Feb. 18 | This Week In Government: Whitmer Signs $1.2B Health Care, In-Person Learning Supplemental; EV Workgroup Contemplating Gas Tax Replacement As Sector FlourishesFebruary 18, 2022
- Whitmer Signs $1.2B Health Care, In-Person Learning Supplemental
- EV Workgroup Contemplating Gas Tax Replacement As Sector Flourishes
- Fiscal Agencies: Biz Tax Revenue Lower Than Expected So Far In ’22
- Senate OKs Personal, Corporate Income Tax Cuts Costing $2B+
- Enbridge RFP Approved For New Line 5 Tunnel
Roughly $1.2 billion in funding will be disbursed to health care workers, schools, and places utilizing COVID-19 testing after Gov. Gretchen Whitmer signed the latest supplemental to dole out federal dollars on Wednesday.
The bill, HB 5523, includes appropriations of $300 million for health care recruitment, retention and training; $150.8 million for testing and screening for COVID-19 in schools; and another $367.3 million to boost lab capacity grants to speed up processing COVID-19 tests.
Whitmer, in a statement, called the bill a “testament to what’s possible when Republicans and Democrats work together to put Michiganders first.”
“The funding will ensure that our kids can continue safely learning in person by expanding testing and screening in schools and make healthcare more accessible to regular Michiganders by allocating funds to recruit and retain critical healthcare workers,” she said. “I look forward to continuing in this spirit of collaboration on the fiscal year 2023 budget, which will create good-paying jobs and put money in Michiganders’ pockets. Let’s work together to invest more of the federal resources we have in programs and initiatives that put Michiganders first.”
Health care officials applauded the move, including Jamie Brown, critical care nurse and president of the Michigan Nurses Association.
“Nurses and other healthcare workers are exhausted after working non-stop in difficult circumstances throughout the pandemic and have made countless sacrifices, including putting our own lives at risk,” Brown said. “Anything that can be done to support healthcare workers should be done immediately in order to retain and recruit the healthcare workers needed to provide patient care as we move forward. It’s urgent that hospitals get these resources to frontline workers as soon as possible.”
With Whitmer signing this latest supplemental, the state will still have $4.7 billion remaining in funds from the American Rescue Plan Act for state fiscal relief to spend.
Whitmer also signed HB 4410 (PA 10, immediate effect), a capital outlay bill that increases the project cost for an engineering and health technology campus at Michigan Technological University.
The chair of the House Appropriations Transportation Subcommittee on Wednesday said he was already in discussions with other legislators on the state’s electric vehicle workgroup about new funding models for transportation revenues if gasoline taxes become obsolete as EV sales and use flourish as expected.
A mention of such conversations came to the forefront during a presentation to the committee on Wednesday from Department of Transportation Director Paul Ajegba on 2022-23 fiscal year budget proposals released last week. Rep. Sue Allor (R-Wolverine), a new addition to the subcommittee, had asked Ajegba how the gas tax would be affected by switching to EVs in the long run and what that could do to state revenues.
Ajegba said the transition from combustion to electric engines would have “a huge impact,” as fewer people using combustion vehicles would ultimately mean less gasoline tax revenues. He also said he shares concerns about future MDOT funding and encouraged the Legislature to start talking about a replacement sooner than later.
“It’s already having impact on manufacturers, who have already said we’re marching towards electric vehicles in 2030 to 2035. Every year leading toward that 2035, people are buying electric vehicles, meaning less gas tax revenue. So last year, this year, we probably lost some gas tax revenues coming in and it’s only going to get worse as more people buy electric vehicles,” Ajegba said. “I think the challenge for us as a state is not so much about incentives for people to buy electric vehicles. It’s to figure out what is going to replace the gas tax method collection of revenues for our transportation system. There’s a lot of ideas out there, obviously. Vehicle miles traveled is one, but that’s also had its challenges. So, I think for the legislators and also professionals in the transportation industry, we’ve got to start having that conversation because it’s already taking place.”
To that, Chair Rep. Scott VanSingel (R-Grant) said there has been work going on behind the scenes on that very issue among the state’s electric vehicle workgroup, even if such talks have not been made public yet.
“We’ve been looking at what roadblocks are there right now to electric vehicles ramping up and just kind of gathering information as to what that industry will look like. And then, on top of that, (Rep. Jack O’Malley) and I were asked last year to come up with a road plan that takes this into account,” VanSingel said. “We pretty much have two funding models between registration fees and gas taxes that fund almost our entire transportation budget when you look at roads, and one of those will be obsolete. That’s a big deal when you only have two major sources. So, we’re trying to get ahead of this. I’ve shared some of those ideas personally with the governor and she’s been receptive. But nothing moves quickly in government, especially when you start talking about revenue. Please be assured, there are people looking into this and the sooner the better. We never make good decisions when we’re in crisis mode. So, I would love to see some work done before we leave the legislature.”
The committee also discussed various spending requests outlined in the budget proposals, such as a one-time investment of $279.9 million into the General Fund, which would amount to investments in four MDOT projects. Those include an aviation weather station reliability initiative ($3.9 million), critical local road and bridge infrastructure ($150 million), a priority rail grade crossing and separation initiative ($60 million) and upgrades to statewide pump station reliability ($66 million).
Pump station upgrades were of particular importance due to the flooding seen last year on Detroit-area freeways, a situation exacerbated by power failures that prevented the pump stations from doing their jobs and clearing water from the area’s carved out highways.
If approved, the state would install instant generators with the money that can kick on if a power failure occurs. Ajegba said the cost of doing so would be far cheaper than a full freeway and highway redesign, which could cost the state billions of dollars.
An example Ajegba used was I-94, which incurred major pavement damage and closures for 14 days to repair damage at a cost of $400,000.
“What I always try to emphasize to people is the cost of the repair is relatively cheap. It is the 14 days that we had to detour traffic around our freeway,” he said. “The delay to the costs to the supply chain pipeline was very devastated. So we’re hoping if we can equip these pump stations with these generators, we’re not going to have to deal with this again in the future.”
The state’s business taxes brought in less revenue than anticipated for the month of January, the House and Senate Fiscal agencies said in their monthly reports released Thursday.
Net business taxes – the single business tax, the Michigan business tax, the corporate income tax, and insurance company taxes – were $65.1 million lower through January 2022 than a year ago, the House Fiscal Agency said.
Michigan business tax refunds were “substantially larger,” than last year, HFA said, though the corporate income tax brought in more than estimated.
The Senate Fiscal Agency said the business taxes combined showed a net loss of revenue and were $67.5 million more negative than forecasted. The MBT alone was $65.1 million more negative than expected.
Overall, the General Fund saw $1.3 billion in January 2022, about $128.8 million below January estimates. Net income tax collections, sales and use taxes exceeded estimates but were offset by lower than projected income tax collections, HFA said.
The House agency said School Aid Fund saw $1.33 billion in January, about $137.4 million above estimates.
The SFA said General Fund revenue was $31.3 million above expectations and the School Aid Fund was $84.4 million above estimates as the two combined for $2.9 billion during January, a 2.9 percent increase from last year.
Revenue from consumption taxes, which include sales and use taxes, beer and wine taxes, liquor taxes and tobacco taxes, totaled $1.19 billion in January 2022, roughly $470.1 million higher than last year on a year-to-date basis, HFA said.
The SFA said sales tax receipts totaled $878.5 million in January, a 16.3 percent increase from last year. Sales tax on vehicle sales exceeded $100 million for the 11th consecutive month, SFA said.
Net income tax revenue totaled $1.57 billion in January, HFA said, and gross collections so far this year were $748.6 million higher than last year, primary due to withholding and collections from the new flow through entity tax.
SFA had net income tax revenue at $1.6 billion, an 8.3 percent increase from last year and $68.2 million above estimates.
Members of the Senate voted Tuesday along party lines to lower the state’s individual and corporate income tax rates to 3.9%, a move which supporters have said would assist families and businesses across the state in the wake of the coronavirus pandemic.
While majority Republicans hailed the bill passage as a much-needed cut for working families and businesses recovering from the pandemic, Democrats bashed the proposal as being a handout to corporations while offering little to residents. The minority party also accused the GOP of moving legislation that stands no chance of being signed by Gov. Gretchen Whitmer.
Passing the Senate 22-16 was SB 768, which was substituted to also include an increase in the deduction a person could claim on retirement benefits. In total, the proposal could cost up to $2.6 billion by 2023.
Under SB 768, introduced by Sen. Aric Nesbitt (R-Lawton), the personal and corporate income tax rates would be lowered to 3.9 percent, effective tax years beginning January 1, 2022. The current state personal income tax rate is 4.25 percent and for the state corporate income tax rate it is 6 percent. The bill would also provide a $500 tax credit per child for families.
Under an S-5 substitute adopted prior to the vote, provisions from SB 467, a bill introduced by Sen. Jim Runestad (R-White Lake) were included. Beginning with the 2022 tax year, a person aged 67 and older would be eligible for a deduction against all types of income of $30,000 for a single return and $60,000 for a joint return. Beginning in the 2023 tax year the deduction would rise with inflation, rounded to the nearest $100 increment.
As passed, the Senate Fiscal Agency estimated combined revenue reduction of General Fund and School Aid Fund of between $1.77 billion and $1.81 billion during fiscal year 2021-22. This would increase to between $2.48 billion and $2.54 billion in fiscal year 2022-23 and to between $2.55 billion and $2.61 billion in fiscal year 2023-24.
The move comes as the issue of providing some form of tax cut has gained momentum within the Legislature and the governor’s administration with the beginning of the latest budget cycle.
Some Republicans have been calling for a large-scale tax cut, saying businesses and families deserve a reduction in response to the impacts of the pandemic and rising inflation. Whitmer’s administration has proposed more targeted cuts to taxes including an expansion of the Earned Income Tax Credit and the restoration of exemptions on retirement income.
Both parties staked out sharply opposing views on the bill during debate.
Sen. Curtis Hertel Jr. (D-East Lansing) said the bill provides a tax cut six times larger for corporations than working families. He added there has been no information provided by Republicans as to where cuts would be needed to be made in the budget if the bill were signed.
“The only thing they’re interested in is in cutting a campaign ad on the Senate floor,” Hertel said. “It is nothing but a show, an attempt to pay off large corporate donors and does nothing for the people of Michigan.”
Sen. Jeremy Moss (D-Southfield) pointed to the corporate income tax cut and the accompanying move to create the pension tax enacted during the administration of former Governor Rick Snyder by Republicans.
“Now, legislative Republicans who have spent a decade bemoaning, decrying, assailing the pension tax that they themselves created, are setting up the exact same framework to further shed our tax burden off of corporations and onto Michigan residents,” Moss said, adding that if enacted it would be likely Republicans would burden families with further taxes in the event of a future budget shortfall rather than corporations.
For Republicans, the focus was on the rate of inflation being the highest it has been since the early 1980s, seeking to point the finger at Democratic policies in response to the pandemic for the paychecks of families not going as far as in the past.
Sen. Michael MacDonald (R-Macomb Township) referred to a recent Moody’s Analytics report of average households spending about $276 more per month due to the current rise in inflation.
“This comes on the heels of job losses, business closures and supply chain disruptions caused by the pandemic and shutdowns of our economy,” MacDonald said. “The time is now to let every Michigander keep more of what they earn.”
Sen. Jim Runestad (R-White Lake) echoed his colleague on inflation, saying a larger tax cut would help businesses and families.
“Michigan’s businesses who survived the pandemic and the shutdown of our economy need to get back on their feet, and this plan makes us competitive,” Runestad said, adding the changes would help attract businesses to the state.
Nesbitt told reporters following session the bill would help families who are struggling as well as businesses, saying he believes it will also make Michigan more competitive than other states.
“This is all about hard-working taxpayers who are in the state of Michigan, and these businesses that were shut down here in the state of Michigan, trying to make Michigan more competitive so we can grow the state, invest in the state and ensure that we’re the best state in the U.S. to … start a career, raise a family,” Nesbitt said. “We need to be competitive with other states instead of trying to put up the surrender flag like those on the Democratic side of the aisle are trying to do.”
Nesbitt when asked about the fiscal analysis was not concerned about the state’s ability to absorb the cost of the proposed tax cut, saying the state budget has grown from less than $50 billion a little more than a decade ago to a proposal of about $74.1 billion for the upcoming fiscal year.
“When you cut taxes, when you invest in Michigan workers, when you invest in Michigan small businesses you grow the economy, you add more people,” Nesbitt said. “We’ve got to get growing again. We can’t just keep slicing up the same size of the pie, we’ve got to grow that pie here in the state of Michigan, and this is something that’s transformational and trying to push that growth in the state.”
The senator added a large majority of the tax cuts in the bill go to families, not corporations.
Still, Nesbitt’s pointing to the state’s budget increases is mostly federal dollars and surplus monies now expected to be one time. Rep. Thomas Albert (R-Lowell), chair of the House Appropriations Committee, has said the state has about $800 million to work with in ongoing funds that could be used toward a tax cut.
Senate Minority Leader Jim Ananich (D-Flint) told reporters families do not benefit from the proposal.
“I think we should be targeting our relief to people that actually are suffering because of inflation, and I think that’s a much more logical place to go and there’s other ways to do it,” Ananich said.
He said other options could include sending checks to residents, increase the size of tax credits that can be claimed by filers, targeting the retirement tax or through various tax exemptions. He added that items like the $500 child tax credit could be something to sit down and include in tax policy negotiations.
Statements from business and conservative groups, including the Small Business Association and the National Federation of Independent Business, hailed the passage of SB 768.
Michigan Freedom Fund Executive Director Tori Sachs also expressed support for the bill while also taking aim at Democrats.
“The state has a $20 billion budget surplus and recently handed out a billion dollars to just one company,” Sachs said. “Instead of spending the taxpayers’ money on more projects for Whitmer’s special interests, the Senate voted to give it back to the people. The state House should do the same and quickly vote to return this money to taxpayers who are struggling with record inflation in the Whitmer-Biden economy.”
In opposition to the bill was the Michigan League for Public Policy.
“Broad-based tax changes, like the cuts to the personal and corporate income taxes, will primarily benefit wealthy individuals and corporations, do little to help spur our economy and have a devastating impact on our ability to provide the services that our businesses and residents value,” the group’s president and CEO Monique Stanton said. “Instead of drastic cuts across the board, regardless of income or need, lawmakers should be providing robust educational opportunities, making transportation more reliable and sustainable, ensuring our water is safe, supporting families, and providing better social and built infrastructure.”
The Mackinac Straits Corridor Authority approved Enbridge Energy’s Request for Proposal for construction of the Great Lakes Tunnel on Wednesday, despite nearly all public commentors and a study from a Canadian environmental group continuing to press fears Line 5 will inevitably burst.
The Corridor Authority accepted Enbridge’s RFP after adopting a Memorandum of Understanding. The MOU determined Enbridge will hire the contractors to construct the tunnel and the Corridor Authority will hire an insurance contractor to perform standards checkups.
The memorandum also ensures Enbridge will allow access to sites and records for the state to collect information when needed.
Mike Mooney, a consultant for the board, said since the last meeting the RFP’s seven points adhering with section 7.5(b) of the Tunnel Agreement made changes with comments made by board members in mind. In October 2021, Board member Paul Novak (D-Detroit) demanded the MOU to clarify how records were passed and that they reach the authority’s contractors in a timely fashion. Novak was not present at the Wednesday meeting.
Mooney said throughout the review process comments from consultants were addressed and resolved by Enbridge, though Mr. Mooney did not specify what the comments were. He did, however, recommend moving forward with the RFP.
The U.S. Army Corps of Engineers, the Department of Environment, Great Lakes and Energy and the Public Service Commission are still in the process of issuing permits. The PSC will provide more information sometime in March. Board member Tony England (D-Ypsilanti) asked how long the Army Corps would take to issue its Environmental Impact Statement. Amber Pastoor, Enbridge tunnel project manager, said the process could take roughly six months, shorter than the projected two years granted to the Corps.
England asked if this would add six months to the timeline, further delaying the commencement of construction. Pastoor said the company can “pump the brakes or accelerate” where it needed to.
The board also touched on comments made by members of the Bay Mills Indian Community and the Pokagon Band of Potawatomi Indians regarding the RFP and proposed Tribal Consultation Policy, with Assistant Attorney General Ray Howd saying their concerns were addressed in a letter recently sent.
Upon request, Bay Mills was granted access to a 2,000-word geotechnical data report. The Pokagon Band raised concerns about the methodology used to screen alternative technical concepts brought forth by bidders, however Howd said the authority responded that any changes to environmental documents must have authority approval.
During public comment several tribal members questioned the consultation between these tribes and the Corridor Authority, with one commentor saying the Tribal Consultation Policy was merely to give off the impression that tribal communities were involved in the decision making.
“The concept of an indigenous consultation has come up recently. What does this vague term even mean?” Hadassah Greensky, member of the Little Traverse Bay Bands of Odawa Indians, said. “Oftentimes this position is given to a singular token indigenous person in order to check a box of inclusivity … my question is how could one or two, or even 10 people, be the decision makers for a nation over 320,000 protectors of the Great Lakes?”
Bay Mills Indian Community President Whitney Gravelle released a statement as well despite comments made by board members and consultants that issues brought forward by the community were resolved. Gravelle referenced a study down by Environmental Defence Canada calling to shutdown Line 5 and use alternative measures.
“Line 5 is an urgent threat not only to our indigenous way of life, but to everyone who calls the Great Lakes home,” the Bay Mills president said. “This report only reaffirms what we have been saying all along – that Line 5 can be shut down with minimal impact. We urge the U.S. and Canadian governments to work together toward that end goal as quickly as possible.”
In a summary of the study, the group reported Line 5 has leaked at least 29 times since 1953 and spilled at least 4.5 million liters – 1.18 million gallons – of oil into surrounding lands and waters.
The group offers several alternatives in its study, including using Enbridge’s Line 78 to distribute crude oil to Sarnia, Ontario. The oil shipped to Sarnia feeds into Ontario refineries and to a refinery in Warren, Pennsylvania. They estimated an additional two to three trains could also be used per day to transport the oil in the instance of a Line 5 closure.
As far as costs, the assumed increase in gasoline prices would be $2.01 per barrel.
Sean McBrearty, Oil & Water Don’t Mix Coordinator, released a statement and said the Environmental Defence’s conclusion was correct. He also said the idea to wait for Line 5 to rupture before shutting it down should be “thoroughly rejected out of hand.”
“The report and Environmental Defence’s overview, Closing Enbridge’s Line 5 Pipeline, makes the case that the worst possible option for Canada’s energy supply and Ontario’s energy consumers is to delay action until Line 5 ruptures or hope that a Great Lakes oil tunnel survives scrutiny and gets built sometime in the distant future before a catastrophic Line 5 failure,” he said. “The report lays out in detail a path forward for Canada and does it strictly on oil industry terms, evaluating only fossil fuel transport options. While renewable energy options and the global transition from fossil fuels aren’t considered in the report itself, Environmental Defence makes the case for clean energy in their overview.”
He continued to say regardless of Canada’s response, President Joe Biden should support Gov. Gretchen Whitmer’s order to shut down Line 5 and Attorney General Dana Nessel’s actions to attempt to decommission the pipeline.
“In Michigan, we know first-hand that we can’t trust Enbridge. It was Enbridge’s negligence that led in 2010 to the largest oil pipeline rupture in the state’s history,” McBrearty said in his statement.
Enbridge spokesperson Ryan Duffy said the alternatives proposed would put the environment at risk and would burn more fuel to transport energy, clogging critical roads and rail lines while creating unnecessary energy dislocations and raising prices.
“Environmental Defense also came up short in that it cites another pipeline (Line 78) as a viable alternative source, yet that pipeline is already full and meeting the demands of other customers,” Duffy said in a statement. “The one thing proved by this misguided plan is that a shutdown of Line 5 would have a significant and immediate impact on the region’s energy supply, businesses and hard working families in Michigan, Ohio, Pennsylvania and Canada’s two largest province – it makes no sense.”
He said Enbridge will continue to advance the project and once all permits have been received, the company is committed to start construction within the timeframe outlined in the Tunnel Agreement. To date, the company has put more than $100 million into the project.
“Placing the pipeline in a new Great Lakes Tunnel will provide extra layers of safety and environmental protection making a safe pipeline even safer, while creating Michigan jobs and securing the energy consumers in Michigan and the region rely on every single day to live their lives and fuel the economy,” Duffy said