The MC: The Mackinac Center Blog

The Proposal 1 road funding initiative on Michigan’s May 5 ballot has excited strong feelings on both sides, but one provision has raised more quizzical eyebrows than passions. This is to initially use most of the new transportation revenue to repay past road repair debt, rather than immediately start pouring concrete and laying asphalt.

Specifically, if voters approve Proposal 1’s $2 billion tax increase (and if as expected legislators pass a necessary “clean up” bill), then most of the revenue from the measure’s $1.2 billion fuel tax will initially go to repay debt on past road repairs. Specifically, in the first year $815 million will be used to repay debt. In the second year, this falls to $456 million. Only in the third year will the full gas tax amount go to current transportation funding, rather than paying for road repairs that politicians put on the state’s credit card years ago.

This actually makes a lot of sense. It gives time to allocate new road tax dollars effectively and rationally, and would remove the drain on current road funding caused by past politicians’ desire to spend now and let their successors pay for it later. The result of those choices has been persistent erosion of current Michigan road funding revenues.

The drain began in the 1990s and early 2000s, when Governors John Engler and Jennifer Granholm both chose to increase the amount of state borrowing for routine road maintenance projects. The political goal was to get a lot of orange barrels out and road repairs underway in a hurry. Various rationales were promoted for why borrowing made sense, but when the cement dust had settled it left a debt service overhang that persists.

In essence, Michigan is still paying today for routine road repairs done 10 years ago and more, which means less money is available to fix today’s roads.

A 2013 House Fiscal Agency report quantified the ongoing debt service drain on the annual transportation budget. The borrowing came in several installments. In the 2000-2001 fiscal year, debt incurred for road repairs increased from $633 million to $1.328 billion. Between 2002 and 2011 additional money was borrowed, and by the close of the 2012 fiscal year the state owed $2.046 billion for past road work.

Principal and interest payments increased apace, taking an ever larger bite out of annual road funding budgets. The House Fiscal Agency reports that annual debt service rose from $47.2 million in 2001 to $187.6 million by 2006. Between September 2009 and October of 2011 this debt consumed around $215 million each year, and it is expected to stay at that level until 2020, when presumably the amount will begin to fall off.

Love Proposal 1 or hate it, clearing away the burden of debt that continues to eat away Michigan’s annual state road budget would be a good thing. Taxpayers and motorists can only hope that a future crop of politicians won’t have to be taught the same lesson.

Gov. Snyder recently sent a letter to Michigan House Speaker Kevin Cotter and Senate Majority Leader Arlan Meekhof explaining some of the problems of occupational licensure.

The governor summarizes some of the good work the legislature has done, and outlines the principles he'll use in "determining whether to support any legislation providing for additional occupation regulation.” Below are these principles:

  1. There must be a substantial harm or danger to the public health, safety, or welfare as a result of unregulated practice, which will be abated through licensure.
  2. The practice of the occupation must require highly specialized education or training.
  3. The cost to state government of regulating the occupation must be revenue neutral.
  4. There must be no alternatives to state regulation of the occupation (such as national or third-party accreditation) which adequately protect the public.
  5. The scope of practice must be clearly distinguishable from other licensed, certified, and registered occupations.
  6. Regulation through registration or listing (as opposed to licensure ) does little to protect public health and welfare, and is not an appropriate use of government resources.

Occupational licensure laws require people to pay a fee and complete state-approved training before they are legally allowed to practice a trade. The public benefits of these laws are dubious, and when they are proposed, the Legislature almost never requires evidence of how licensing laws will actually protect public health and safety. Usually, these mandates are initiated and supported by special interest groups who benefit directly when their competition is limited.

Gov. Snyder recognizes that licensing serves to protect groups from competition, which drives up prices for consumers and harms the poor the most. He should be applauded for his efforts and the Legislature should move forward with eliminating these barriers to, as Gov. Snyder put it, the "pursuit of happiness."

Mackinac Analyst on Frank Beckman Show

James Hohman talks about Proposal 1 study findings

Assistant Director of Fiscal Policy James Hohman discusses his Proposal 1 study on "The Frank Beckman Show" on WJR AM760.

The May 5 ballot proposal raises revenue to fix the roads by increasing the sales tax from 6 percent to 7 percent and changing the way gas is taxed. The study shows the proposal will cost taxpayers $2 billion and the average household approximately $500 more per year. At the Energy Information Administration’s estimate average gas price for 2015 of $2.39, Proposal 1 would increase the price per gallon by 10 cents.

Most of the revenue raised under this proposal goes to road construction and maintenance, however, the proposal does include additional spending such as increased funding for public schools and increased earned income tax credits.

March 27, 2015, MichiganVotes Weekly Roll Call

A raise for judges; welfare truants; legalized scalping

Now with one click you can approve or disapprove of key votes by your legislators using the VoteSpotter smart phone app. Visit votespotter.com and download VoteSpotter today!


Senate Bill 56, Give judges a raise: Passed 33 to 3 in the Senate

To increase judges’ salaries around $12,000, and index them going forward to increases in the salaries paid to unionized state “civil service” employees. After the change salaries would range from around $150,000 to $163,000 depending on which level of court.

Who Voted “Yes” and Who Voted “No”


Senate Bill 85, Extend preemption of local gun control to air guns: Passed 29 to 8 in the Senate

To revise the state law preempting restrictive local gun control ordinances so it applies to “pneumatic” guns, defined as ones that shoot “a BB or pellet by spring, gas, or air.” Locals could adopt restrictions on possession of these by minors, prohibit “brandishing” them to induce fear, or shooting in a heavily populated area.

Who Voted “Yes” and Who Voted “No”


Senate Bill 54, Ban using a drone to interfere with hunter: Passed 110 to 0 in the House

To prohibit using an aerial drone to interfere with or harass a person who is hunting. This would expand an existing law that bans interfering with or harassing hunters. Senate Bill 55 bans using a drone for hunting and also passed the House unanimously.

Who Voted “Yes” and Who Voted “No”


House Bill 4193, Allow electronic “proof of vehicle insurance”: Passed 108 to 2 in the House

To revise the state’s no-fault insurance law to allow “proof of insurance” documents motorists are required to have when driving to be an electronic communication from the insurance company visible on a mobile device. If asked a driver could be required to forward the information to a designated site.

Who Voted “Yes” and Who Voted “No”


House Bill 4041, Ban welfare for persistent truancy: Passed 74 to 36 in the House

To withhold welfare benefits from a household with children who are persistently truant from school. A truant child age 16 and above could be removed from the household for this.

Who Voted “Yes” and Who Voted “No”


House Bill 4015, Repeal ticket scalping ban: Passed 70 to 40 in the House

To repeal a state law that bans ticket “scalping” at sports and entertainment events, or selling tickets at a higher price through a service or agency.

Who Voted “Yes” and Who Voted “No”


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visit http://www.MichiganVotes.org.

An article by American Enterprise Institute scholar Andrew Biggs in the Wall Street Journal (subscription required) explains how the bogus “transition costs” argument against reforming government pension systems recently became even more bogus.

To refresh, this was the argument used in 2012 by teachers unions and state pension bureaucrats to scuttle a transformational school pension reform bill that had passed the Michigan Senate. The measure would have closed the system to new hires, instead granting them generous 401(k) benefits.

Biggs writes:

But the public-pension industry—government unions and the various financial and actuarial consultants employed by pension-plan managers—claims that ‘transition costs’ make switching employees to defined-contribution pensions prohibitively expensive...

The argument goes as follows: The Governmental Accounting Standards Board’s rules require that a pension plan closed to new hires pay off its unfunded liabilities more aggressively, causing a short-term increase in costs.

But GASB standards don’t have the force of law; nearly 60% of plan sponsors failed to pay GASB’s supposedly required pension contributions last year…GASB standards are for disclosure purposes and not intended to guide funding. New standards issued in 2014, GASB says, “mark a definitive separation of accounting and financial reporting from funding.”

In fact, nothing requires a closed pension plan to pay off its unfunded liabilities rapidly, and there’s no reason it should…Whether new hires are in a defined-contribution pension or the old defined-benefit plan, the size of the unfunded liability and the payer of that liability are the same.

Michigan’s school pension system is among those “60 percent of plan sponsors” who failed to meet “annual required contributions” last year, and thus it broke a GASB “rule.” This means the state did not contribute the amount the system’s own accountants estimated is needed to both cover the cost of another year’s pension credit earned by school employees, and start “catching up” on the past underfunding that has generated a $26 billion unfunded liability. (The estimate was $2.1 billion, and the state only put in $1.6 billion.)

Rule number one of getting out of a hole is to stop digging it deeper. The bill passed by the Michigan Senate in 2012 was potentially transformational because it would have closed the defined-benefit school pension system to new hires, placing the state on a glide path to eventually getting out from under employee legacy costs.

The signs are hopeful that the current House and Senate may complete the work begun by Gov. John Engler and the 1996 Legislature when they closed the state employee pension system to new hires, a reform that saved taxpayers between $2.3 and $4.3 billion.

Right-to-work is not for or against unions. In fact, the only effect of right-to-work on collective bargaining is that it takes away a union’s ability to get a worker fired for not paying them.

In 1999 Robert P. Hunter, a Senior Fellow in Labor Policy for the Mackinac Center for Public Policy, created the Spectrum of Government Intervention in Organized Labor. On one side of the spectrum was government outlawing unions, labeling them a criminal conspiracy. On the other side was forcing all workers to be members of a union.

click to enlarge

Hunter, taking a Goldilocks approach, said that the preferred place for government intervention in organized labor was in the middle: neutrality. Hunter maintained that government should not force or forbid anyone from joining (or associating with) a union.

While right-to-work is not completely neutral — workers can still be forced to accept representation from a union and employers are still obligated to negotiate with a union — it is a step closer to Hunter’s ideal.

With right-to-work, unions, workers and employers can still bargain over wages, hours, working conditions and everything else they typically bargain over.

The difference is that with right-to-work a union must earn the dues of its members.

By proving their worth to their membership and making them compete, right-to-work can make unions stronger. Combine this competition with right-to-work states adding more jobs — meaning there is more opportunity for union jobs — and the result is that union membership may grow faster in right-to-work states compared to non-right-to-work states.

In 2014, the right-to-work state of Indiana tied with the non-right-to-work state of Colorado for adding the most union members in the country. Both states added 50,000 new union members each, according to data from the Bureau of Labor Statistics. The state that lost the most union members was the non-right-to-work state of Washington, which lost 55,000 members.

The ratio of which group of states adds more union members varies each year. In 2012, right-to-work states added 39,000 new members and non-right-to-work states lost 390,000. Other years, like last year, forced-unionism states come out ahead.

Even union officials are starting to take notice of the fact that right-to-work can help unions thrive.

As Gary Casteel, secretary-treasurer for the United Auto Workers recently noted:

“I've never understood [why] people think right to work hurts unions … To me, it helps them. You don't have to belong if you don't want to. So if I go to an organizing drive, I can tell these workers, 'If you don't like this arrangement, you don't have to belong.' Versus, 'If we get 50 percent of you, then all of you have to belong, whether you like to or not.' I don't even like the way that sounds, because it's a voluntary system, and if you don't think the system's earning its keep, then you don't have to pay.”

A year after Michigan passed its right-to-work law, Doug Pratt, director of member and political engagement for the Michigan Education Association, said that right-to-work caused his union to increase their efforts to “explain to our members why membership is of value,” and that “We’re stronger because of it …”

Likewise John Beck, an associate professor in Michigan State University’s School of Human Resources and Labor Relations told the Livingston Daily:

“There’s an imperative now that really demands that unions pay more attention to [member engagement] than they have in the past. In that way, I don’t think that, by its very nature, [right-to-work is] the death knell. In fact, some would argue that it’s actually going to be kind of a needed shot in the arm.”

Right-to-work has little effect on collective bargaining, but can have major effects on the efficacy of union representation.

(Editor’s note: A version of this article first appeared on the Web site of the Illinois Policy Institute.)

House Considers Repealing Outdated Crimes

There are current laws against walkathons and bad language

Yesterday the House Committee on Criminal Justice heard testimony on a package of bills that would amend or repeal several archaic laws. Among the laws under consideration are criminal prohibitions on participating in walkathons, playing “The Star‑Spangled Banner” as part of a medley, using “reproachful” language and selling dyed baby chicks and rabbits. The hearing was covered by the Detroit Free Press and MLive.com.

A study published by the Mackinac Center and Manhattan Institute found that Michigan has more than 3,100 criminal prohibitions in statute. The study identified numerous criminal laws that could be either repealed or amended to reduce the penalties.

The efforts to prune unnecessary crimes from the books are led by a work group led by Rep. Chris Afendoulis, R‑Grand Rapids Township, and Rep. Kurt Heise, R‑Plymouth.

This is a worthwhile process; a review by the Michigan Legislature will identify dozens of laws that no longer serve a useful purpose in protecting people or property. Additionally, the Legislature should enact a bill that would clarify whether criminal defendants should have known they were committing a crime.

Automatic Tax Increases are Not Good Policy

Letter: Continued cigarette tax policy will increase smuggling from other states

Author’s Note: This was originally published Friday, March 20, in the Post Bulletin (see Postbulletin.com).

The Post Bulletin’s recent op-ed arguing for maintenance of the state’s existing automatic tax increase on cigarettes (Our View: Cigarette tax should be left alone, March 12, 2015) is misleading and shortsighted on several fronts.

First, it does not provide evidence to support its assertion that “the number of smokers in Minnesota has continued to drop since the Legislature raised the excise tax on cigarettes in 2013.”

Instead it cites Minnesota surveys conducted in 2010 and 2014 that show a rate decline of 10.6 percent (from 16.1 percent to 14.4 percent). Most of the decline took place before the tax hike was imposed.

Second, in 2012 we estimated the average cigarette consumption decline among states at 2.3 percent. This alone explains almost 87 percent of the smoking rate drop the Post Bulletin erroneously credits to Minnesota’s previous cigarette tax hike.

Lastly, we estimated the smuggling rate differences in Minnesota with an excise tax rate of $2.83 and $2.90. Raising the tax by 7 cents hiked the state smuggling rate by 0.8 percentage points. If that becomes an annual average Minnesota will remain a top five smuggling state and for little in the way of gains to public health.

A better solution is to adopt the bill repealing automatic adjustments upward and let the real price of cigarettes drift back down to more rational levels.

March 20, 2015, MichiganVotes Weekly Roll Call

Abortions, homosexual adoptions, school bake sale "push-back"

Now with one click you can approve or disapprove of key votes by your legislators using the VoteSpotter smart phone app. Visit votespotter.com and download VoteSpotter today!


Senate Bill 84, Authorize “Choose Life” license plate: Passed 26 to 11 in the Senate

To require the Secretary of State to develop a “Choose Life” license plate, with fees collected from its sale given to organizations and projects that promote alternatives to abortion.

Who Voted “Yes” and Who Voted “No”


Senate Bill 139, Push-back against school “bake sale” restrictions: Passed 36 to 1 in the Senate

To require the Michigan Department of Education (MDOE) to “take all steps necessary to ensure maximum state and local control over” school lunch nutrition mandates. Also, to limit to three per week the number of fundraising sales of food or beverages during school hours that do not meet mandated school lunch nutritional standards. The bill was introduced in response to federal and MDOE restrictions and bans on the sales.

Who Voted “Yes” and Who Voted “No”


House Bill 4038, Allow eviction notices by email: 85 to 24 in the House

To allow landlords to send eviction notices by email, if the lease provides for this. Sending these notices is just the first step in the eviction process.

Who Voted “Yes” and Who Voted “No”


House Bill 4189, Let adoption agencies refuse adoptions that violate moral convictions: Passed 65 to 44 in the House

To specify in statute that private adoption or foster care agencies are not required to participate in an adoption or placement that violates their written religious or moral convictions, including adoptions of a child by a homosexual. Also, to prohibit a state agency from discriminating or taking an “adverse action” against a child placement service for this reason.

Who Voted “Yes” and Who Voted “No”


SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate.

Media Covers MEA President’s Public Pension

Story first discovered by Michigan Capitol Confidential

The Detroit News and WLNS 6 News have reported on the deal between the Michigan Education Association and Lansing School District where the district pays Steve Cook’s $201,613 salary and $51,976 pension contribution, which is then reimbursed by the Michigan Education Association.

Steve Cook is listed as an “Educator on Loan” from the school district to the union. Cook is president of a private organization and does not have any job duties with the Lansing School District.

Michigan Capitol Confidential first drew attention to this arrangement with a report on Feb. 26, 2015, with a follow-up story the next day.