forfeiture.
Other important recommendations for reform of asset forfeiture laws are
contained in the Mackinac Center for Public Policy study, Reforming Property
Forfeiture Laws to Protect Citizens' Rights.
For further information, please see
www.mackinac.org/792.
5. Reform eminent domain.
Starting in the 1950s, courts have given legislatures carte blanche to expand
beyond any reasonable limits the scope of eminent domain property takings. Our
Founding Fathers made provisions for condemning property for limited public
use, which was understood to mean things like roads and bridges. But new
laws have gradually expanded "public use" to mean "public purpose."
Sadly, Michigan has been a leader in this erosion of the right to own property,
the 1981 Poletown Neighborhood Council v. City of Detroit case being a
milestone. Such court decisions have opened the door for abuse, corruption, and
the destruction of property rights. The potential for politically connected
developers and self-serving politicians to abuse the process is almost
unlimited. And politicians are getting bolder. Earlier this year the Michigan
Legislature passed HB 4028, which explicitly authorizes municipalities to
transfer to a developer property declared "blighted" under highly
subjective definitions. In 1999, former Detroit Mayor Dennis Archer elicited
howls of protest when he used eminent domain to benefit casino operators.
"Property owners are protected, because they receive fair market value," say
defenders of eminent domain. But they are not protected, and here's why:
Imagine an owner has held on to his Detroit property near the river for 30
years, hoping that some day its value would rise. Now this potential is being
recognized by others, to the point where developers are weighing options. When
one of these makes a low-ball offer, the owner wisely refuses to sell. But if a
developer has a cozy relationship with city officials, he can use eminent domain
laws to avoid the expense of voluntary market transactions. He gets the city to
condemn the property on the basis of the "public interest" in a development, and
to transfer it to himself. The owner is forced to sell for an amount based on
past sales of comparable property, which ignores the turnaround value. This
after he has hung on and paid high property taxes for 30 years.
The solution is to return the law to the traditional definition of "public use"
in eminent domain cases, ending the unfair practice of taking property from one
private citizen for the profit of another. Regardless of the purpose of the
taking, business property owners should be compensated based on the value of the
property's current location as well as local "good will" and other intangibles.
Current law requires compensation for the real property value only.
For further information, please see
www.mackinac.org/4046.
6. Revise historic preservation laws.
In 1970, the Michigan Legislature passed Public Act 169, a law that permits
local governments to regulate changes to property in designated "historic
districts." Some municipalities subsequently created historic district
commissions with sweeping powers to restrict what types of changes property
owners can make to their homes or businesses.
At a city council meeting in Midland, several historic district residents
chronicled how costly, time-consuming, and intimidating it was to apply for a
"Certificate of Appropriateness" from the historic district commission (HDC) for
home improvements. The HDC is not obligated to advise or assist property owners,
and makes no attempt to do so. The burden is on the owner to prove that any
proposed improvement is historically accurate, even if no historic evidence
exists. Decisions by the commission are often perceived as arbitrary, arrogant,
petty, and even vindictive. People who were once amicable neighbors spy on one
another, reporting presumed violations to the HDC. Similar experiences are
occurring in other parts of Michigan as well. After Owosso created a historic
district commission by ordinance, for example, citizens petitioned for a public
vote on the issue. The ordinance was subsequently defeated by a 70-percent
margin.
The best defense against erosion of historic value is to convince property
owners that it is in their best interests to preserve the historic significance
of their homes. This does not require the force of government.
The beautiful city of Marshall in south-central Michigan is proof that
preservation is possible without government intervention. Marshall's famous
historic district is the product of voluntary cooperation among property owners,
many of whom rejected a recent attempt to impose a commission-based district
under PA 169. It's time for the Legislature to revisit the 1970 law to make the
preservation of historic private property a voluntary, educational project
rather than a political, coercive one.
For further information, please see
www.mackinac.org/4091 and
www.mackinac.org/pubs/comments/3861.
Michigan is blessed with an abundance of natural resources, and the state's environmental quality has vastly improved in the past three decades. All areas of the state are currently in compliance with national ambient air quality standards, and Great Lakes wildlife is thriving, indicating healthier waters. The bald eagle population, for example, increased from just 50 nests in 1961 to 366 in 2000 (see Chart 1).1 Wild trout stocks have likewise rebounded: Hatchery lake trout comprise less than 20 percent of the trout population in Lake Superior, for example.2 Forestland, too, is flourishing, now covering 44 percent of the state. The rate of wetland loss, meanwhile, is in decline.
Smokestacks and tailpipes no longer constitute the gravest environmental threats. Billions of dollars invested in new technologies have dramatically reduced industrial emissions (see Chart 2). Indeed, it is proof of our environmental progress that the regulatory focus has largely shifted to more marginal sources of pollution, such as stormwater runoff and dry-cleaning exhaust. More than releases of PCBs, DDT, or lead, the biggest challenges include "natural" phenomenon such as the "invasion" by non-native species of the lakes and inland waters.
Washington has long dictated the lion's share of environmental regulation.
And while laws such as the Clean Water Act and Clean Air Act have produced
results, the costs to the economy, property rights, and state sovereignty have
been colossal. In his book "Clearing the Air: The Real Story of the War on Air
Pollution," author Indur M. Goklany documents that air quality had been
improving prior to federalization-and probably would have continued to improve
regardless of costly mandates from Washington. But states like Michigan do have
an important role to play as laboratories for more effective environmental
policy. This means relying less on the command-and-control regulatory regime
that stifles innovation and increases bureaucratic costs in favor of flexible,
incentive-based policies that yield greater benefit for every dollar spent.
7. Require legislative approval of major environmental regulations.
Environmental concerns understandably rank high among Michigan citizens, and
elected officials are, therefore, loath to be perceived as anti-environmental.
But voters also are pragmatic, recognizing the flaws inherent in the radical
policy prescriptions advocated by many in the green lobby. In juggling these
various interests, lawmakers often enact vague environmental statutes that
effectively delegate to regulatory agencies an enormous amount of discretionary
power. But such regulatory agencies have every incentive to promulgate the most
costly and complex rules. (Exacerbating matters is the fact that courts have
long deferred to the presumed expertise of agencies such as Michigan's
Department of Environmental Quality, even in the absence of statutory
authority.) More rational regulation likely would result if major regulations
were required by law to undergo legislative scrutiny and win approval before
taking effect. Not only would such a requirement restore accountability to the
Legislature, it would force the executive branch to prioritize its rulemaking by
slowing the proliferation of new regulations.
8. Privatize conservation of public lands.
In their report "Progressive Environmentalism: A Pro-Human, Pro-Science,
Pro-Free Enterprise Agenda for Change," authors Richard L. Stroup and John C.
Goodman describe the dramatic improvements in water quality achieved in England
and Scotland after private groups secured from the government exclusive fishing
rights in public waterways. Voluntary associations such as the Anglers'
Cooperative in England fiercely protect their waters to preserve fishing stocks.
But as Stroup and Goodman note, "In this country, virtually all state
governments have disallowed private ownership of stream flows on the theory that
government should hold these rights in `public trust.' As a result, public
streams are often subject to over fishing and pollution." In the interest of
improving the condition of inland lakes and streams, the Legislature should
authorize a pilot project involving privatization of fishing rights.
9. Neutralize government advantages in enforcement actions.
Regulators routinely exercise the option of filing enforcement actions in Ingham
County, the seat of state government, rather than the jurisdiction where the
alleged violation occurs. This choice of venue poses a disadvantage to citizens
because of the increased costs associated with a case being tried far from the
defendant's home or business. Moreover, government is shielded from the true
costs of enforcement actions and, therefore, is not fully accountable for the
number and types of cases adjudicated. Legislation is needed to require that
regulatory enforcement actions be filed in the jurisdiction where the alleged
violation occurs, unless the defendant agrees otherwise.
10. Eliminate incentives for "urban sprawl" and reform policies that induce
urban flight.
Continued development and the destruction of wildlife habitat often are
cited as threats to the environment. Consequently, a slew of legislative
proposals to limit land use are pending in the Legislature, while counties and
municipalities across the state are enacting ordinances to restrict development.
Yet there is little objective evidence that Michigan is facing a "sprawl"
crisis: Less than 10 percent of the state is urbanized, and long-term trends
show no dramatic changes in land use.
The Mackinac Center for Public Policy study, "`Urban Sprawl' and the Michigan
Landscape: A Market-Oriented Approach," analyzes decades of statistics on
urbanization and land use in Michigan to offer five key recommendations for
rational land use policy:
Tax policies should be fair and uniform across the board so as to minimize tax- triggered flight.
Siting and other regulatory permitting should be streamlined to reduce the cost of doing business in Michigan and to encourage wealth creation and investment in all businesses and industries, including agriculture.
Full or "marginal" cost-pricing for public services and infrastructure should be implemented to avoid indirect subsidization of "urban sprawl."
Land use programs should emphasize flexibility and voluntary participation.
Property rights must be protected to preserve liberty and rationalize markets and planning.
In addition, the redevelopment of core cities would be enhanced were local
governments to expedite deed clearance on tax-reverted and abandoned properties
by contracting with private experts to clear the backlog and with real estate
agencies to return the properties to private ownership.
For further information, please see
www.mackinac.org/763,
www.mackinac.org/3684, and
www.mackinac.org/3401.
11. Allow judicial review of all environmental enforcement actions.
Several of Michigan's principal environmental statutes prohibit citizens from
seeking judicial review of enforcement decisions dictated by the Department of
Environmental Quality (DEQ). Regulators have justified their unchecked power by
claiming that litigation would delay clean-ups and other remediation orders,
thereby endangering public health and the environment. In fact, however, a great
many DEQ cases go unresolved for years at a time. And absent the check on its
enforcement powers, the agency is insulated from accountability. Establishing
the right to judicial review would inject discipline into environmental
regulation.
12. Eliminate Michigan's Civilian Conservation Corps.
Modeled on Depression-era public works programs, Michigan's Civilian
Conservation Corps (CCC) employs some 200 young adults each year for state park
maintenance. The majority of recruits are also fed and housed by the state,
making program costs per corps member more than $17,700-more than double the
amount of per pupil spending in Michigan. Participants who log 1,700 hours also
become eligible for a federal education grant of $4,725 (or $2,362 for 900 hours
of service). Enrollment suspends all payments due on outstanding student loans,
while accrued interest is covered in full by taxpayers. Thus, Michigan families
who may be struggling with their own college costs are subsidizing the
eligibility of others for federal tuition assistance.
The CCC program enables the Department of Natural Resources (DNR) to avoid some
of the budget discipline that otherwise requires government agencies to
prioritize spending. If the DNR cannot properly fulfill its stewardship
obligations absent a corps of federally subsidized workers, perhaps some of the
state's vast land holdings ought to be returned to private ownership. Grappling
with the prospect of budget shortfalls, Michigan cannot afford the luxury of
such a costly make-work program.
Economic growth in Michigan will depend, in part, on the continued
evolution of advanced telecommunications and technology. Technological
innovation also will provide citizens enormous power and convenience. There is
broad agreement that a competitive market is the best means of increasing the
availability and affordability of new products and services. That goal,
unfortunately, has been thwarted by continued federal and state regulation that
has actually secured the market position of reigning monopolies. And the market
uncertainty created by unending disputes over regulatory minutiae inhibits
investment by potential competitors.
13. Repeal the Michigan Telecommunications Act.
The Michigan Telecommunications Act has hindered market development, thereby
depriving consumers of the lower costs and higher quality services that
competition typically yields. An analysis by BBK Ltd.'s Anderson Economic Group
concluded that Michigan's telecommunications law "increases government power,
and reduces that of consumers. This increased regulation takes the form of
mandated services, fixed prices, regulation of commercial speech, barriers to
entry, and new government powers." The Legislature should repeal the price
controls and service mandates in the MTA as well as curb the powers of the
Public Service Commission to regulate telecommunications.
14. Prohibit government entry into telecommunications service markets.
Several municipalities in Michigan have launched cable and high-speed Internet
services in direct competition with privately owned firms. But government should
not be allowed to exploit its tax and regulatory advantages to undermine the
private sector. Lawmakers should enact legislation that expressly prohibits
state and local government from owning or operating any telecommunications
service.
15. End discriminatory tax treatment of investment in telecommunications
infrastructure.
Under current law, telecommunications property is taxed based on intangible
assets such as the income it generates. Most other personal property in Michigan
is taxed based on the depreciated value of the tangible asset. This
discriminatory tax treatment is a major barrier to private investment in
Michigan's telecommunications infrastructure and should be ended.
16. Resist the imposition of sales taxes on Internet transactions.
The U.S. Supreme Court has ruled that state and local governments cannot force
out-of-state retailers to collect sales taxes because this would interfere with
interstate commerce. States and localities may only require companies with a
"substantial physical presence" or "nexus" in their state to collect sales
taxes. That's as it should be.
But some public officials are eager to cash in on the growth of catalog and
online sales. Gov. Engler, for example, strongly supports a National Governors'
Association (NGA) proposal called the "Streamlined Sales Tax" that would
effectively deputize a third-party entity to collect and distribute taxes on
out-of-state purchases. If enacted, the proposal would open the door to a
national sales tax. The Michigan Legislature last year gave approval for
Michigan to collaborate with other states in furthering the NGA plan.
But taxes are supposed to pay for services that governments provide, such as
police protection. Out-of-state vendors with no physical presence in a state do
not consume government services. Thus, it would be unfair to tax out-of-state
retailers.
The NGA plan also raises privacy concerns. When a consumer pays sales tax at a
local shop, no one asks her name, where she lives, or anything about her buying
habits. Under the NGA plan, however, the third-party tax collector could easily
collect such information.
Supporters of the NGA plan talk a lot about fairness and the need to "harmonize"
states' sales taxes. But Michigan "loses" revenue all the time to states that
tax less and tax better, and it gains revenue over states that tax more and in
more harmful ways. That's healthy tax competition, and it's one of the reasons
the states are called "laboratories of democracy."
Colorado Gov. Bill Owens, in a February 1, 2002 speech, made some revealing and
instructive comments on the Internet tax issue that bear repeating to a Michigan
audience:
When I go on Main Street to buy something at Wal-Mart in Aurora, Colo., I am using the city street. I am protected by the city police force. If there is a fire and I need the help of the fire department, they are there. As I am going to that Wal-Mart or while I am in that Wal-Mart, if I drink water from the water faucet, I am using municipal water. I am in fact receiving city services when I go to that Wal-Mart and make that purchase.
When I buy something over the Internet from Lands' End in Wisconsin, the only impact on any government in Colorado is the UPS truck that arrives at my door, bringing me that package. And UPS, I can assure you, more than pays its fair share in gas taxes for the use of that local or state road. There is no nexus between a service rendered and a service delivered for that Internet tax that some would want me to have to pay to Aurora and to Colorado.
Twenty states are now meeting regularly, setting up the system, so that if Congress ever allows us to tax the Internet, there are states all ready to go forward with the compact to make this happen. Well, let me just tell you-and I bet Colorado is not the only state that will do this-but it is my goal, if that day ever happens, to have Colorado be the Switzerland of Internet taxation. I want us to be a tax haven so that these companies move to Colorado.3
Some say the effort to impose sales taxes on all Internet transactions is a train rolling down the track. But it's a train that should be derailed.
Michigan's image as a place to do business has improved in recent years as
the state has reduced burdensome regulatory costs and taxes. But one major
roadblock to consolidating and expanding those improvements remains: an
unfriendly labor climate. Sometimes unfairly, but often with good reason,
Michigan is perceived in other parts of the country as a place where labor
unions wield inordinate and harmful influence. And improving the labor climate
in Michigan is more than a positive economic policy approach: It is necessary to
thwart abuse of the rights of Michigan workers. The following recommendations
will help enforce Michigan workers' moral and legal rights as well as have a
positive impact on the state's economic climate. See Chart 6.
17. Enforce the Beck rights of Michigan workers and enact "paycheck
protection."
Under the 1988 ruling of the U.S. Supreme Court in Communication Workers of
America v. Beck, workers are entitled to a refund of any union dues that are
used for purposes unrelated to collective bargaining activities, contract
administration, or grievance processing. Unfortunately, these Beck rights
have gone largely unrealized because workers are unaware of them and governments
have shown virtually no desire to enforce them. The result is that labor unions
routinely spend half or more of their members' dues on causes and candidates
that many of those members oppose.
Michigan took a limited step in this area by enacting Public Act 117 in 1994.
Under this legislation, individual workers must give their consent each year
before payroll deductions can be used for political action committee
contributions. Full protection of Beck rights, however, would require
worker approval for all noncollective bargaining-related dues expenditures.
Either by act of the Legislature or by executive order of the governor, Michigan
should act to protect workers' freedoms of speech and association by enforcing
the Beck decision. Requiring the posting of Beck information notices in all
private-sector firms that contract with the state would be a step in the right
direction. An April 1996 survey of 1,000 union members nationwide revealed that
78 percent were not aware of their right to have an independent accounting of
how their unions spend their dues money and to secure a refund for that portion
spent for noncollective bargaining activities.
"Paycheck protection" for all Michigan workers would put real teeth in the
effort to enforce Beck rights by requiring that unions which compel dues
and fees secure from each worker a prior, annual, voluntary, written
authorization to use any dues for noncollective bargaining activities. Workers
could automatically shield their money from noncollective bargaining activities
upfront when dues are collected, instead of having to jump through hoops to
recover those dues after they have been extracted.
Details about the Beck decision and suggestions for specific wording of
an order to enforce it in Michigan are provided in the Mackinac Center for
Public Policy study, "Compulsory Union Dues in Michigan." Information about
paycheck protection is provided in the Mackinac Center report, "Paycheck
Protection in Michigan."
For further information, please see
www.mackinac.org/235,
www.mackinac.org/1021, and
www.mackinac.org/790.
18. Enact a right-to-work law.
With the September 2001 passage of a "right-to-work" law in Oklahoma, 22 states
now protect the right of every worker to abstain from union membership without
fear of losing his or her job. Michigan, unfortunately, is not one of those
states.
The lack of a right-to-work law is a drag on Michigan's economy. While
right-to-work states have a solid record of economic growth, new jobs and rising
wages, Michigan's economic performance has been lackluster by comparison.
According to economist and Mackinac Center adjunct scholar William Wilson, for
the period 1977-99, Michigan's economy grew an average of 1.8 percent
annually-well below the 3.4 percent annual growth registered in right-to-work
states (see Chart 3). Only three
states (Montana, West Virginia, and Louisiana) had slower growth than Michigan
during this period.4
A comprehensive study in the early 1990s by George Mason University economist
James Bennett demonstrated that adjusting for the cost of living, including
taxes, families in the 21 (pre-Oklahoma) right-to-work states earned $2,852 more
in real income per year than did their counterparts in Michigan and the other 29
states that lacked right-to-work laws.5 Between 1970 and 2000, the 21
right-to-work states created 1.4 million manufacturing jobs, while Michigan and
the other states without right-to-work laws lost 2.3 million manufacturing jobs.
This, in turn, led to an unemployment rate that in Michigan was 2.3 percent
higher on average than in states with a right-to-work law.6 The evidence is
clear and compelling: Right-to-work really means the right to work for more-more
individual freedom, more jobs, and more income in real terms.
Nothing could do more for worker rights and Michigan's image and economic
development than a right-to-work law. The only thing union officials have to
fear from right-to-work is the free choice of the very workers they purport to
help.
For further information, please see
www.mackinac.org/74,
www.mackinac.org/3354, and
www.mackinac.org/112.
19. Pass a "Union Accountability Act."
The Michigan Public Employment Relations Act allows for the collection of
mandatory union dues as a condition of employment. But government employee
unions are not required to account — either to the state or to their members — for
how that dues money is spent. This leaves the door wide open for corruption, as
well as political spending of dues that are contrary to the interests of workers
themselves. Just as publicly held corporations are required to report their
financial condition, unions should be required to account for how they spend
their members' money.
A "Union Accountability Act" would require unions that represent state and local
government employees to file annual reports outlining their financial condition
and showing the extent of their political spending. These reports would be
audited by certified public accountants, using the same standards that apply to
businesses. Unions that do not file accurate reports would be required to refund
dues money and after a second offense would face an automatic decertification
election.
A Union Accountability Act would not prevent workers from exercising their First
Amendment right to support their union's political agenda, but would help
citizens to "follow the money" and make it easier for those workers who oppose
the union to enforce their right to not support union politics. As a
consequence, workers would have the accurate and verifiable information they
need to determine whether or not their money was being used wisely and to root
out waste, fraud, and corruption by union officials.
The Mackinac Center estimates that government employee unions in Michigan take
in over $95 million of membership dues annually. Much of this money is used for
political initiatives, giving the unions tremendous clout in Lansing and
Washington. Loopholes in campaign finance laws allow union officials to hide the
extent of their spending.
The state of Michigan gives unions a wide range of powers, including the ability
to extract forced dues. But with power comes responsibility. Officials of
government employee unions should be willing to bear the burden of accounting
for their expenditures as a legitimate cost of business and a natural
consequence of the favorable treatment they receive under current law.
For further information, please see
www.mackinac.org/3944 and
www.mackinac.org/4113.
20. Create a "Teacher Bill of Rights."
Gov. Engler, in a major address to the Legislature in October 1993, stated that
no teacher in Michigan should be coerced into joining and paying dues to a
union. Unfortunately, a coercive employment situation persists for most Michigan
public school teachers. Therefore, it's high time for the Legislature to pass,
and the governor to sign, a "Teacher Bill of Rights" that would make exclusive
representation optional for each individual teacher in Michigan and remove
unions' duty of fair representation toward any teacher who opts out of his or
her workplace union.
The monopoly bargaining privilege of the Michigan Education Association (MEA)
and the Michigan Federation of Teachers (MFT)-afforded by Michigan's existing
Public Employment Relations Act (PERA)-is the basis of the power of these two
labor organizations to prevent teachers from negotiating their own terms of
employment. As the exclusive representative, school employee unions inevitably
end up bargaining education policy with local school boards and state
government. The interests and objectives of individual teachers are often
subordinated to the "collective whole" even when the individual teacher's
employment opportunities may suffer as a result.
Accordingly, current legal requirements that force teachers to accept union
membership or pay dues or fees as a condition of employment should be repealed.
PERA should be further amended to permit unions to represent only those teachers
who affirmatively elect such representation in writing. Employees who do not
agree to such representation should be permitted to negotiate for themselves.
Under a Teacher Bill of Rights, teachers would be allowed to opt out of the
bargaining unit and negotiate their own wages, benefits, hours, and other terms
of employment. Unions would owe no duty of fair representation to any teacher
who elects independent (non-collective bargaining) status, but would be
prevented from discriminating or retaliating against any teacher on the basis
that he or she has elected not to join or be represented by a union.
Relieving unions of any legal duty toward non-members eliminates their claim
that they are forced to represent all without being compensated for their
services-the so-called "free rider" argument. Forced dues would neither be
needed nor allowed.
A Teacher Bill of Rights would allow teachers to act autonomously, getting the
best deal for their services as independent professionals or joining a union
when they believe it is in their best interest to do so. This freedom will bring
new dignity to the teaching profession in Michigan and appropriately reward the
skilled teachers who should be free to negotiate for the value of their
specialized expertise.
For further information, please see
www.mackinac.org/1660.
21. Remove the state government's ability to act as a union collection
agent for union political funds.
If workers' wages are the source of union funding, then employers are the pipes
that convey the flow of dues to labor organizations. Payroll deduction is a
convenient and popular method of funds collection that springs from a
contractual provision between the union and the employer. Without such an
agreement, unions would bear the burden of collecting funds from their
memberships after the money has made its way into workers' pockets. This would
require union collection agents to persuade members to consciously and
voluntarily part with their hard-earned money.
The state has a compelling interest to remove partisan politics from government
workplaces. One solution, the banning of "wage check-offs" for political
purposes, has withstood judicial scrutiny. Political action committee (PAC)
funding is already regulated in Michigan: Public Act 117 of 1994's ban of
"reverse check-offs" (which stipulate that a worker must take action if he does
not want political contributions deducted from his paycheck) and
requirement for annual, worker consent of PAC payroll deduction authorizations
were significant steps toward greater worker freedom and union accountability.
According to the Michigan Chamber of Commerce, after union legal challenges
resulted in Public Act 117 being upheld in court, worker contributions to union
PACs declined in 1998, indicating many workers' desires were previously being
thwarted. The Legislature should build on these reforms by prohibiting
government collection of all political funds via payroll deduction.
Prohibiting political payroll deduction would serve three additional purposes.
First, it would afford greater protection of workers' free speech rights by
returning direct control over disbursement of union political funds to the wage
earner before it goes to union coffers. Second, it would compel unions during
collection periods to persuade their members that the unions' political
expenditures properly represent the political views of their memberships. Third,
it would save Michigan taxpayers the cost of having the government acting as the
dues collector for unions, which are private enterprises and ought to absorb
such costs themselves.
See Chart 4 for an illustration of PAC contributions.
22. Repeal the Prevailing Wage Act of 1965.
Imagine a law that subsidizes the well-off, discriminates against large segments
of the workforce, wastes tens of millions of dollars every year, and hurts the
competitiveness of Michigan businesses. Unfortunately, there is no need to
imagine such a law: Those are the effects of the Michigan Prevailing Wage Act of
1965. It is a classic case of special-interest legislation that benefits a
narrow few at the expense of the many.
The act, which covers construction projects in Michigan that receive full or
partial funding from the state, requires workers to be paid "prevailing" wages
and benefits.7 In practice, this invariably means the rates fixed in
local collective bargaining agreements-in other words, union wages and benefits.
The competitive compensation packages established by nonunion contractors and
their employees-who make up almost two-thirds of Michigan's construction
workforce-simply are ignored in determining "prevailing" rates. Less expensive
nonunionized firms, along with their competent and qualified workers, are
effectively frozen out of work on a host of projects from school construction to
road repair. In a Mackinac Center report, Ohio University professor of economics
Richard Vedder estimates that Michigan's prevailing wage law increases the cost
of construction on applicable projects by at least 10 percent.8 That means the
Prevailing Wage Act cost Michigan taxpayers an extra $421.2 million in 1999, an
amount equal to 6 percent of the revenue generated by the state's income tax on
individuals.9
The prevailing wage law also reduces employment in construction. Between
December 1994, when the law was found to be pre-empted by federal law, and June
1997, when the law was reinstated, Michigan saw construction employment rise by
17,600 jobs, compared to only 4,000 jobs that opened up in the period
immediately prior to the court decision that temporarily struck down the
law.10
The Legislature should apply common sense and sound economics by repealing this
costly special-interest legislation. At the very least, it should follow the
example of the Ohio Legislature, which in 1997 exempted public schools from
having to pay the excessive costs mandated by that state's prevailing wage law.
Hillsdale College economist Gary Wolfram estimates that by following Ohio's
example, Michigan would save over $150 million in school construction costs
annually.11
The evidence on employment and construction costs shows that the state
prevailing wage law has adverse consequences. The Legislature would do well to
repeal it.
For further information, please see
www.mackinac.org/2380.
23. Outlaw the use of "project labor agreements" on any building
construction using state funds within the state of Michigan.
"Project labor agreements" (PLAs) mandate that all contractors must employ
members of designated unions for all labor performed on a particular site. These
"union-only" arrangements are frequently agreed to by state and local
governments in order to guarantee labor peace during the life of a given
contract. But the premium paid for this peace also permits union discrimination
and noncompetitive bidding to persist.
Assuring labor peace on a construction site is a legitimate goal, but strikes
are primarily a function of unions themselves. Consequently, nonunion
contractors are actually in a better position than union contractors to deliver
on a no-strike promise. PLAs are not a foolproof means of avoiding labor strife;
in fact, strikes and other delays have occurred on projects covered by PLAs in
other states.12
As a matter of public interest, the Legislature should ensure that Michigan's
public construction awards are consistent with existing state bidding policies
designed to foster competition in government contracting. The purpose of the
many bidding laws is to protect the public by placing bidders on an equal
footing, and to ensure that competition will eliminate the possibility of fraud,
extravagance, or favoritism in the expenditure of public funds. But PLAs reduce
competition and cause discrimination against nonunion employees in favor of
union membership. This discrimination has potentially severe detrimental effects
on nonunion employees and employers.
For further information, please see
www.mackinac.org/88.
24. Pre-empt local "living wage" ordinances.
The proliferation of municipal "living wage" ordinances is a threat to economic
growth in Michigan. These ordinances require employers who do business with a
city, or who benefit from tax abatements, "enterprise zones," or other
subsidies, to pay employees an above-market premium wage of around $8 to $12 an
hour, and often require health benefits. As this report was written,13 "living
wage" laws were in effect for Detroit, Ann Arbor, Eastpointe, Ferndale,
Pittsfield Township, Ypsilanti, Ypsilanti Township, and the Washtenaw County
Road Commission (see Chart 5).
"Living wage" ordinances have a certain superficial appeal; they are usually presented as a way to lift workers-and the families they support-out of poverty. But their appeal rests on a lack of knowledge about how the labor market works. These ordinances actually tear away the lower rungs on the ladder to economic opportunity. A Michigan House committee recently heard from small businesses with specific examples: A machine shop owner testified that he has seven employees and would like to hire more, but won't be able to if his city adopts a proposed living wage ordinance. "I just hired an ex-con at $7.50 an hour, and if he does well he can make a lot more. With a $10 living wage I could not take a chance on this employee, or younger, lower skilled workers."14
By artificially raising the cost of labor, "living wage" ordinances force employers to hire higher-skilled workers (in order to improve productivity and justify the higher wage rates) or reduce their payrolls. In either case, unskilled workers don't gain income-they lose jobs. And in the process, they lose opportunities to gain the work experience and on-the-job training necessary to find their way to higher wage employment. At the same time, higher wage costs lead to higher prices on goods and services sold to local government. These costs are eventually passed on to taxpayers in the form of higher taxes or limited services.
The spread of "living wage" ordinances is the result of a nationwide campaign
by union officials. While such proposals have long been rejected by Congress and
state legislatures because of their harmful economic effects, they often find
fertile ground among ambitious local politicians. Not all local politicians are
fooled, however. Ed McNamara, the Democratic executive of Wayne County, may have
summed up "living wage" ordinances best, if rather bluntly: "living wage" is a
"diabolical instrument that's got to be eliminated. It's the greatest deterrent
to economic development of anything out there."15
Wages should be agreed to by employers and employees, not dictated by the
government. "Living wage" laws simply add another level of government
interference in the market. By pre-empting local "living wage" laws, the state
of Michigan would clear away obstacles to job creation, economic growth, and
employment opportunities.
Local "living wage" laws are simplistic public policy with bad economic results.
The Legislature should not hesitate to set them aside.
For further information, please see
www.mackinac.org/1705.
25. Give Michigan workers a flexible "comp-time" law.
In today's workplace, the act of punching a time clock in factory fashion is
disappearing. The nature of work is changing and so are the needs and desires of
workers who want ever more flexibility in their hours and compensation. Laws
governing the workplace, however, are not always keeping pace. The issue known
as "comp time" is a case in point.
Under existing law, hourly wage earners must be paid time-and-a-half or more for
anything beyond the normal eight-hour day. But as workers increasingly feel a
need to adjust their work schedules to accommodate family activities, desired
leisure time, or the work patterns of a spouse, the old overtime practice is too
rigid. Some workers would prefer to work overtime on some days and receive time
off rather than cash for the extra hours.
The problem is that antiquated wage laws prevent workers from trading overtime
earnings for comparable time off-a practice known as "comp time" that is
becoming increasingly common in public-employee workplaces. Union leadership
(but not so much rank-and-file workers themselves) oppose the adoption of any
laws that would grant this time option because they fear employers will abuse
the system to avoid paying overtime wages altogether. The 1964 Michigan minimum
wage law sets minimum wage and overtime standards for many hourly employees not
covered by the federal Fair Labor Standards Act. Under these federal and
state laws, employees must be paid in cash for overtime even though many would
prefer the option of cashing in this pay for equivalent time off.16
Michigan's representatives in Washington can work to make the necessary changes
at the federal level, but state legislators can act to extend the comp-time
option to many workers right now. Today, there are more working, single parents
and dual-income families than ever before. Especially for women in dual-earner
and single-headed households, the comp-time option would provide greater
workplace flexibility.
Comp time doesn't present a radical, untried idea. For many years, federal,
state, and local governments have granted comp-time options allowing their
employees trouble-free comp-time arrangements for leisure, family needs, or
continuing education.17 It's time that employees in the private sector enjoyed
the same benefits public-sector employees already enjoy.
Granting Michigan workers more flexibility in their work schedules by
recognizing their preference for comp time is a progressive, pro-worker,
family-friendly reform whose time has come.
26. Amend the Public Employment Relations Act to recognize the unconditional
and immediate right of public-sector employees to resign their union
memberships.
Employees in the private sector have an unconditional right to resign from union
membership at any time. A line of U.S. Supreme Court cases recognizes this right
as essential to preserving the integrity of the First Amendment's guarantees of
free speech and free association. As a result, private-sector union
constitutions and bylaws that limit the timing of an employee's resignation from
the union are unconstitutional. Additionally, it is a violation of a union's
duty of fair representation under the National Labor Relations Act to refuse to
honor an individual's unconditional withdrawal from the union.
Michigan's Public Employment Relations Act (PERA), which governs public-sector
labor relations in the state, provides an option to government employees who are
exclusively represented: They may either become members of a union, or else they
decline union membership and become nonmember "agency fee payers."18 But some
Michigan public employee unions place limitations-such as time-limited "window
periods"-on the right of union members to resign. Unfortunately, PERA as written
does not protect an employee's unconditional right to resign, contrary to
federal labor law regarding the individual's First Amendment right of free
association. The Legislature could better protect government employees' rights
by amending PERA to include a clause specifically prohibiting any unreasonable
restrictions on any government employee's right to resign from his union.
27. Permit employees to vote on compulsory support clauses.
Compulsory support clauses are provisions in agreements between employers and
unions that obligate employees to either join a union and pay union dues or else
refrain from joining but pay agency fees, which are usually an amount equivalent
to the dues of a full union member. Compulsory support clauses are the primary
source of funding for unions, and they carry the force of law-so union
negotiators will routinely sacrifice employees' economic benefits for the legal
right to compel every employee to pay dues or fees. Unfortunately, employers
often agree to a compulsory support clause, regarding it as a throwaway
concession to the union. Ultimately, however, it is employees who pay in the
form of reduced compensation.
An amendment to Michigan's Public Employment Relations Act (PERA) requiring
prior employee approval-by way of a majority vote on the compulsory support
clause-would give employees the ability to accept or reject an obligation to pay
dues or fees before such an obligation is included in the contract and becomes
legally binding.
The Legislature also should amend PERA to include a provision allowing for a
"deauthorization" vote in unionized government workplaces where a specified
number of employees presents a petition to the Public Employee Relations Board
asking for such a vote. Deauthorization is a procedure whereby employees remove
their union's legal ability to coercively extract fees; it in effect repeals a
contract's compulsory support clause. If a majority of employees voting
supported deauthorization, the compulsory support clause would be removed but
the rest of the contract would remain in force, and the union would retain its
exclusive bargaining rights.
The inherently abusive nature of the compulsory support clause is a ripe
opportunity for employee-friendly labor reform. An amendment to PERA requiring
employee approval for compulsory support clauses, as well as the option of
deauthorization, would do much to promote democracy and fairness in the
workplace.
28. Amend the Public Employment Relations Act to require employee
ratification of union contracts for public-sector employees.
Some unions in Michigan allow for an employee ratification vote of negotiated
contracts, but employee ratification is by no means a uniform practice, nor is
it legally required. Without such ratification procedures, union officials may
feel free to trade direct employee benefits-such as wage increases-for items
that benefit union institutional interests, such as paid time off for union
officials or free office space.
Even those unions that do provide for employee contract ratification do not
necessarily require a secret-ballot vote. Public votes mean that union officials
can keep an eye on any members who vote the "wrong" way on a contract.
As employee representative, a union has an ethical obligation to advance the
interests of its members, not merely its own institutional interests.
Unfortunately, Michigan's Public Employment Relations Act (PERA) as written does
not adequately hold public-sector unions accountable to this standard.
Accordingly, the Legislature should amend PERA to require all public-sector
unions in Michigan to hold secret-ballot ratification votes, allowing all
employees in a bargaining unit the opportunity to accept or reject the
collective bargaining agreement their union has bargained for them. The PERA
amendment should provide that each bargaining unit employee-regardless of his
union membership status-may vote on the acceptance of any contract offer
submitted by the employer, including collective bargaining agreements that
affect wages, benefits, and working conditions.
29. Require the Michigan Employment Relations Commission (MERC) to
investigate the merits of unfair labor practice charges filed by employees.
Existing administrative procedures for pursuing unfair labor practice charges
place an insurmountable burden on individual employees attempting to enforce
their rights through the Michigan Employment Relations Commission (MERC). MERC
presently does not investigate the merits of an unfair labor practice charge
before issuing a complaint-it is the charging party's responsibility to gather
sufficient facts, affidavits, and other evidence in support of the charge.
Employees pressing charges with MERC usually do not have the benefit of counsel
and must conduct this investigation independently and at their own cost.
If the charge appears to state a claim, then a complaint issues and a formal
hearing occurs. Without counsel, however, employees in a hearing are left to
navigate a maze of unfamiliar formal procedures entirely on their own. Such a
prospect provides a significant disincentive for individuals employee who want
to enforce their rights against a union or employer through MERC.
Unsurprisingly, relatively few employees attempt to enforce their rights this
way.
MERC should be accessible to unions, employers, and individual employees alike.
Accordingly, the Legislature should amend the Public Employment Relations Act to
authorize MERC to investigate charges and prosecute complaints on behalf of
individual employees. A MERC attorney should investigate charges as they are
filed, taking affidavits from the charging party and relevant witnesses. He
should then determine whether there is reasonable cause to believe that the law
has been broken and if so, a complaint should issue. Upon issuance of a
complaint, the case should be assigned to a MERC trial attorney, who would
prosecute the case on behalf of the employee.
All across America, a consensus is emerging about the troubled state of
public education: The system is hidebound with regulations, bureaucracy, and
disincentives for excellence. Remove these barriers, subject the system to
competition, empower parents with choice, and improvements will at last begin to
take place-that's the general prescription accepted more widely with each
passing day. With the introduction of inter-district choice, charter schools,
school funding restructuring, and other reforms of recent years, Michigan has
made progress. Sadly, however, too many children still languish in poor and
unsafe schools. Few issues are more important to the future of our state than
education reform-making Michigan schools competitive for the 21st century.
The Mackinac Center for Public Policy is Michigan's leading education reform
organization, having produced hundreds of studies, commentaries, articles, and
policy recommendations since 1988. Its largest publication, Michigan
Education Report (MER), is received by over 130,000 people, including
most teachers in the state. MER and a wealth of education-related
material can be easily found using the search engine at
www.mackinac.org.
30. Remove the cap on the number of charter schools state universities can
authorize.
Michigan's status as a national charter school leader is directly related to
the bold and innovative steps taken by state universities. However, this
progress is being impeded by the legislative limitation placed on the number of
charter schools state universities can authorize.
The current cap is set at 150 schools, despite increased demand from parents. In
fact, 66 percent of Michigan's charter schools have waiting lists, and 75
percent of the state's charter schools' enrollment grew from the 2000-01 school
year to 2001-02.19 See Chart 7. The Legislature should remove this cap and allow for the
expansion of charter schools rather than rationing choice and opportunity to
children. It should also consider the creation of an additional authorizing
entity such as a statewide charter school board.
Charter schools have been particularly well received by many minority and
poor students. More than 50 percent of Michigan's charter school students are
ethnic minorities, compared to an average of 19 percent in traditional public
schools. Forty percent of charter school students are eligible for the free and
reduced portions of the National School Lunch Program.20 For these students,
charter schools offer the only alternative to a system that is failing to meet
their needs. These opportunities should be expanded rather than restricted.
An April 2002 report from a commission headed by Michigan State University
President Peter McPherson endorsed the need for more alternatives, particularly
for disadvantaged students, but contradicted itself by calling for an overly
restrictive expansion of charter schools precisely where students with the
greatest needs reside.
The charter school movement is the future of public education-local control
and accountability with public funds. The Michigan Department of Education and
the Superintendent of Public Instruction should begin to prepare the state for
the transition.
For further information, please see
www.mackinac.org/3719,
www.mackinac.org/3219, and
www.mackinac.org/2975.
31. Extend the length of charter school contracts and allow schools to use
multiple sites under one charter.
The length of charter contracts is not specified by statute, but three to five
years has emerged as the norm. Contracts of such short duration have a
dramatically negative impact on the financial arrangements that charter schools
can enter into, thereby reducing flexibility and options and raising the cost of
providing an education. The Legislature should encourage charter school
authorizers to use long-term contracts or even "evergreen" contracts that can be
revoked any time a compliance failure exists or persists.
Allowing charter schools to use multiple sites under one charter would permit
campus-style schools with a single address, the use of off-site facilities for
instructional purposes, or the establishment of charter high schools that
service pre-existing K-8 charters. A multi-charter contract also would encourage
replication of quality programs that are in demand by parents.
32. Prohibit traditional public school districts from restricting the use of
non-utilized school buildings by charter schools.
The Legislature should stipulate that when a government school seeks to sell a
facility, it cannot prohibit the sale of the property to a charter school or in
any way inhibit the use of that property by a charter school after sale.
33. Allow property tax exemption to be passed on from a charter school to its
landlord.
Schools that lease facilities currently suffer additional costs because their
landlord cannot benefit from the schools' tax-exempt status. This reform would
help ease the burden that charter schools now have with regard to securing
facilities.
34. Permit experience and/or education to qualify teachers for charter
schools.
In addition to hiring state-certified teachers, charter schools should be
allowed to hire noncertified teachers whose experience and/or education
qualifies them to teach in a particular field.
Arizona law permits noncertified teachers to enter the teaching profession, and
that state has experienced great success in attracting the kind of quality
educators who would be excluded from teaching at traditional public schools in
Michigan. Meanwhile, statistics on homeschooled children demonstrate the weak
relationship between certification and academic success.21
35. Reform teacher certification to increase the pool of quality teachers.
Teacher certification has never guaranteed qualification. In fact, many people
who possess the ability and knowledge to teach are ultimately excluded from
entering the teaching profession due to expensive, time consuming, and onerous
red tape imposed by certification procedures.
The original purpose of the teacher certification process was to ensure quality,
but certification does not guarantee mastery of a subject. According to the U.S.
Department of Education, 36 percent of public school teachers-972,000 teachers
out of 2.7 million nationwide-did not major or minor in the core subjects they
teach.22
Dr. Sam Peavey, professor emeritus at the University of Illinois, is among many
experts who argue that "after 50 years of research, we have found no significant
correlation between the requirements for teacher certification and the quality
of student achievement."23
The state should reform teacher certification in order to allow the most
qualified people to enter the classroom at any time. The teaching profession
should be open to all who are deemed to be positive role models and competent in
their subject areas, regardless of certification or lack thereof. School
districts and individual schools should be given the authority to set
qualifications for teachers.
Public policy should address the shortage of highly qualified teachers by
encouraging local schools and districts to recruit teachers from the ranks of
their best students and provide training and mentoring in the schools in which
they will serve. Additionally, by allowing local schools and districts to
establish their own teacher qualification standards, competent professionals
with subject matter expertise would be recruited into the teaching profession.
For further information, please see
www.mackinac.org/1651.
36. Expand public schools-of-choice programs to allow all students in all
districts to attend the public school of their choice.
The Legislature should remove the provision in section 105 of the State School
Aid Act24 that allows school districts to choose, or refuse, participation in
the public schools-of-choice program. All schools should be required to
participate, and all Michigan students should be allowed to attend the public
school of their choice.
In 1996, the state of Michigan made it easier for parents to choose their
child's school from among those in their own and neighboring districts.
Previously, parents wanting to send their children to schools other than their
assigned district school were typically forced to obtain permission from the
assigned district in order to avoid paying tuition to the public school of their
choice.
For participating districts, the law now allows students to transfer between
public schools in the same local district, to public schools in the same
intermediate school district, or to public schools in contiguous intermediate
districts without paying tuition, provided the desired district has space. While
the number of students exercising public school choice is increasing, the number
involved in the schools-of-choice program is limited because districts control
whether or not they will participate.
Although the law doesn't explicitly limit the number of students who can leave
districts to attend schools outside their district boundaries, intermediate
school districts often strictly limit the number of students they enroll from
outside neighborhoods. Intermediate school district conglomerates may "opt out"
of certain provisions in the state's public school choice plan and create their
own choice programs that are actually aimed at curtailing the level of choice.
As a result, although the law encourages more choice than ever, choice remains
elusive for many students.
According to the Michigan Department of Education, 283 out of 554 districts
participate in Michigan's schools-of-choice plan, and another 165 districts have
adopted their own plans, offering very limited forms of choice. More than 100
districts do not permit choice. Overall, the number of students participating
statewide in the choice program has grown from 5,611 in the 1996-1997 school
year to 33,506 in 2001-02, a small percentage of the 1.7 million K-12 public
school population in Michigan.25 See Chart 8.
Districts such as the Genesee and Kent Intermediate School Districts have
created their own choice programs, allowing few students to choose the school in
which they enroll. The programs allow each student's assigned district to deny
or grant permission each year for that student to attend his or her
school-of-choice.
If the district denies permission for a student to leave, the student faces the
same dilemma he would have faced before the choice program began: He must pay
tuition to the district of his choice or stay in the assigned district.
It is time for this to change. The Legislature should alter the
schools-of-choice law to require all districts to allow public school students
to freely choose the school they prefer to attend. This would provide ample
competition between districts, encourage improvements, and free students from
schools that are not serving their individual needs.
Opening the public schools-of-choice plan to offer full choice would also
benefit districts financially. Though the choice plan has been criticized and
rebuffed by some district officials, it has proved profitable for many districts
that have participated. For example, during the 1990s, as choice increased
through the growth of charter schools and public school choice, the Dearborn
school district began preparing to retain and attract students. New, specialized
programs were developed, with parents' preferences becoming the primary focus.
Concurrent with Dearborn's aggressive efforts to recruit students, enrollment in
Dearborn public schools increased from 13,857 in 1994-95 to 17,075 in 2000-01,
even as competition from neighboring school districts and charter schools has
increased.
For more on how districts are responding to competition, see the 2000
Mackinac Center for Public Policy report, "The Impact of Limited School Choice
on Public School Districts."
For further information, please see
www.mackinac.org/2962 and
www.mackinac.org/3236.
37. Remove from the state constitution discriminatory language that
prohibits education tax credits, and place a Universal Tuition Tax Credit before
voters.
The U.S. Supreme Court has defended the primary right and responsibility of
parents to direct the education of their children.26 However, Article 8,
Section 2 of the 1963 Michigan Constitution prevents the majority of Michigan
parents from choosing the safest and best schools for their children without
paying twice. It is therefore incumbent upon the Legislature and the citizens of
Michigan to remove the 1970 amendment that took away this right and
responsibility from parents.
Under the current system, parents who choose to send their children to a
nongovernment school must pay twice-once in taxes for public schools they don't
use and again in tuition for the school they do use. This financial penalty
prevents the majority of Michiganians from exercising their rights as parents,
as it is only the wealthy who are able to afford such financial choices.
As detailed in the Mackinac Center for Public Policy study, "The Universal
Tuition Tax Credit: A Proposal to Advance Parental Choice in Education," a
properly designed education tax credit plan can save money for the state's
School Aid Fund, make possible an increase in the state's per pupil foundation
allocation, create new incentives for school improvement, and expand options for
parents-all at the same time.
Education tax credits are gaining momentum across the country. In recent years,
12 states have considered, and six have passed into law, some form of education
tax credit (see Table 1). Arizona's
program is the largest in the country, having provided more than 19,000
scholarships worth over $32 million to low-income students since 1998.27 In
2001, Pennsylvania and Florida enacted credits for businesses that want to help
pay tuition for students to attend better or safer schools.
For further information, please see
www.mackinac.org/3541,
www.mackinac.org/3662, and
www.mackinac.org/S1997-04.
38. Preserve and strengthen Proposal A and school choice through "Proposal
A+."
When Michigan voters overwhelmingly approved the school finance constitutional
amendment known as Proposal A in 1994, they thought they were going to get
several important things: a sales tax hike in exchange for significant property
tax relief, less disparity in spending among school districts, and substantially
more per-pupil funding.
The plan has delivered on those promises, but there's a rising chorus for giving
school districts renewed authority to seek higher local property taxes. For
schools that need extra money and can make a good case for it, there's a much
better way than undoing what the voters endorsed seven years ago: It's a plan
known as "Proposal A+."
First, it's important to take account of just how much Proposal A has
accomplished for Michigan. Prior to 1994, Michigan's property tax burden was 35
percent above the national average and driving residents and businesses
elsewhere.28 Today, that burden is much closer to the national average and one
of the reasons for the state's impressive economic progress of recent years.
Proposal A has been good news for schools, too. Since 1994, the minimum
per-pupil foundation allowance that school districts are guaranteed by the state
has risen almost 43 percent, two-and-a-half times the inflation rate. In
1993-94, the 10 lowest-spending districts spent $3,476 per pupil while the top
10 spent $9,726. Today, the lowest 10 spend almost twice as much-$6,500-and the
highest 10 spend $11,189.29 According to the National Education Association,
Michigan outspends 43 other states per pupil.
Nonetheless, if there are schools that can't or don't want to effect cost
savings to improve their bottom lines and can make a convincing case that they
need more money to do their job, they could do so under Proposal A+. This is not
another tax hike opportunity. Rather, it's a chance to encourage greater
financial support on a voluntary basis for all schools, public and private, at
the same time.
The proposal was first presented publicly in the Dec. 7, 2001 issue of The
Detroit News, in a commentary jointly authored by Congressman Peter Hoekstra and
Mackinac Center President Lawrence Reed. It would amend the Michigan
Constitution to allow a "universal" tax credit for educational expenses and for
contributions to scholarship funds. The credit could be claimed by parents,
friends, family members and even businesses against such levies as the state's
personal income tax, 6-mill statewide property tax and the Single Business Tax.
The maximum credit need not be high. Arizona's $500 tax credit has generated
tens of millions of dollars in scholarship funds for students from low-income
families, and millions more for use in the public schools.
The Proposal A+ plan would apply toward contributions to public as well as
private schools. It would mean that government schools would not have to mount
expensive and uncertain ballot efforts to get voter approval for a tax increase.
If they made their case persuasively, they could entice individuals and
businesses to make voluntary contributions. Up to the maximum credit allowed,
those contributions would not cost the donor a penny, and nobody's taxes would
increase as a result.
By allowing even a small tax credit for private education, Proposal A+ would
strengthen local influence in the financial investment in Michigan children's
education. Parents who choose private options, particularly low-income parents
in inner cities, are often securing excellent educations for their children at a
savings to the taxpayer and at great sacrifice of their own resources. They
deserve a break. Parents who want to help their local public schools also will
have the opportunity to do so.
Proposal A+ is not a voucher. Voters spoke convincingly and finally on that
question in defeating a voucher plan in November 2000. The much more palatable
and familiar vehicle of a tax credit would encourage contributions to schools,
public and private, that make the best case that their fellow citizens should do
more to support education.
39. Schedule all school elections with general elections in November.
In the interest of greater public participation in the democratic process and
reducing onerous costs, all school-related issues that need voter approval
should be decided in the general election cycle that occurs each November.
Currently, Michigan school districts can call an election every six months. A
vote might be in February one year and June the next. Polling places for these
elections are often sites other than those used in general elections, and
citizens are confused even more when some districts have elections on days other
than the customary Tuesday.
By requiring that school governance and finance issues appear on the November
ballot, significantly more citizens will know the place and time of the election
and will exercise their right to decide how their schools will be run. Ballot
consolidation would also relieve school officials of the responsibility for
conducting elections and allow them instead to focus that time and money on
their primary responsibility educating children.
40. Exempt innovative schools and school districts from the requirements
of onerous state statutes and regulations.
Public policy should encourage teachers and administrators to recognize the
diversity of students and provide the array of educational programs that will
better address the varied ways children learn. These alternative education
programs, known as "schools within schools" and pioneered by New York City's
District 4, have demonstrated significant success.
If significant numbers of parents and teachers want to implement alternative
programs, the state superintendent of public instruction should be authorized to
exempt a school or district from state requirements that inhibit innovation and
to guarantee that freedom as long as educational progress is demonstrated.
Parents within the district wishing to enroll their child in a traditional
school or an alternative school should be free to do so.
Alternative schools should be free to adopt specific, written admission
standards. Standards may include, but need not be limited to
consideration of the capacity of a program, class, grade level, or school building;
student academic ability;
student behavior; or
an advance requirement of parental participation
41. Replace Michigan's public school "count day" with an average daily
membership calculation.
Michigan should discontinue using a student count day to determine school
population and adopt an average daily membership (ADM) method for determining
the number of students attending a school on a daily basis. An ADM method would
take school attendance numbers over time and calculate the average number of
students attending school each day.
Currently, each district's pupil count is a blend of two count days. The
blend is comprised of 20 percent of the count taken on a day in February of the
prior school year and 80 percent of the count on a day in September of the
current school year.
States that use an ADM method of accounting for student attendance ensure that
schools are fairly compensated for students they actually teach. Schools with an
increase in attendance receive an increase in funding. Conversely, schools with
dips in attendance realize dips in funding. Schools are paid only for the days
that students attend school.
Not only would the ADM method of accounting for student attendance save the
state money, it also would encourage attendance. Determining a school's funding
amount based on average daily attendance would reward schools with consistently
low truancy rates. With just two count days, schools have been known to
artificially inflate their numbers by having pizza parties or using other
gimmicks on count days to bring in students not in attendance on a regular
basis. Additionally, students at their desks would truly represent funding for
school districts, encouraging schools to treat parents and students more like
valued customers.
42. Give schools "real-time" funding for their per-pupil portion of state
aid.
Currently, the state per-pupil grant, which is the bulk of public school
district funding, is paid annually. The remaining state aid is paid in eleven
equal portions on the 20th of every month, except for September. The per-pupil
grant should also be in monthly installments based on the "average daily
membership" count (see recommendation 41, above) for the previous month. Current
law presumes that attendance will remain constant for the entire year. But a
number of factors, such as immigration (immigrant workers' children) or
transfers from charter, public, or private schools, affect schools' population.
With "real-time" funding, schools would be able to accurately forecast the
amount of money that they will receive without the delay in funding. The dollars
would follow the student, and schools faced with sudden increases in students
are assured a fair share of educational funding. Additionally, school districts
would be forced to manage their funding on a cash flow basis based on student
attendance, much like other service providers (restaurants, hospitals, etc.).
43. Exempt public schools from the Prevailing Wage Act.
Earlier in this document, Michigan's Prevailing Wage Act was explained as
special-interest legislation designed to benefit organized labor at the expense
of anyone in the state who receives state tax dollars for a construction
project. The act, in effect, requires the payment of union-scale wages and tends
to lock out the majority of Michigan construction workers and firms that are
open (or "merit") shops. The act should be repealed in its entirety.
However, legislators who are unwilling to go the full measure should at least
provide relief to the state's public schools by exempting them from compliance
with the Prevailing Wage Act. Within the first five years, such an exemption
could save Michigan schools millions of dollars in unnecessary construction
costs-money that could be better used in the classroom. Legislators who oppose
such an exemption have no right to decry a shortage of funds for public
education.
During the time the Michigan Prevailing Wage Act was not in effect-from December
1994 to June 1997-Michigan schools enjoyed 30 months of substantial savings. The
Hastings School District in Barry County, for example, was able to take
advantage of a nonunion bid for a $4.3 million construction project and saved 13
percent.30
The Ohio Legislature in 1997 exempted schools from that state's prevailing wage
law-saving schools an average of 10.5 percent in construction costs, according
to the nonpartisan Ohio Legislative Budget Office. If Michigan were to follow
Ohio's lead, our schools would save at least $150 million annually-a figure that
represents 10 percent of average annual school construction costs and which is
equivalent to $90 for every student in the state.
For further information, please see
www.mackinac.org/3844.
44. Strengthen the powers and responsibilities of local school boards.
Michigan public school boards should be encouraged by the Legislature, the
governor and his or her administration, and the State Board of Education to
remove exclusive representation clauses that require union permission before employees can explore opportunities with other professional organizations;
negotiate compulsory support clauses out of their collective bargaining agreements to maximize the rights and freedoms of individual public school employees;
advise their employees of their rights under U.S. Supreme Court rulings regarding union dues for noncollective bargaining purposes;
remove seniority-based salary schedules from their collective bargaining agreements and institute performance-based pay scales that reward outstanding teachers and attract the best people to the job of educating tomorrow's leaders;
competitively bid for teacher and support personnel health care packages to ensure the best benefits at the lowest cost; and
competitively bid for noninstructional service providers. Privatization of transportation, food service, building maintenance, and janitorial services allows for cost savings on these budget items. Privatization also allows for a reduction in the amount of oversight of these services by administrators and an increased focus on classroom instruction.
These and many other suggestions for improving schools through changes in
school board collective bargaining policy are explained in the Mackinac Center
for Public Policy study, "Collective Bargaining: Bringing Education to the
Table."
For further information, see
www.mackinac.org/791.
45. Encourage innovative programs to enhance accountability in education.
Public school districts and private schools should shoulder at least some of
the financial burden of addressing the lack of basic skills among their
graduates. At least one school district has proposed some sort of "money-back
guarantee" for high school diplomas. In other words, if high school graduates
are unable to demonstrate mastery of basic skills, schools would have to pay for
at least some of the cost of remedial education for those students. This
financial responsibility would provide a further incentive to schools to ensure
that their graduates were minimally competent.
In September 2000, the Mackinac Center for Public Policy released a pioneering
study entitled, "The Cost of Remedial Education: How Much Michigan Pays When
Students Fail to Learn Basic Skills," by Dr. Jay P. Greene. (The study is
accessible on the Internet at
www.mackinac.org/3025.) It showed that the annual cost to the state's
businesses and universities of the failure of Michigan students to acquire basic
skills in high schools is $601 million per year. One of the study's
recommendations was for schools to provide a "money-back guarantee." As it turns
out, there is at least one public school district in Michigan that has been
doing that successfully for several years: Rockford Public Schools, near Grand
Rapids. It's a model that ought to be encouraged all across the state. For more
information, read a commentary by the Rockford Public Schools Superintendent
Mike Shibler on the Internet at
www.mackinac.org/3179.
46. Enact "Freedom School" legislation.
As first proposed in 1993 by Mackinac Center Senior Policy Analyst Dr. Gary
Wolfram, the "Freedom Schools" plan would introduce reforms to the public school
system that would help all children receive a quality education.
Here is how the plan would work. A supermajority of the parents of a school,
perhaps two-thirds, or a supermajority of the teachers in a school, perhaps
three-fourths, would have the ability to declare the school a "Freedom School."
This would set the school free from the current system and free from the school
district. The per-pupil school operating funds would then go directly to the
school rather than to the district headquarters. The school would be able to
operate independently of the district, setting its own curriculum, uniform
policy, personnel policy, etc. However, no child would be assigned to the school
(it would truly be a "choice" school), and thus the school would have to provide
an education that is better than the alternatives in order to retain and/or
attract students.
The parents would elect a board to operate as the governing body of the school.
This would not require parents to run the day-to-day operations of the school.
There are several good management firms that operate public schools in Michigan.
To argue that parents are not capable of electing a board or running for the
board of a Freedom School is a red herring. According to Dr. Wolfram, in 1920
one in 15 adults in Michigan was on a local school board, and it's widely
acknowledged that they delivered high-quality education-in some respects, much
higher than we do today.
The building would remain the property of the school district. However, the
district would be required to rent the building at fair-market value to the
Freedom School. There are methods to set a fair-market value, such as an
appraisal of an assessor agreed to by both parties. Maintenance of the building
would be determined in the rental agreement.
Some have argued that poorly performing schools lack parental support, and thus
Freedom Schools would not arise in Michigan's poorest performing districts. This
theory could be tested by allowing Freedom Schools in the poorest performing
districts. One reason parental participation is low in districts such as Detroit
is the enormous size of the district and the inability of parents to truly
affect outcomes. Freedom Schools would provide this opportunity, and the
skeptics would be astonished at the interest of parents in their children's
education once the parents are given greater control.
47. Reform higher education.
The state universities of Michigan, like many of their counterparts across the
nation, are suffering from a general erosion of academic standards and a
politicization of the undergraduate curriculum. The traditional core curriculum
that once guaranteed that all graduating students shared in the same body of
knowledge and enjoyed the same competence in cognitive skills is in tatters. An
in-depth analysis of the undergraduate curriculum and recommendations for reform
are discussed in the Mackinac Center for Public Policy report, "Declining
Standards at Michigan Public Universities."
As proposed in that 1997 report, tenure rules on Michigan's campuses should be
changed to encourage teaching excellence. Alternative accreditation of English
departments, writing programs, and other humanities departments and programs
should be instituted. Teachers-in-training should take far fewer courses in the
education departments and schools of education and far more substantial courses
in subject areas. The rules and regulations against political indoctrination in
the classroom should be vigilantly observed and rigorously enforced. An
all-campus undergraduate core curriculum should be established so that all
students in state universities will undergo the essential core training and gain
exposure to common, high-level material in the arts and sciences.
To preserve the autonomy of the state's universities, the Mackinac Center
recommends that the Legislature not attempt to meddle directly by legislation in
the curricular and personnel affairs of those universities. To advance a
serious, statewide discussion of these and other reforms recommended in the
report, the Mackinac Center calls on the governor to appoint a special
commission for the purpose of reviewing those recommendations and examining
university issues such as curriculum and tenure.
For further information, please see
www.mackinac.org/236.
For most of Michigan's history, economic development was thought of as
what happened when people pursued their own productive enterprises, free of
undue interference from government. The principles of free markets-"a fair field
and no favor"-were the main guideposts for Michiganians. As a result, many jobs
were created-more of them and at higher wages than anywhere else-when
profit-seeking entrepreneurs rushed to meet the public's demands and government
encouraged a safe and stable environment in which to do business.
Today, however, economic development often means "industrial policy," a
euphemism for state government picking winners and losers; doling out subsidies;
and engaging in wealth redistribution and corporate welfare. As a result, many
government bureaucracies are loudly but falsely claiming credit for "creating"
jobs. It is time for the Legislature to address economic development with a
critical eye and the proper analytical tools.
When Gov. Engler took office in 1991, Michigan's overall tax burden was well
above the national average. Total state and local tax revenues as a share of
personal income were 10.9 percent. By 1995, the Senate Fiscal Agency reported
that the percentage had fallen to 10.3 percent. By the end of the decade, the
tax burden was back up to 10.7 percent of personal income. In Fiscal Year 2000
it was 10.8 percent. Michigan must reduce its overall tax burden, particularly
in light of the need to stay competitive with other states that are also cutting
taxes. According to the Tax Foundation, a Washington, D.C.-based nonprofit
organization, Michigan ranks 16th in per capita state and local tax burden as a
percentage of income, which means that 34 states have a lesser burden than does
Michigan. The following recommendations will help ensure Michigan's economic
prosperity.
48. Scale back the Michigan Economic Development Corporation.
The Michigan Economic Development Corporation (formerly the Michigan Jobs
Commission) is the state's department of corporate welfare, taking in hundreds
of millions in federal and state tax dollars and doling out tens of millions of
dollars in subsidies and other favors to select businesses. The Legislature
should examine this agency's budget and ask to what extent its programs merely
redistribute jobs to the politically well connected while causing many other
businesses to incur the costs of retraining and rehiring in tight labor markets.
Many of the MEDC's activities appear disturbingly similar to the failed
gimmickry of previous administrations. The Legislature should recognize that
corporate welfare and "industrial policy" are no less objectionable when
Republicans practice them than when Democrats do. The best policy for the state
to follow is to excise all those programs of the MEDC that amount to corporate
welfare, leaving any necessary or mandated functions to be managed by either a
streamlined MEDC or other departments of state government.
State government should pursue economic development by improving core government
services such as transportation, reforming education, cutting taxes and
bureaucracy, and implementing needed labor reforms. This was the broad-based
approach advocated and practiced by Gov. Engler in his first term but which has
since been joined by the dubious programs of the MEDC. Indeed, the MEDC has
brazenly declared in its own publications that its primary activity in 2002 will
be working to preserve its own continuance into the next administration.31
It also should be noted that when the MEDC subsidizes some firms, it usually
hurts other firms. Consider the case of Boar's Head Provision Company-a meat
products company headquartered in Brooklyn, N.Y. In exchange for the company's
promise to invest $14 million and create 450 new jobs in Michigan over three
years, the MEDC arranged in 1998 to give Boar's Head an "economic development
package" worth up to $5.1 million in federal, state, and local resources. It
included up to $3 million for equipment leasing, an abatement of the 6-mill
state education tax of up to $212,590, and as much as $1,000 per worker for
training. Armed with these "incentives," the company opened a processing plant
near Holland, Mich., on Dec. 13, 1999. What the MEDC's press releases never
revealed was the impact of the deal on other Michigan businesses, such as Koegel
Meats Inc., in Flint.
Like Boar's Head, Koegel makes meat products. A Michigan-based family business
for three generations, it produces an extensive line of cold cuts and the
popular "Koegel's Vienna Frankfurters" that get grilled by the millions in
Michigan backyards every summer. Its meat products still use recipes devised by
Albert Koegel when he emigrated from Germany to Michigan and started the company
in 1916. The firm sells 99 percent of its product in Michigan and employs about
100 people at its Flint facility. For all of its 86 years, Koegel Meats always
has paid its taxes while never receiving government favors or taxpayer dollars
in the form of abatements or subsidies. The company always has trained employees
with its own funds. In fact, when the company was once offered federal money for
job training, Al Koegel turned it down because he did not want the hassle of red
tape and paperwork.32
It is patently unfair to extract tax dollars from Koegel and use them to benefit
an out-of-state competitor such as Boar's Head. Unfortunately, this sort of
situation is part and parcel of the MEDC's mission-a mission that needs to be
dramatically revised or ended.
For further information, please see
www.mackinac.org/2670,
www.mackinac.org/4053, and
www.mackinac.org/718.
49. End self-aggrandizing advertisements.
One specific area the Legislature could examine is the MEDC's advertising to
celebrate its own self-importance. In late 2001, the agency released a brochure
of its "2002 Corporate Objectives" in which it listed "Ensure the Continuity of
the MEDC" as its No. 1 objective. In other words, the bureaucrats at Michigan's
department of jobs have made protecting their own jobs their top priority
in 2002.33
The MEDC also is running a series of self-aggrandizing radio advertisements
through the 2001-02 fiscal year, which ends on Oct. 31, 2002, just days before
the next election. The timing of this ad run may not be a coincidence, since
Michigan voters will choose a new governor in the election, and that governor
may not be as favorably disposed toward the MEDC as Gov. Engler has been.
The MEDC is spending $850,000 to produce and run the ads, which all underscore
the importance of the MEDC in general, or what it has meant to specific
entrepreneurs.34 Of the 16 ads that the Mackinac Center for Public Policy has
obtained through the Freedom of Information Act, all contain the following
introductory and concluding remarks:
"The Michigan Economic Update is presented by the Michigan Economic Development Corporation, the No. 1 driving force behind business growth in Michigan"35 (emphasis added).
Implicit in this astounding claim is the MEDC's apparent belief that the
thousands of Michigan entrepreneurs who risk their own money bringing products
to market, who meet payroll, navigate state-mandated regulatory mazes, and pay
taxes to support bureaucracies such as the MEDC itself are a secondary force in
Michigan business development. This is an unrealistic, if not insulting, view of
how a modern market economy works.
Each MEDC advertisement also concludes with the statement:
"The Michigan Economic Development Corporation is in the business of helping businesses grow and succeed. They can give your business an edge, provide you with expert help on workforce training, recruiting skilled workers and corporate tax strategies. The experienced staff at the Michigan Economic Development Corporation can help you cut through red tape that can save time and money. Plus, their services are free"36 (emphasis added).
The MEDC's activities are far from free. Since fiscal year 1999-2000 the MEDC
has received more than $244 million in General Fund/General Purpose dollars-tax
money extracted from Michigan citizens.37 The General Fund is the money in the
Michigan budget over which elected politicians have the most discretion. And
this figure does not include the money that is received by the MEDC from the
federal government and other sources.
It is unseemly when government agencies promote themselves with lavish media
buys, but particularly so when the agency is of such dubious worth as the MEDC
and at a time when an economic downturn demands that government tighten its
belt.
50. End duplicative state Internet job bulletin boards.
The MEDC's counterproductive work goes beyond just handing out favors to
particular businesses. Sometimes, it competes directly against private firms
and, in one particularly notable case, even against another state agency.
Consider two highly similar programs-one operated by the MEDC and the other by
the Michigan Department of Career Development (MDCD). The MEDC sponsors a web
site called "Michigan Careersite" while the MDCD operates one known as the
"Michigan Talent Bank." They each carry out the same function-bringing job
seekers and job providers together-and compete not just with each other, but
also with hundreds of private, Michigan-based job recruitment companies.38
Why does the state run these redundant sites? According to the MEDC, Michigan
Careersite was created to help attract "skilled workers in Information
Technology, Life Sciences, and Advanced Manufacturing." The MDCD says its
Michigan Talent Bank is intended to "bring employers and employees together,"
but it does not exclude skilled workers from any field, so the two sites end up
performing overlapping duties. In addition, an MEDC brochure about Michigan
Careersite brags about its ability to "grab" jobs posted on Michigan's Talent
Bank and move them to its own.39
Reading the brochure, one gets the sense that even MEDC officials know they
should not be in the job board business. It reads, "The world does not need
another job board. We know. Internet job boards are one of the great advances in
modern recruitment, but their popularity and abundance have reduced human
resource staff productivity nationwide. The MEDC is partnering with
Michigan-based Careersite.com to fix this problem."40
Private recruitment companies have long helped employers find qualified workers
to fill jobs. During the 1990s, Michigan alone saw 348 new "human resource"
firms spring up to fill this role. Michigan also is home to many privately run
labor exchange web sites, such as Careermatrix.com. Its founder, Dennis Hoyle,
is not thrilled with the state's involvement in his business. "It really is
irksome to see the state using our tax dollars to compete against us," he said.
"Moreover, it's bizarre watching the agencies competing against each other.
There really isn't much difference between the two sites."41
Additionally, a number of general web sites in the state, such as Mlive.com,
operate labor exchanges, and many newspapers post their want ads online. There
are over 6,000 web sites specifically dedicated to job recruitment nationwide,
and most of these private organizations do their work without costing the
taxpayer a cent. Meanwhile, the MEDC is spending about $500,000 to operate
Michigan Careersite for its first two years. The MDCD does not know what it
costs to operate the Michigan Talent Bank.42
Another irony is the MEDC's mission to recruit workers from outside Michigan.
According to the agency, it is "saturating the cities of Chicago, Indianapolis,
Cincinnati and Columbus" with $5 million in advertisements to tell workers about
Michigan job opportunities. At the same time, the MEDC is enriching Career Site
Corp., which it hired to help run Michigan Careersite. Career Site Corp. also
operates Careersite.com, a national labor exchange site that can help Michigan
workers find jobs outside the state.43
51. Abolish the Michigan Economic Growth Authority (MEGA).
An important element of the MEDC's business retention and attraction efforts is
MEGA, a program of selective tax abatements for firms that promise to create or
retain a certain number of jobs in Michigan. It is the essence of the government
strategy for "picking winners and losers" that economists regard as
counterproductive to genuine, lasting, market-directed development. During the
past few years, Michigan labor markets were the tightest they have been in three
decades. It hardly seems necessary for the state to be playing this game even if
government were capable of knowing which firms are deserving and which are not.
Yet Michigan has an entire state bureaucracy that is organized around the
mistaken idea that government economic planners can figure out which endeavors
in the marketplace will be winning investments and which will not. Decades ago,
Austrian economist Ludwig von Mises and his Nobel Prize-winning student
Friedrich Hayek argued forcefully that such predicting is fraught with
complications and limitations. It simply isn't possible to predict the
ever-changing preferences of consumers, or the impact of innovation, competition
and technology in a vibrant, healthy economy.
Take, for example, MEGA's pick of Webvan Group Inc. of Foster City, Calif. An
online grocery retailer, Webvan was offered $23.4 million in tax credits by MEGA
on Dec. 21, 1999, to build one of its 26 distribution centers in Michigan. The
company's stock finished that week at $18.38 per share.44
Webvan was supposed to be a big winner. Doug Rothwell, MEDC president, told Site
Selection magazine in May 2000 that "Detroit was picked by one of the
best-financed retailers on the market for the next wave of e-retailing." State
officials heralded the Webvan-MEGA deal as wise policy and a win for Michigan.
But the marketplace rendered a very different verdict.
Webvan's stock began a steady descent almost immediately following the MEGA
agreement, reaching $0.47 per share on Dec. 15, 2000. The company withdrew its
promise to build a distribution center in Michigan, forfeiting the MEGA tax
credits. (see Chart 10). Webvan stock
proceeded to lose 100 percent of its value with the company declaring bankruptcy
in July 2001.45
Why did state officials fail to predict Webvan's difficulties? MEGA regularly
issues reports purporting to forecast exactly how many jobs will be created by
its tax credits, even 20 years into the future. The answer is simple: Hayek's
knowledge problem again. Entrepreneurs putting their own money on the line have
more reason to forecast correctly than anyone, yet even they fail much of the
time. For government planners spending taxpayers' money, this sort of economic
prediction is infeasible to say the least.46
Maintaining a government department that hands out special favors to certain
businesses and not to others is not only unfair, it may also hurt economic
growth. Harold Brumm, an economist with the General Accounting Office in
Washington, D.C., says companies devote substantial resources to securing
government favors, and that this has a "relatively large negative effect on the
rate of state economic growth." In other words, without discriminatory
favors and especially with more broad-based tax and regulatory relief,
Michigan's economy might be doing better than it is.47
MEGA also is unfair to existing businesses that must compete with the firms
favored by MEGA abatements. As of Dec. 31, 2001, MEGA has awarded more than $1
billion in tax credit opportunities to 137 projects.48 The majority of MEGA
recipients must show that they have created a net number of new jobs to receive
these credits against their Single Business Tax liabilities. But there is no way
to prove that these jobs would not have been created anyway. See Chart 9. In addition, the
MEGA program makes it harder to cut taxes across the board-cuts that would
encourage the creation of many thousands of jobs in their own right.
Unfortunately, most MEGA recipients also receive many other government favors
along with their credits: job training subsidies, property tax abatements, the
elimination of fees for building permits, and on at least one occasion, free
municipal recreation passes for employees of the expanding firm.
For further information, please see
www.mackinac.org/718.
52. Sustain the phased-in reductions in the state's income tax and Single
Business Tax.
In 1999, Gov. Engler proposed, and the Legislature subsequently enacted, a
phased-in reduction of the state's flat 4.4 percent personal income tax rate to
3.9 percent over five years. The Single Business Tax (SBT) was put on a 23-year
path to extinction by another law passed that same year. Broad-based reductions
in personal income tax rates and Michigan's particularly onerous SBT burden on
businesses will do far more for Michigan's economic development than selective
abatements or subsidies.
The complicated SBT is especially harmful to businesses. It's the only
comprehensive, statewide, value-added tax imposed by any state, and businesses
pay it whether they earn a profit or not. If Michigan had a standard corporate
income tax, the rate necessary to raise the revenue brought in by the SBT would
have to be in the vicinity of 15 percent-far higher than the corporate income
tax rates of all but perhaps two states. That ought to tell us what businesses
here have been saying for years, namely, that the SBT is a job-killer.
In 1998, calculations of the Senate Fiscal Agency prompted The Detroit News to
editorialize that "Michigan's state and local taxes as a share of average state
personal income are moving back up to levels not seen since before John Engler
took office in 1991." At that time, combined state and local taxes amounted to
10.9 percent of personal income. They fell to 10.3 percent by 1995 but had edged
back up to 10.7 percent by the end of 1997. Michigan workers need and deserve a
tax cut. As pointed out earlier in this document, the Tax Foundation has shown
that Michigan's overall tax burden is still above the national average.
With the current recession crimping state revenues, many are calling for
delaying or canceling the scheduled reductions in the personal income tax and
Single Business Tax. When he unveiled his 2003 budget proposals in February
2002, Gov. Engler wisely endorsed retaining those cuts. That's the course on
which Michigan must remain.
For further information, please see
www.mackinac.org/3821.
53. Lower the cost of home ownership.
The state's real estate transfer tax stands at $3.75 per $500 of total home
value at the time of purchase. To encourage home ownership, that rate should be
cut to $2.50 or lower, as soon as possible.
54. Help businesses create jobs by lowering payroll taxes.
Michigan's unemployment insurance payroll tax base-currently at $9,500 of an
employee's earnings-should be restored for at least one year to the federal
level of taxable wage base, which is $7,000. This would have no direct impact on
state revenues because employers pay this tax into a separate fund, which
presently is in surplus. Mirroring the federal wage base for one year would help
cut the overall tax burden on all Michigan businesses.
55. Eliminate the double sales taxation of automobiles.
The 1994 hike in Michigan's sales tax from 4 cents to 6 cents on the dollar
exacerbated at least one inherent flaw in the way the sales tax is imposed: the
double taxation on automobiles, a major Michigan product on which tens of
thousands of jobs depend.
When someone in Michigan buys a car, he pays sales tax on the purchase price.
When he later trades in the car, he pays sales tax not only on a new vehicle but
also on the trade-in value of the old vehicle. That amounts to double taxation
because the individual already paid sales tax on the full value of that vehicle
at the time of its purchase. The Legislature should end this inherently unfair
practice.
56. Extend personal property tax relief.
In July 1998, the Legislature passed a bill that permits a handful of distressed
municipalities to offer personal property tax breaks of up to 100 percent on the
installation of new equipment by companies that relocate within Michigan. While
tax reduction is laudable, this extremely selective approach is unfair to
existing businesses that pay full freight and must compete with newcomers that
get a substantial break. The Mackinac Center agrees with the MEDC that cutting
the onerous personal property tax "is necessary to reduce unemployment, promote
economic growth, and increase capital investment in the state," but a broader
and more comprehensive reduction of the tax would be much more fruitful.
Generating about $1.7 billion statewide, the personal property tax in Michigan
is an important source of revenue for many local units of government (which
retain about one-third the total, leaving two-thirds to assist public
education). However, it is also a detriment to economic development. Other
industrial states against which Michigan competes, such as Pennsylvania,
Illinois, and New York, have eliminated their personal property taxes
altogether. Michigan must move in that direction to stay competitive.
The Legislature should enact legislation that would allow all local units of
government, not just the 50 or so covered in the July 1998 law, to eliminate or
phase down their personal property taxes.
57. Critically review unfair state government and university competition with
the private sector.
In a number of areas, Lansing is competing head-on with private enterprise and
doing so unfairly. In the past, this has involved such things as sales of
computers, floral supplies, and recreational time (e.g., use of tennis courts)
by the universities, and in other cases it involves more direct state agency
intrusions. The Legislature should direct a comprehensive review of all those
state government activities that compete with the taxpaying private sector,
determine which are legitimate and appropriate, and jettison the rest.
58. Critically review state-mandated health benefits.
State-mandated health benefits have exploded across America in the past 30
years. They range from government-required coverage for drug and alcohol abuse
treatment in most states to coverage for hair transplants in Minnesota and
pastoral counseling in Vermont. The National Center for Policy Analysis
estimates that approximately one-quarter of all citizens without health
insurance lack this important protection because the cost of state mandates has
priced them out of the health insurance market (see
Table 2).
Consumers in the medical insurance marketplace should be free to pick the benefits that best suit their particular needs and desires. The Legislature should review all state-mandated health benefits and consider abolishing at least some and lowering the required dollar amount of coverage on others. The Legislature should refrain from adding new mandates, especially those whose costs outweigh their benefits. Following this recommended course will result in more Michiganians being insured and lower costs for Michigan businesses and health plans.
59. Expand the scope of privatization.
Michigan has engaged in significant privatization of state and local government
duties in the past decade. In many cases, the process was well thought-out and
the result was better service at lower costs. In a few cases, the process was
hasty or ill-conceived and the results were poor.
The promise that privatization holds when it is the product of careful
consideration is as great as ever. Indeed, because of its many successes,
privatization is a megatrend across America, including at the local level of
government in Michigan. The Legislature and the governor should renew their
commitment to exploring this option across a broad array of state activities.
One area that cries out for privatization is corrections-a fast-growing sector
of state and local governments. Michigan lags behind more than two dozen other
states whose experience with contracting for private operation and management of
prisons and county jails is extensive and largely successful. Private management
of the state's new juvenile facility in west Michigan is a promising start, and
the state should follow this up with a more vigorous approach to cutting its
horrendous corrections costs through privatization of other facilities.
Moreover, the Legislature should clear the books of all impediments that deny
counties the option to privatize jail management.
Another area of privatization that Michigan can take action on involves Social
Security. In May 1997, the Oregon Legislature passed a resolution urging
Congress to grant waivers to let states opt out of the federal Social Security
system and design their own retirement plans for both private-sector and
government employees. Since then, Colorado has adopted a similar resolution and
at least six other states are considering one. Many economists now believe that
the only way to save Social Security before it goes bankrupt early in the 21st
century without crippling tax hikes or substantial benefit reductions is to
privatize it. Nations such as Chile have already shown that allowing individuals
the freedom to invest their own retirement funds is a viable alternative to our
present system, and one that can provide far greater payouts to retirees.
Accordingly, a Mackinac Center for Public Policy report entitled "Saving
Retirement in Michigan" urges the Michigan Legislature to adopt a resolution
that asks Congress to either
partially privatize the existing Social Security program by allowing workers to shift all or part of their current retirement payroll taxes into privately owned and managed accounts; or
grant the state of Michigan a waiver to opt out of the federal Social Security system and design a more beneficial retirement plan for its citizens.
60. Encourage Detroit to privatize to avoid fiscal disaster.
Through legislation, appropriation, and the bully pulpit, Lansing policy-makers
have the ability to prod Michigan's largest city to streamline its operations,
improve services, and become less dependent upon state assistance. The
inauguration of a new mayor this year brings new hope for the beleaguered
metropolis, and the state should help see to it that hope gives way to real
policy change. The clock is ticking and the time is short for Detroit to do what
needs to be done. Consider these facts below. The city of Detroit
has lost 7.5 percent of its population since 1990, a sign that life in the city is not as appealing as alternatives;
is so far in debt that it owes $1,073 for every man, woman, and child in its environs;
owes an additional $2,600 per capita in unfunded health-care liabilities (the cost of funding this liability rose by 13.6 percent in just one year, from 1999 to 2000);
will have to spend billions of dollars in the next several years to comply with new federal water and sewer mandates; and
has such poor fire department services that it lost approximately $177 million worth of residential property in 2000 alone, an amount equal to 75 percent of the value of residential structures built during the entire decade of the 1990s.
What to tackle first to begin saving money and fixing city services? Here are
a few suggestions:
Cobo Conference and Exhibition Center: Since 1980, Cobo has cost the city
of Detroit an average of $9.1 million per year to maintain. That comes to $182
million in 20 years. Cobo should be entrusted to the private sector, a move that
could earn the city a one-time sales payment of at least $50 million and
generate another $1.9 million in property taxes annually. At a minimum, Detroit
should contract with a private firm to manage the facility for less cost, as
cities including Riverside, Calif., and Denver, Colo., have successfully done
with their convention centers.
Department of Public Works: Duties performed by this department could be
outsourced in whole or in part. Shaving just 20 percent from the cost of running
Detroit's DPW would save Detroit residents more than $28 million annually. In
fact, Detroit already knows the kind of savings it can realize in this way: In
1998, the DPW privatized oil changes for police vehicles. Savings figures
haven't been announced, but the Mackinac Center calculates that if all 500
police cars get their oil changed 10 times yearly with a private vendor, the
cost would come to roughly $165,000. That's an astounding 83.5 percent drop in
the cost the city previously incurred to perform this operation.
Belle Isle: How long will Detroiters permit their crown jewel to be
neglected by poor city services? The city should hand over the entire 985-acre
island park to a nonprofit corporation, just as was done successfully with the
Detroit Institute of Arts. Some mayoral candidates have, to their credit,
considered this "nonprofitization" idea, which could relieve the city of its
annual Belle Isle appropriation, the latest of which topped $5.5 million.
People Mover: The most recent subsidy for this sparsely used
transportation service was $11.4 million, a substantial sum that could be better
directed to other needs if Detroit simply unplugged this boondoggle.
Public Lighting: There is no reason for the city to run its own power
plant. Investor-owned utilities are more than capable of serving Detroit's
needs, and for less. Utilities usually sell for 1.5 to 2.5 times their equity
(that is, assets minus liabilities). If this were the case for Detroit's power
company, a sale could fetch millions and relieve Detroit of management
headaches, including appropriation of an annual subsidy, which is expected to
top $10 million in the 2001-02 fiscal year.
Detroit is full of talented and caring people who want to trim the
suffocating municipal bureaucracy so they can unleash their creative
entrepreneurial powers to build better lives for themselves, their families, and
their communities. Citizens all over the state understand that Michigan's
overall prosperity can be greatly strengthened by making Detroit a world-class
city once again. The Legislature should focus its attention on getting that job
done, not through greater subsidies that only insulate the city from its
leaders' poor policies, but by encouraging new directions that emphasize
privatization and modernization.
For further information, please see
www.mackinac.org/3148.
61. Pursue regulatory reform and include sunset provisions in new
regulations.
More than 2,000 rules and regulations within state government-rules and
regulations imposed upon the private sector-have been abolished under the Engler
administration. The Mackinac Center recommends continued progress in this
direction through the careful scrutiny of all existing regulations and requiring
whenever possible that all new state regulations be subject to automatic
"sunset" after two years to allow for a meaningful assessment of their real-life
costs and benefits.
62. Continue welfare reform with a strong emphasis on work incentives.
In Michigan last year, welfare caseloads hit a 27-year low with the number of
people on welfare falling below 100,000. While caseloads in the nation as a
whole plunged 39 percent from 1993 to 1998, Michigan's plummeted 49 percent. A
greater-than-ever percentage of Michigan welfare recipients is working at least
part-time, though achieving that has been expensive. Midland County, for
instance, received almost one half-million dollars from the state for child care
and a bus system intended to increase the incentives for work. The Michigan
Economic Development Corporation has even spent thousands of dollars to pay old
traffic tickets for welfare recipients.
One important lesson from the many reforms in Wisconsin, Michigan, and elsewhere
is that programs emphasizing work placement over training are having better
results. The problem is that too few reform initiatives place finding a job as
the highest priority, or they do not do enough to discourage the bad behavior
and costly lifestyles that keep people in the welfare quagmire.
Michigan should continue its generally positive path to welfare reform by
encouraging reforms at both state and local levels that set time limits, promote
marriage, and responsibility, require drug testing, impose tough work
requirements, establish a "family cap" to discourage recipients from having
additional children while on welfare, target benefits to those most in need, and
encourage efficiency and privatization.
63. Reduce state spending.
In fiscal year 1990, actual state spending from state sources (excluding federal
revenue) was $12.8 billion.49 K-12 school aid was $2.99 billion.50 Excluding
school aid, the bottom line was $9.95 billion.
In fiscal year 2000, state spending from state sources (excluding federal
revenue) was $23.4 billion.51 Excluding $10.1 billion in net K-12 school aid
funding, which was greatly increased when Proposal A transferred a significant
portion of school funding from local property taxes to state revenues, the state
spent some $13.6 billion in fiscal year 2000.52
Between 1990 and 2000, the cost of living rose 31.7 percent.53 The state
population rose 6.9 percent.54 If these figures are applied to 1990 spending
levels, the result is an estimate of what the 2000 budget would have been had
spending stayed constant. The amount is $13.8 billion. This means that, in
current dollars, the actual $13.6 billion fiscal year 2000 spending total is
some $181 million lower than the 1990 level.
On the surface this looks pretty good. Dig a bit deeper, though, and it
appears that an opportunity was lost to make substantive cuts in the size of
government. In 1990, Michigan was still recovering from a devastating
retrenchment in the auto industry. The state unemployment rate was 8 percent. By
2000, this had fallen to 3.6 percent, well below the national average for the
first time in decades.55 Welfare caseloads dropped from more than 200,000 to
less than 100,000.56 Serious crime incidents fell from 549,344 to 401,398.57
Some contend that these improvements were the result of higher state spending:
Higher prison spending may mean fewer crimes because career criminals are not
free to target citizens while in jail. Lowering welfare caseloads may require
more state spending on employment assistance. That's debatable, and in any event
taxpayers understandably expected a dividend in the form of substantially lower
state spending as economic growth accelerated. Instead, scores of inefficient
and outmoded programs were left on "autopilot" as state leaders were unwilling
to take on the contentious debates that cuts would entail.
The figures quoted above compare just 1990 to 2000. The year-to-year numbers
reveal important details. Earlier in the decade, real spending came down
smartly, but that trend reversed in 1997. Using a baseline of 1997 spending
levels, real spending rose $157 million in 1998, $539 million in 1999, and $565
million in 2000. That's a grand total of $1.261 billion in spending growth
during the economic boom years of the late 1990s-just when the demand for
government services should have fallen the most. Instead, Lansing saw higher
revenue as an excuse for a spending binge, among other things passing massive
pork-laden supplemental spending bills in 1999 and 2000 ($412 million and $612
million).58
As a result, state and local governments are still collecting $102.80 for every
$1,000 of personal income, down only slightly from $106.10 in 1989.59 The
state tax burden as a percentage of personal income rose from 7.2 to 8.6 percent
in the 1990s.60 (This is overstated by the 1994 Proposal A shift from local to
state school funding, but has also edged up since then.) According to the latest
statistics from the Tax Foundation, Michigan's overall tax burden is still
higher than the national average: 34 states take less from their citizens.
The lesson is that no opportunity should be missed to cut spending,
especially in good times. Michigan's economy and state government both would be
in better shape to meet today's budget challenges had this been done. In the
future, state budget leaders need to redirect their "kinder and gentler"
concerns to taxpayers in general, not the special interests that accrete around
every spending program.
64. Reform the budget process to make state spending transparent.
The amount of detailed information about actual spending plans contained in
executive budget bills has sunk to an unprecedented low level. The budgets are a
shell of their former selves. It's so bad that even most of the legislators who
vote for them have little idea of what programs they are authorizing.
Here is a minor example: The fiscal year 2002 Consumer and Industry Services
(CIS) budget contained a $10 million line item (later cut to $5.5 million)
entitled "nursing home quality incentive grants," with no further explanation.
In fact, the grants were designed to reward nursing homes that complied with
certain state recommendations by buying the homes air conditioners or other
amenities. While some may view this as outside the proper role of government, it
hardly needs to be hidden for political reasons. But the average taxpayer would
be challenged to discover how this money was spent.
This is a comparatively transparent example. It was a discrete line item, and
"boilerplate" language elsewhere in the budget requires grant criteria to be
posted on the Internet. One can find the actual grant application on the CIS
website with the details. In contrast, it can be impossible to unravel funding
for routine department operations.
Take the CIS "Executive Direction" line. $5.6 million was appropriated for 64.5
"unclassified" (non-civil service) "full time equivalent" (FTE) staff positions.
What do these "64.5" people do? The budget document is silent, and there is no
standardized annual report from CIS or any other state department showing where
the money goes.
If asked, the House and Senate Fiscal Agencies can provide line item summary
booklets giving a rough breakdown. These reveal that this item includes
compensation to various state commission board members, among other things. But
elsewhere even this source is silent, such as the 227 FTEs in the Michigan State
Housing Development Authority (MSHDA) line item for "housing and rental
assistance programs." This item encompasses several programs of varying
effectiveness and efficiency, yet no breakdown is available describing the
actual allocation of resources.
The rest of the CIS's $569.8 million budget is similar. Occasionally, the
Legislature demands specifics, usually for political or ideological reasons that
only incidentally shed light on expenditures. For example, Democrats demanded
that of the 99 FTEs involved in occupational safety and health (appropriation:
$9.1 million), 30 be general industry safety inspectors, 20 be construction
industry safety inspectors, and 26 be industrial hygienists. This level of
detail (including the functions of the other 23 FTEs) should be standard for
every line item. Programs like the nursing home incentive grants should include
a brief description of the item right on its line. (Note: The CIS budget is no
better or worse than others; it was selected as a typical budget for
illustration purposes.)
There are many possible explanations for why detailed budget information is
lacking. Like any good manager, department heads want maximum flexibility
without excessive micromanagement by the "board" (or Legislature, in this case).
Such tensions are understandable, though with taxpayer dollars at stake,
disclosure must win out. The other explanations are less excusable. Government
loves secrecy. Politicians and bureaucrats know that large portions of the $36
billion in revenue from all sources they spend each year might not pass public
scrutiny. Having been embarrassed by past revelations of outrageous "pork," they
now keep everything close to the vest. In addition, some contend that an
experienced governor is taking advantage of inexperienced term-limited
legislators to "roll up" broad spending categories into single line items. The
average citizen can't decipher the budget; neither, apparently, can the average
legislator.
The budget process should be reformed to require detailed line item breakdowns.
Any citizen should be able to examine annual budgets to determine where his or
her money is being spent.
65. Require standardized annual state department performance reports.
Transparent budgeting is only the first step in needed state budget reform. In
addition to future cash flow projections, private corporations issue annual
reports explaining in detail how they did or did not accomplish goals in the
past year. These reports reveal which profit centers are making or losing money,
allowing rational decisions to be made. Similar reports should be required for
government, which is also in the business of spending money. State government
issues lots of press releases, but no standardized documents detailing where the
money goes.
Some agencies and departments do make an effort to report their activities, and
other reports are required by statute. But there is no consistency in the
standards, forms or measurements used. The overall impression is that the public
is shown only what bureaucrats and politicians want them to see, rather than a
balanced view.
Therefore, standardized, detailed annual department reports should be required
describing how the money from each line item was actually spent. These should
match inputs of tax dollars with specific outputs for each program. Outputs
should be measurable in concrete terms-not hidden behind clouds of fluffy prose.
This means the criteria for judging success must be explicitly defined.
Requiring annual departmental reports will allow decision makers and citizens to
compare each program's performance over time with the intentions of the
authorizing legislation. Without this information, it is impossible to make
rational choices about any program.
66. Require state "rent-to-own" office space deals to follow the regular
capital outlay process.
In 1999, a mini-scandal erupted when it was revealed that the House of
Representatives had spent $10 million on a no-bid contract to provide furniture
for a new House office building, including $1,000 leather chairs for
legislators. While this outrageous deal was politically sensational and the
media had great fun with it, little was said about the much bigger problem
represented by the procurement of the new $200 million building itself, which
was obtained without any regular legislative accountability or oversight.
One would search the legislative journals in vain for a roll call vote approving
this $200 million commitment of taxpayer money. That's because the regular
capital outlay process required for executive department construction projects
under the Management and Budget Act is less rigorous for "rent-to-own" deals and
does not apply to the legislative or judicial branch.
The House office building project was one of several acquired in rent-to-own
deals in 1999, which also included a $300 million Department of Environmental
Quality building in Lansing. In 2000, the trend continued with a $240 million
contract on the former General Motors Corp. building in Detroit. These projects
circumvent the normal full review process for building projects in which the
legislative Joint Capital Outlay subcommittee approves each step of construction
planning and cost authorization. In contrast, leases come to the committee
ready-made, for a simple up or down vote.
Officials in the present administration contend that quick up-or-down votes on
rent-to-down deals allows projects to be completed more quickly and avoids
additional costs resulting from delays caused by the regular capital outlay
process. But aside from the fact that full accountability should not be optional
when spending taxpayer dollars, these contentions are not plausible for two
reasons. First, the law establishing the capital outlay approval and oversight
process was rationalized and streamlined in early 1999, eliminating many of the
bottlenecks.61 Second, despite protestations to the contrary by the
administration, it's hard not to conclude that the taxpayer is getting a lousy
deal. If the state owned the buildings, it would not pay property tax to local
governments, and finance costs would be at a lower tax-free municipal bond rate.
Plus, the profits generated by the real estate developer would not be included
in the price.
The rent-to-own process is a potential breeding ground for corruption and
influence peddling. That is why the law requires a regular capital outlay
process with full legislative oversight and accountability at each step.
Legislation should be passed immediately requiring that legislative and
judiciary buildings, and executive branch rent-to-own projects, get full review
under the regular capital outlay process.
67. Reform the Michigan Catastrophic Claims Association (MCCA).
The Michigan Catastrophic Claims Association was established to allow all
insurance companies to have reasonable access to reinsurance to pay for their
large losses under Michigan's no-fault law, which requires insurers to pay
lifetime, unlimited medical costs for persons injured in automobile accidents.
The MCCA was created in 1978 after many insurers reported difficulties in
finding a reinsurer who would provide this sort of unlimited coverage. MCCA
reimburses insurers for no-fault losses in excess of $250,000. Funds for this
reimbursement come from premiums assessed upon all insurers writing automobile
insurance in the state. The MCCA makes an annual calculation of the anticipated
losses for the ensuing calendar year, then divides those losses by the
anticipated number of "car years." Every insurer is assessed this amount (which
is known as a "pure premium," the amount per vehicle needed in order to pay
anticipated losses) for every car it insures during that year.
Because no one had experience in providing reinsurance for this sort of
exposure, earlier premiums were too low. Over time, the MCCA gained experience
and has had more success in matching estimated pure premiums with actual losses
incurred during the ensuing years. However, the no-fault statute does not allow
the MCCA to distinguish between different kinds of vehicles and to recognize
that some types might have lower loss payouts that would justify a lower pure
premium assessment. Recent studies have shown that this "one-premium-fits-all"
approach to MCCA assessments results in excessive charges for some types of
vehicles, especially commercial vehicles. Recent MCCA data suggest that
assessments for commercial vehicles are over three times the amount necessary to
pay losses incurred by those vehicles.
In a three-year period ending in June 1999, the actual per car losses for
commercial vehicles were $13.93 per year, as compared to $45.59 for private
passenger vehicles and $84.17 for motorcycles. When all classes were combined,
the loss per car year was $43.87. These lower losses for commercial vehicles
result from the fact that when both no-fault and workers' compensation are
available to pay for medical expenses, only workers' compensation pays. In a
sense, the current MCCA scheme requires businesses to pay twice for employee
injuries: once in their auto insurance policies and then in their workers'
compensation policies.
Had these loss ratios been applied to the 2002 MCCA assessment, which is $71.15
per vehicle, the assessment per commercial vehicle would have been only $22.60.
This overcharge of almost $50 per vehicle discourages investment by Michigan
business and results in hiring of fewer employees by such businesses.
This drag on economic growth can be eliminated by requiring the MCCA, in its
calculations, to classify vehicles according to their exposure to loss. The MCCA
assessment should be calculated and levied upon four different classes of
vehicles: private passenger autos, motorcycles, historic vehicles, and "all
other" (that is, commercial and farm vehicles). Charging premiums based upon
actual exposure to loss provides accurate information to policyholders about how
to allocate their resources between insurance, loss control, and other
alternative uses of their capital.
68. Update the regulation of policy forms and rates for most commercial lines
of property-casualty insurance.
In 1979 and 1981, the Michigan Legislature recognized that competitive markets
provide the best consumer protection with respect to quality of service and
lower prices, and amended its laws with respect to private passenger automobile,
homeowners, and workers' compensation insurance to allow competition, rather
than regulatory fiat, to determine prices. The Legislature repealed insurance
laws requiring that rates for these three lines of insurance be approved by the
state insurance commissioner. Instead, it substituted a "file and use" system,
under which companies could file their rates, and if the commissioner later
determined that they violated the statutory requirement that they not be
"excessive, inadequate or unfairly discriminatory," the commissioner could then
take action. Further, the statute was amended to indicate that a rate could not
be considered excessive if the market for the line of insurance was competitive.
The result has been dramatically lower rates for workers' compensation, and
rates for private passenger auto and homeowners insurance that are low in
comparison to other states when Michigan's generous benefits are considered.
Interestingly enough, the law with respect to other types of insurance, such as
commercial auto, property and liability, was not changed, leaving a regulated
rate system in effect. Even the National Association of Insurance Commissioners
(NAIC), which could hardly be accused of being soft on insurance companies, has
recognized that commercial customers need much less government protection than
do private individuals and has recommended that rates for all commercial lines
of insurance be regulated on a "file and use" basis. The NAIC has made a similar
recommendation with respect to regulation of policy forms, that is, they may be
filed and then used without prior regulatory approval.
In addition, the NAIC has recommended that all rate and form regulation be
abolished for property-casualty insurance for large commercial insurance
customers that have sufficient resources to understand their insurance needs and
the bargaining power to deal with insurance companies. In other states, a
separate category of "exempt commercial policyholders" has been freed from
regulatory scrutiny, allowing these large, sophisticated organizations and their
insurance companies to freely negotiate prices and coverage without government
interference.
The old prior approval systems were designed in the late 1940s, when most
insurers belonged to "rating bureaus," which were essentially cartels. Such
cartels no longer exist, and now insurers develop prices individually and
compete actively against one another. The regulatory modernization recommended
by the NAIC and adopted in a number of states recognizes the vast changes in
insurance markets that have taken place in the last 50 years. Michigan should
not lag behind in updating its regulations.
Michigan's transportation system is crucial to the state's economic
progress. In 1997, the Legislature raised the gasoline tax, enacted reforms to
cut the costs of road building and maintenance, and embarked upon a major,
long-overdue repair effort. With the condition of the roads now clearly
improving, transportation funding and related issues have slipped off the radar
screen of the public and the Legislature. The Legislature should elevate
transportation issues once again and address the following four reforms.
69. Reform the system for the maintenance of state roads.
In most counties, the Michigan Department of Transportation (MDOT) contracts the
maintenance of state roads to the counties themselves; however, in a limited
number of counties, MDOT maintains its own roads with its own facilities,
equipment, and personnel, and the county road commission works only on the
county roads.
In those counties where MDOT does its own work, it should request bids for
the maintenance of its roads from the local county road commission, any
neighboring commission, and private contractors. While it may prove that MDOT
continues to be the best source in these counties, the duplication of resources
for state and county roads in a given county makes little sense, and MDOT should
be encouraged to leave the maintenance business whenever possible. In those
counties where MDOT currently contracts with the local road commission, the
entire county's work should be put out for bid from the local county,
neighboring counties, and again, private contractors. While the local county
road commission may continue to be the best contractor, the open bidding process
would be a valuable one in its own right.
70. Allow counties the option of abolishing their road commissions.
Michigan is the only state in the union with separate, independent county road
commissions. While there are many exceptions, the commissions can be patronage
machines at their worst. With the state and federal governments providing the
bulk of money for county and local operations, there is little incentive for
local government to consider changes to an age-old system that offers many
public employment jobs and too often tolerates poor performance and high cost in
maintaining roads.
The Legislature should at least allow counties the option of terminating this
unnecessary level of bureaucracy by allowing for the dissolution of independent
county road commissions and giving the money it now provides to the road
commissions directly to county commissions and county executives.
71. Evaluate the formula for distributing road funds.
Since 1951, most state road tax and fee revenues have been divided according to
a controversial formula that provides 36.1 percent to state government, 36.6
percent to county road commissions, 18.8 percent to cities and villages, and 8.5
percent to transit agencies. The Legislature must review the formula by which
state fuel and vehicle-registration taxes are distributed.
There is no particular merit to these percentages; they are the result of many
amendments to the original formula of 1951, proposed in response to transient
political forces. The formula has grown complicated, and the original guiding
principle has been forgotten under layers of amendments and handouts to favored
programs. The heated discussions of the formula and how it might be changed have
degenerated into a free-for-all, with each level of government arguing for a
bigger share of the pie. Local units in particular seem to want to turn the
formula into a revenue-sharing scheme first and foremost. Which roads attract
the most actual traffic has taken a back seat to the grab for more money.
There may be no one right way to distribute motorist taxes, but before the
system is overhauled, legislators should adopt these principles to guide any
future debate about formula changes:
These revenues do not "belong" to any agency, geographic area, or unit of government. They are motorists' fees for the use of the road system, given in trust to the Michigan Transportation Fund to be distributed in proportion to motorists' and shippers' needs.
State aid should be focused on the routes of statewide importance, as indicated by the proportion of long-distance or other trips that cross jurisdictional lines. Taxpayers depend on the state to assure a uniform, adequate system that carries them across city limits and county lines.
Funds should follow the traffic. The distribution of funds among state, county, and city systems should be guided first by the distribution of vehicle miles on those systems. Formulas that unduly favor route miles, population, or other factors risk cross-subsidy of little-used roads and congestion in the state's busiest places.
Purely local needs should be addressed by local funds. Local taxpayers know best whether local roads deserve more investment. The Transportation Fund should not be treated as a revenue-sharing scheme to which every local government is "entitled."
The distribution formula should be simplified, and earmarked funds and
special programs should be eliminated. If the formula is adequate, clumsy fixes
like the Local Program, the special distributions of the 1997 tax-increase
revenues, and the Economic Development Fund (which dispenses transportation
dollars to localities according to the number of jobs new industries in their
areas claim to have "attracted" or "retained") will not be needed.
Although the share of motorists' taxes given to mass transit was reduced in
1997, the total amount given to transit continues to increase. The Legislature
should permanently reduce the mandated share of gas tax revenues allocated to
mass transit. The 1990s saw palatial bus stations built on potholed streets that
made every bus trip a trial; possibly the best thing that could be done for
transit in Michigan is to devote more transit aid to road repair.
It's also time to clear the books of the $100 charge paid by Michigan truckers
for the privilege of being regulated by the Michigan Public Service Commission.
Trucking has been deregulated, and there is no clear authorization for the use
of this money for anything.
72. Avoid micromanaging transportation technologies through tax policy or
subsidies.
Invariably, when the Legislature gets around to addressing transportation
issues, some lawmakers are tempted to get into the business of picking winners
and losers. The Mackinac Center cautions against any legislation designed to
provide artificial boosts to gasohol, electric cars, propane burners, passenger
trains, flywheel-powered buses, and other politically favored (but not
necessarily economically viable) technologies. Government is not good at picking
winners.
73. Enact cost-reduction ideas proposed in the Mackinac Center for Public
Policy report, "Fixing the Roads: A Blueprint for Michigan Transportation
Infrastructure Policy."
Seven years after its publication, the Mackinac Center's "Fixing the Roads"
report continues to be one of the most comprehensive of its kind, with many
suggestions for reform that deserve renewed attention in the Legislature.
These reforms include increased competitive bidding for road repair and
construction projects, changes in land acquisition procedures, greater
application of value engineering concepts in road type and design standards,
tort reforms to minimize frivolous claims and payments, and the streamlining of
MDOT.
For further information, please see
www.mackinac.org/242.
74. Revise mandatory minimum sentencing laws.
Across the nation, state legislators are grappling with tough questions related
to sentencing. At issue are harsh mandatory sentencing laws that remove
discretion from judges and dramatically lengthen prison sentences through
special provisions such as consecutive sentencing. These automatic sentences
impose "one-size-fits-all justice," usually based solely on the weight of the
drugs involved.
Legislators intended to target "drug kingpins" and to deter drug use when they
enacted mandatory sentencing laws. But the laws backfired. States are filling
their prisons with low-level, often first-time offenders, while the drug
kingpins exchange information and assets for lighter sentences. As for
deterrence, drugs are purer, cheaper, and more easily obtainable than ever. And
the cost of warehousing drug offenders is straining many state budgets to the
limit.
Those runaway prison costs, as well as a rising skepticism about the efficacy of
the current approach to combating drug abuse, are leading many states to quietly
reconsider their drug penalties. Recently, Louisiana, Connecticut, Indiana,
Iowa, Mississippi, California, and North Dakota rolled back mandatory drug
sentences. Massachusetts, New York, Alabama, Georgia, New Mexico, and Idaho are
all considering revising their drug laws.
In 1998, the Michigan Legislature became a leader in this reform movement when
it voted to relax the "650 Lifer Law." This law had mandated life without parole
for sales of 650 grams of heroin or cocaine, even for first-time offenders, and
was the harshest drug law in the nation. Unfortunately, the 1998 reform left
some of the draconian sentencing structure in place.
Legislators need to finish the job by giving judges back the ability to fit the
punishment to the crime and to the individual offender. All the tools are in
place. Michigan has sentencing guidelines that allow judges to base sentences on
all the relevant factors in a case. The guidelines allow judges to impose
appropriate sentences from within the range, but prevent sentencing extremes.
In addition, a statewide drug court and drug treatment movement, which has the
enthusiastic backing of many county prosecutors and law enforcement officials,
is proving that lives can be turned around. Such programs enhance public safety
and restore families at a fraction of the cost of incarceration.
National and statewide polls indicate that citizens overwhelmingly support
cost-effective treatment and carefully supervised alternatives to incarceration
for many low-level drug offenders. That's not being soft, but being smart, on
crime-and in these difficult economic times, Michigan's taxpayers also will
thank their legislators for finding the courage to do the right thing.
75. Don't be quick to revise term limits; generate a genuine debate about
restoring a part-time Legislature.
By an overwhelming vote in 1992, Michigan citizens approved limitations on the
terms of the governor (two four-year terms), members of the Michigan House
(three two-year terms), and members of the Michigan Senate (two four-year
terms). Given that this year Michigan has the first major turnover since 1992 in
the governorship and the Senate, it is rather early in the term limits
experiment to draw sweeping conclusions about their effectiveness and any
necessity for adjustments.
Nonetheless, a movement is afoot in Lansing to revise and extend the term
limits provision of the Michigan Constitution. It is not a grassroots movement
broadly based around the state, but rather is focused among longtime Lansing
politicians, lobbyists, and pundits. Perhaps a strong case someday will be made
that term limits do not serve the cause of good government, or have somehow
actually harmed Michigan, but it doesn't help the cause of reform that so many
of its leaders and advocates have a vested interest in returning to the old
days. That was when politicians, lobbyists, and pundits didn't have to worry
much about lots of fresh new faces in the Legislature; once they made a friend
in a particular legislator, they often had him or her on their side for a long
time.
Those leading the effort to dilute the 1992 term limits amendment have not yet
made a powerful case for change. They speak of inexperience in the Legislature
and the inordinate influence of the governor and the permanent bureaucracy. But
what's so far been missing in their arguments is a "smoking gun"-actual
legislation signed into law that shouldn't have seen the light of day and that
wouldn't have seen the light of day in the pre-term limits age. Pork barrel
bills still pass, just as before. Tough decisions are being made, just as
before. And by one measure-overall restraint of government spending, there has
actually been more of that in the last decade than in the free-spending decade
that preceded 1992.
Proponents of revising term limits are wasting their time if the example of
California is predictive. In March 2002, voters there were faced with a
proposition to circumvent the state's term limitations, which are identical to
Michigan's and were adopted two years before. The forces supporting the proposed
revision outspent their opponents by a ratio of 10-1 but were defeated in a
landslide.
Vague promises of better government if only the term limits provision were altered are not enough reason for a change, especially this early in the term limits era. Those now eager for an extension of term limits should at least be offering Michiganians something real in exchange, such as re-introduction of a part-time Legislature.
Michigan was not poorly governed before its Legislature became full-time less
than 40 years ago. More than 40 states, including many much greater in
population than Michigan, get by just fine with part-time Legislatures. Indeed,
the composition of those part-time bodies is at least as diverse as Michigan's,
and their members tend to focus more on the most important business of state
government and less on cooking up dubious schemes for its expansion.
If Michigan is to have a debate about retention, extension, or elimination of
term limits, it should engage in a simultaneous debate about restoring a
part-time Legislature.
76. Create a market for "vanity" license plates.
Like many states, Michigan offers "vanity plates," a specific combination of
numbers and letters for an extra fee. (Specialty plate designs to benefit
certain causes or institutions, such as universities, are also available.) These
plates are popular because Michigan drivers like having more choices to express
themselves and the state likes the revenue thus raised.
How does the present vanity-plate assignment system work? The state uses a
simple first-come, first-served system to assign vanity letter combinations. In
other words, one could request the "BIGIDEA" vanity plate. But if someone
already has taken it, then no matter how much money one might be willing to pay
the state, there is no way for that person to get "BIGIDEA" (and the state of
Michigan will continue to collect only the original flat $35 "asking price" for
it).
The problem with the present system is that it is actually an overlooked golden
opportunity to raise more transportation dollars that could be used to fix
Michigan roads. The present system is inefficient because it ignores the
market-based reality that many letter combinations are desirable to a number of
people and companies.
That's opportunity knocking. The Legislature should direct the Secretary of
State to set up an online auction system so that any Michiganian can bid on any
letter combination, with each one going to the highest bidder each year. How
would it work? The state could begin by setting the minimum bid at the current
vanity plate surcharge of $35 to make the revenue raised even with current
levels for plates that only one person wants.
But some combinations will attract many bidders because they can be quite
valuable to businesses, groups, or individuals, and each one is unique. For
example, letter combinations for passions (such as #1 M FAN, GO BLUE, SPARTAN,
GOFISHN, QUILTER, TEACHER) are fun and could make great gifts. Combinations for
professions (EYE DOC, ATTORNY, CPA, SALES, PLUMBER, SURGEON, and TV/radio
station call letters) would also be popular.
Auctions ensure a fair market price-the price a willing buyer will pay to have
that unique combination. Bidding would open on the Internet for two weeks, with
the winner getting rights to the plate for a year, after which it would go to
auction again before the current license expires. Michigan already has attracted
national attention for its online auctions of surplus property. Extending that
idea to include license plate combinations is not a big leap. Public computer
terminals in state licensing offices would ensure that no one is excluded from
the online bidding process.
77. Abolish Michigan's archaic prohibition on Internet wine sales.
It's been nearly seven decades since the national war against alcohol during
America's Prohibition period (1920-33) came to an end with the repeal of the
18th Amendment. But 29 states including Michigan still prosecute a kind of
mini-Prohibition of their own: They forbid consumers from buying alcoholic
beverages from other states unless the products are shipped through a
state-licensed liquor authority.
The Michigan law is a relic from 1934, when states took over the regulation of
alcohol sales after Prohibition was repealed. The thought then was that states
that want to discourage drinking should have the power to determine the sources
of legal beer, wine, and spirits. Whether that made sense then or not, the law
today does little more than bestow a monopoly privilege on domestic sellers,
raise prices, and limit choices for Michigan consumers.
Undoubtedly, people who ignore the law transport lots of illegal alcohol from
other states into Michigan. Short of searching every car and truck at the
borders, the state can't possibly expect to stop the flow. The primary effect of
the law is probably to restrict sales over the Internet. Anyone who has ever
attempted to purchase wine from one of hundreds of web sites of wineries in
other states is familiar with a reply similar to this from all but perhaps a
handful of wineries: "Sorry, Michigan is not a ship-to state. We can't sell to
you." The few exceptions are those that agree to comply with state regulations
that do nothing more than jack up the price by about 25 percent.
Of course, Michigan wineries that have web pages can and do sell wine legally
over the Internet to Michigan residents. Thousands of Michigan citizens who
don't abuse alcohol and who would simply like to get an occasional bottle from a
favorite out-of-state winery wonder what makes the state think its law does any
good. Nonetheless, the Michigan Liquor Control Commission does make an
enforcement effort. In a state of nearly 10 million residents, the commission
seized more than a hundred packages of illegally shipped beer, wine, and liquor
in 2000. And it's been fighting a lawsuit filed by Michigan residents who claim
the law is unfair and violates the interstate commerce clause of the U.S.
Constitution.
Michigan legislators don't need to wait for the courts to work this out. They
should recognize the futility of this throwback to Prohibition, strike a blow
for freedom of choice and competition, and repeal the 1934 law.
In the long run, Michigan policy-makers should (and probably will) be judged
by the state's citizenry not according to flashy photo-ops, fiery rhetoric, and
smoke-and-mirror politics. They will be judged by what they actually
accomplished for the good of Michigan. This suggests that lawmakers ought to put
aside parochial concerns, avoid the pork barrel, eschew the temptation to plan
and control the lives and businesses of people, keep government in its proper
place, and solve problems in ways that leave citizens freer, better off
materially, and facing a future full of new opportunities. These principles have
guided each of the recommendations offered in this report.
With confidence in the integrity and intentions of Michigan's governor and
elected lawmakers, the Mackinac Center for Public Policy is pleased to offer the
foregoing recommendations for consideration and stands ready to supply
additional details.
The Mackinac Center for Public Policy expresses appreciation to the John Locke Foundation, a public policy research institute in Raleigh, N.C., for several inspirational suggestions used in the introduction. Many members of the Mackinac Center staff and boards of directors, advisors, and scholars contributed to this report.
Michigan Department of Environmental Quality, Office of Special Environmental Projects, "State of Michigan's Environment 2001," November 2001.
Ibid.
Gov. Bill Owens, "`Look at the Difference It Makes to Have a Conservative Governor,'" Human Events, March 4, 2002, p. 11.
U.S. Department of Commerce, Bureau of Economic Analysis, gross state product estimates. Data accessible by Internet at http://www.bea.doc.gov/bea/regional/gsp.
James Bennett, "A Higher Standard of Living in Right to Work States," National Institute for Labor Relations Research, 1994.
U.S. Department of Labor, Bureau of Labor Statistics.
MCL 408.552.
Richard Vedder, "Michigan's Prevailing Wage Law and its Effects on Government Spending and Construction Employment," Mackinac Center for Public Policy, September 1999, pp.12-14.
U.S. Census Department, "Michigan State & Local Government Finances by Level of Government: 1998-99," available on the Internet at http://www.census.gov/govs/estimate/9923mi.html.
Ibid.
"Michigan's Prevailing Wage Law Forces Schools to Waste Money," Mackinac Center for Public Policy, Nov. 9, 2001, accessible by Internet at https://www.mackinac.org/3844.
Maurice Baskin, "Union-Only Project Labor Agreements, the Public Record of Poor Performance," Associated Builders and Contractors, 2000, pp. 12-13.
February 2002.
State Rep. Robert Gosselin, "Local Government Getting Too Pushy," The Detroit News, Nov. 11, 1999, p. 11A.
"Big-Four Assail Engler," The Detroit News, June 6, 1999, p. 1B.
29 U.S.C. 207 and MCL 408.384a(8).
For example, the U.S. Office of Personnel Management policy on compensatory time is available on the Internet at http://www.opm.gov/oca/pay/HTML/COMP.HTM. The state of Michigan's overtime policy, including compensatory time, can be read online at http://www.state.mi.us/dmb/ose/Bargaining_Units/mcoc/mcoc_article17.htm.
MCL 423.210.
Michigan Association Public School Academy newsletter, fall 2001, p. 1.
Ibid.
Lawrence M. Rudner, "The Scholastic Achievement and Demographic Characteristics of Home School Students in 1998," Home School Legal Defense Association. Accessible by Internet at http://www.hslda.org/docs/study/rudner1999/Rudner0.asp.
"The Condition of Education 1998," National Center for Education Statistics, available on the Internet at http://nces.ed.gov/pubs98/condition98/c9858a01.html.
"Why Do We Certify Teachers?" Investor's Business Daily, Aug. 11, 1998, p. A1.
MCL 388.1705 (2).
Data from the Michigan Department of Education's Education Options, Charters, and Choices Office, January 2002.
Pierce v. Society of Sisters, 268 U.S. 510, 535 (1925); Wisconsin v. Yoder, 406 U.S. 205 (1972); Wolman v. Walter, 433 U.S. 229, 262 (1977); Mueller v. Allen, 77 L.Ed.2d 721, 728 (1983).
Carrie Lips, "Arizona school-choice plan provides model for others," USA Today, Aug. 23, 2001, p.13A.
Public Sector Consultants Inc., "Michigan in Brief: 1998-99," Chapter 5: "K-12 Funding," p. 235. Accessible on the Internet at http://www.michiganinbrief.org/edition07/Chapter5/K12Funding.htm.
Michigan Department of Management and Budget, Chart: "Since Proposal A School Per Pupil Funding Has Exceeded Inflation," available on the Internet at http://www.state.mi.us/dmb/budget/k12fund/graphs.htm.
Allan Lundell, "A Study of the Effects of the Exemption of School Construction and Renovation Projects from Ohio's Prevailing Wage Law: An Interim Report of a Five-Year Study, Year Two," Ohio Legislative Budget Office: Columbus, Ohio, January 2000.
Undated brochure published by the Michigan Economic Development Corporation entitled, "2002 Corporate Objectives." The first of five objectives reads, "[e]nsure the continuity of the MEDC."
Michael D. LaFaive, "Government `Economic Development' Handouts Rob Peter to Pay Paul," Viewpoint on Public Issues 2000-08, Mackinac Center for Public Policy, February 2000, accessible on the Internet at www.mackinac.org/2670.
See note 31.
Information obtained from the Michigan Economic Development Corporation (compiled by Spencer Nevins and Jeffery Mason) via the Freedom of Information Act, Dec. 19, 2001.
Ibid.
Ibid.
Telephone interviews with Maria Tyszkiewicz, analyst, Michigan Senate Fiscal Agency, by Michael LaFaive of the Mackinac Center for Public Policy, 2001.
Michael LaFaive, "State-Run Internet Job Boards: Wasteful, Redundant, and Unfair," Viewpoint on Public Issues No. 2001-12, Mackinac Center for Public Policy, April 2001, available on the Internet at https://www.mackinac.org/3387.
Ibid.
Ibid.
Ibid.
Ibid.
Ibid.
Michael LaFaive, "Failed E-Business Deal Underscores Futility of State Economic Planning," Viewpoint on Public Issues No. 2001-01, Mackinac Center for Public Policy, January 2001, available on the Internet at https://www.mackinac.org/3201.
Ibid.
Ibid.
Harold J. Brumm, "Rent Seeking and Economic Growth: Evidence from the States," Cato Journal, vol. 19, no.1, spring/summer 1999.
Data from the "All MEGA Projects" spreadsheet, obtained from the Michigan Economic Development Corporation (compiled by Spencer Nevins) via the Freedom of Information Act, Jan. 11, 2002.
Michigan State Budget Office, "Statement of the proportion of total state funding from state sources paid to local units of government - legal basis." Deposits made to the Budget Stabilization Fund ("Rainy Day Fund") are subtracted, and withdrawals from the fund are added, so that setting money aside for a "rainy day" is not counted as "spending."
Executive Budget Fiscal Year 2002, "Historical Expenditures/Appropriations; Gross," except that 1996-1998 figures are from the state Comprehensive Annual Financial Reports for those years, to more accurately reflect school aid spending following a change in accounting periods made after Proposal A went into effect.
See note 52, above.
See note 53, above.
U.S. Consumer Price Index, accessed by Internet at the Michigan Senate Fiscal Agency's web site, http://www.senate.state.mi.us/sfa/econrev/USCPI.pdf.
Michigan Census 2000, "Population Change and Distribution," accessible by Internet at http://www.libraryofmichigan.org/binary/totalPopbyCounty.pdf.
U.S. Department of Labor, Bureau of Labor Statistics, data accessible by Internet at http://data.bls.gov/cgi-bin/surveymost?la as follows: Select "Michigan," "MICHIGAN, seasonally adjusted - LASST26000006," then click "reformat" and under "Specify year range" select "from" 1990 and "to" 2000.
Michigan Family Independence Agency, "Information Packet," April 2001, accessible by Internet at http://www.mfia.state.mi.us/Reports/informationpacket2001.pdf.
Michigan State Police Criminal Justice Information Center, "2000 Uniform Crime Report," accessible by Internet at https://www.michigan.gov/msp/0,1607,7-123-1645_3501_4621-26742--,00.html.
H.B. 4075 in 1999 and S.B. 968 in 2000.
"Tax Revenue Comparison: Michigan and the U.S. Average," Citizens Research Council of Michigan, December 2001, accessible by Internet at https://crcmich.org/PUBLICAT/2000s/2001/Memo1059.pdf.
Michigan Senate Fiscal Agency, "State Tax Burden Per-Capita, 1970-71 to 1998-99," accessible by Internet at http://www.senate.state.mi.us/sfa/revenue/statetaxburdenpercapita.pdf.
SB 259 (1999-2000), Public Act 8 of 1999, MCL 18.1113 et seq.; Michigan House Fiscal Agency, "Michigan Capital Outlay Process," January 2001, accessible by Internet at http://www.house.state.mi.us/hfa/capoutl.pdf.