Government Relations Update
From Jamie Callahan
November 2, 2007

State Budget: Agreement is Found

With over seventeen hours to spare before a second possible state shutdown on October 31, the legislature approved the last pieces of the FY 2008 budget.The two bills enacted at the end of September, raising taxes $1.3 billion for FY 2008, gave the state the money necessary to remain operational during the October continuation budget.

The administration and legislature were able to come to agreement on the final points of the budget relating to the privatization of certain foster care and juvenile justice services and whether the state should continue moving towards financing an additional crossing of the Detroit River.The governor has said she would not veto scholarship funds designated to students attending private colleges, which was an earlier point of contention.

One interesting point in the budget is that the agreement contains $750 million more in the General Fund part of the budget compared to last year, up to $9.86 billion.The total state budget is approximately $43 billion.The reasoning behind the increase comes from the need to repay obligations from the 2007 fiscal year that the legislature pushed off until this fiscal year, such as debt service, Merit Award Trust Fund payments and university and community college payments.The increase can also be attributed to additional funding to cover higher Medicaid costs and state employee benefit costs.

Another point to monitor is the DNR and DEQ budgets, as they were passed with what could be called mystery money.Both budgets were passed with a total of $26 million generated from fee increases yet to be specified.The fee increases will need to be enacted by January 15, 2008, to avoid a reduction in departmental services.

According to reports, the fees targeted to cover the gap are a $5 increase to fishing and hunting licenses and increases to environmental regulation fees (typically paid by the business community).The revenues sought break out as $8 million for the DNR and $18 million for the DEQ.

Sales Tax on Services: Repeal Efforts Begin

Momentum to repeal the recently enacted sales tax on services is growing, now that the legislature has put the state budget to rest.

Bills have been introduced in both the House and Senate to repeal the recently enacted and much maligned tax.Bills have also been introduced to delay implementation as well as bills to exempt specific activities.No bills have been introduced at the submission of this article that make the repeal revenue neutral, such as a surcharge to the Michigan Business Tax (MBT) or an adjustment to MBT rates.

On November 1^st, the Senate passed SB 845, which pushed the effective date of the services tax to December 20^th, giving them more time to negotiate the repeal of the widely despised tax. Committee hearings are slated in both the House and Senate starting as early as November 5^th on either specific bills or the service tax in general.

The Northwest Michigan Regional Chambers Alliance (which Traverse City Area Chamber is a member) issued a statement in support of repealing the services tax.It can be viewed by clicking this link.

The ‘Ax the Tax Coalition’ launched their petition initiative to repeal the services tax with a press conference in Lansing.Their website is up and running at www.axthetax.com.There is a section on the website for those interested in helping collect signatures as part of the petition initiative.

The chamber continues to be active in working for the repeal of this burdensome tax.If you are interested in submitting testimony regarding the service tax, the chamber is collecting comment from members to personally deliver to the chairs by emailing our Government Relations Division.If you choose, you may send comment directly to the committee chairs, Sen. Nancy Cassis and Rep. Steve Bieda.As always, it a good idea to make sure your Representative and Senator receive a copy of your correspondence.Contact information for your local legislators are available on the Traverse City Area Chamber of Commerce website.

Back to Business

Now that the state budget has finally been resolved (other than the fee increases noted earlier), the legislature will likely start addressing a number of issues that took a back seat to budget negotiations.

In addition to the repeal of the service tax, issues likely to pop up before the Thanksgiving break include individual market reform for insurance, ergonomic standards, water diversion, brownfield redevelopment, and energy policy, among others.