March 3, 2023 | This Week in Government: $1.34B Supplemental Passes House

The $1.34 billion supplemental appropriations package approved by the Senate Tuesday night is on its way to the governor’s desk with hundreds of millions to aid a Ford Motor Company plant in Marshall and an agreement to pass a series of tax breaks for various businesses following House action Wednesday.

The House passed HB 4016 on a vote of 59-49, with four Republicans joining 55 Democrats in support. Rep. Phil Green (R-Watertown Township), Rep. Mike Mueller (R-Linden), Rep. Kathy Schmaltz (R-Jackson), and Rep. Curt VanderWall (R-Ludington) all voted in favor of the bill.

The Republican Caucus cut deals with Democratic leaders and the Governor’s Office to get the legislation over the finish line, including sending HB 4001 to the governor’s desk without immediate effect in the Senate and tax cuts for small businesses.

The legislation includes incentives for the Ford Motor Company electric vehicle battery plant, an additional deposit from the General Fund into the Strategic Outreach and Attraction Reserve fund, and spending on housing, water utilities, and various projects that were included in the bill as passed by the Senate (See Gongwer Report Feb. 28, 2023).

“Michigan is pressing forward and is showing that it’s important for us to attract good paying jobs. It’s important for us to support the health care sector. It’s important for us to look after our environment,” House Speaker Joe Tate (D-Detroit) said following the bill’s passage. “We have these important items, and continue to have those conversations until we can get across the finish line with the work that we’re doing– and doing it in a bipartisan fashion.”

Rep. Dylan Wegela (D-Garden City) was the lone Democrat to vote against the legislation. Wegela has twice voted against bills containing appropriations to the SOAR fund (See Gongwer Michigan Report, Jan. 26, 2023, See Gongwer Michigan Report, Feb. 9, 2023).

The package includes approximately $630 million for a Ford electric vehicle battery plant in Marshall, of which $330 million will go to the Department of Transportation and just under $300 million will go to the Department of Labor and Economic Opportunity.

“It’s the best economic news to South Central Michigan in my lifetime. The best economic news we’ve had in South Central Michigan since…W.K. Kellogg invented the cornflake 120 years ago,” Rep. Jim Haadsma (D-Battle Creek) said during a speech on the floor. “This is game changing.”

An additional $170.3 million deposit from the General Fund will go into the SOAR fund. A total of $212.5 million in federal funding will go to the Department of Environment, Great Lakes, and Energy for the federal Home Energy Rebate program and for the oversite of disposal wells. The bill also includes funding for the Department of Health and Human Services, the Department of Natural Resources, and the Department of Military and Veterans Affairs.

Many of those items outside of SOAR were needed to secure the vote of Democrats starting to chafe at the continued push of Gov. Whitmer to stock the SOAR fund with huge sums in the many hundreds of millions.

To secure Republican votes, Minority Leader Matt Hall (R-Richland) worked with Democratic leaders and the Governor’s Office to agree on future legislative items that the Republican caucus would like to see passed.

“The leader worked together with the governor and Democratic leaders to make sure to put together an agreement,” said Jerry Ward, press secretary for Minority Leader Matt Hall (R-Richland). “Leader Hall and our caucus worked very hard to make sure that we got some sort of progress for the people of Michigan out of this vote.”

As part of the agreement with Republicans, Democratic leaders agreed to send HB 4001 to the governor without immediate effect in the Senate (see separate story). This prevents the $180 rebate checks from being cut, meaning that the state may not avoid triggering a potential income tax rollback written into a 2015 law, which was the primary objection of the Republican Caucus to HB 4001.

There also will be tax cuts for small businesses, a sales and use tax exemption for delivery and installation, and sales and use tax exemptions on industrial processing.

There will also be statutory changes to the Michigan Strategic Fund Board so that the minority leaders of the House and the Senate each get one appointment, expanding it to a 13-member board, Ward said.

“We expect those to move in the next little while,” he said.

Republicans have pressed for the exemption on delivery and installation after the Department of Treasury began assessing sales and use tax on those items. Tate would not speak specifically to the negotiations.

“I think there are a lot of items and bills that will be taken up,” he said. “In terms of 4016, my focus has been on the content of this bill.”

Some Republicans criticized Democrats for not openly discussing the contents of the bill prior to bringing it to a vote in the House.

It is the latest in a string of massive supplemental appropriations bills near or topping one billion rushed through the Legislature less than 24 hours after spending details were made public, a pattern going back to the 2019-20 term when Republicans were still in charge. The new Democratic majority appears to have adopted the tactic, at least for now.

“Why is this wheeling and dealing even necessary?” Rep. Ann Bollin (R-Brighton) said. “The people of Michigan entrust us with the great responsibility of appropriating their money…they deserve to know the facts and the data to determine whether money is being wasted.”

Republicans put forward nine different amendments to the bill Wednesday night, but all were gaveled down.

One of the amendments, put forward by Rep. Thomas Kuhn (R-Troy), would have ensured that the funding for the Ford project was deposited into SOAR and underwent the appropriations transfer process.

As passed, the funding for Ford will not go through the SOAR appropriations process because it’s a direct appropriation to site development and to the Marshall Area Economic Development Alliance.

“It is in keeping with the spirit of the appropriations process,” Tate spokesperson Amber McCann said. “The Legislature uses supplementals to take available money and put it toward their priorities, and we did so today.”

Gov. Gretchen Whitmer praised the final passage Wednesday of legislation increasing the exemption for retirement income and expanding the Earned Income Tax Credit but was quiet on the now defunct $180 rebate checks that won’t go out to tax filers and the potential income tax rate cut that is still looming.

HB 4001 fell short Tuesday night of the 26 votes needed in the Senate for the required two-thirds majority to give the bill immediate effect. For the $800 million intended for the rebate checks to be appropriated, the bill needed immediate effect.

Because that money won’t be shifted in the 2021-22 fiscal year, the income tax rate could be reduced under the 2015 road funding package that mandates a reduction in the rate if General Fund revenues grow by a factor of inflation plus economic growth. Both the House and Senate Fiscal agencies projected GF revenue increased enough to trigger an income tax decrease to about 4.05 %. However, with books from the fiscal year not officially closed, it is unclear what will happen.

The House ordered the bill enrolled Wednesday and swiftly presented it to Whitmer at 7:41 p.m., starting the 14 days for the governor to sign or veto the bill. Whitmer hailed the movement of the bill to her desk and will sign it.

Republicans have hammered Democrats on the possibility of using the potential rebate to circumvent an income tax rate rollback, and it is the key reason they did not support HB 4001 nor immediate effect for the legislation.

Almost lost in the weeks of battling over the rebate vs. a rate rollback are two longtime Democratic priorities they have pursued for years.

The bill includes an expansion of the Earned Income Tax Credit to 30 percent of a filer’s federal EITC and a substantial deduction for retirement income to be phased in over four years.

It marks key proposals the Democrats have been calling for since 2011. Under Republican former Governor Rick Snyder’s administration, the EITC was cut, and the state began taxing pensions that were previously exempt.

Whitmer, in a statement Wednesday, praised the plan as real relief for those struggling most with inflation.

“This is long overdue relief for Michiganders after the rug was ripped out from under them in 2011, when the retirement tax was slapped on and the Working Families Tax Credit was gutted,” Whitmer said. “It was wrong. Now, we are making it right. We’ve been fighting to get this done for over a decade and I am proud to have partners in the Legislature committed to delivering real relief.”

Whitmer did not mention the $180 rebate checks ($90 each for those filing jointly) that were part of HB 4001 but won’t be sent out since the bill didn’t get an immediate effect. She also did not mention the income tax rate rollback. When asked about those items, a spokesperson for the governor pointed to the statement the governor sent out earlier in the day praising HB 4001 as passed.

Republicans are claiming a win.

“After Gov. Whitmer pulled out all the stops to ram through her plot to hike taxes on Michiganders and small businesses, Republicans stood strong for taxpayers in our state. The governor backed down, and her disastrous scheme failed,” House Minority Leader Matt Hall (R-Richland Township) said in a statement. “Now, every Michigan resident and small business will get a permanent income tax cut as they wrestle with the rising costs of living, now and in the years ahead. And working families and retired seniors struggling the most will see even more relief, under proposals championed by Republicans – without the extra baggage of Gov. Whitmer’s tax hike.” 

Applause filled the Senate chamber Wednesday after the body voted to expand the Elliott-Larsen Civil Rights Act to include sexual orientation and gender identity or expression, an effort that has been pushed unsuccessfully for decades.

Sen. Jeremy Moss, the state’s lone openly gay senator, told colleagues during a floor speech Wednesday that for 50 years, there has been a dogged but unsuccessful effort to add LGBTQ protections against discrimination into ELCRA.

Unsuccessful, he added, until Wednesday.

“Today I am running through the tape, but this baton has been passed from generations to generations of LGBTQ activists … many of whom are no longer with us after fearlessly dedicating their lives to equality,” Moss (D-Southfield) said. “This bill is dedicated to them.”

Moss, who also serves as the Senate’s president pro tempore, walked to the rostrum at the front of the chamber after he finished speaking to preside over the vote on his LGBTQ rights legislation, SB 4.

Moments later, a historic vote was taken, moving such legislation through a full legislative chamber for the first time in state history. A rare display of applause filled the chamber following the bill’s passage.

The ELCRA would be changed by banning discrimination based on sexual orientation and gender identity or expression under SB 4, which passed the Senate 23-15 with three Republicans joining all 20 Democrats in support: Sen. Joseph Bellino of Monroe, Sen. Ruth Johnson of Groveland Township, and Sen. Michael Webber of Rochester Hills.

Expanding ELCRA has received broad support from business groups that generally support Republicans, but still most GOP senators voted against the bill. The concerns from Republicans who voted no seemed to center around religious rights. Religion is also a protected class under ELCRA.

The bill now heads to the House, where the Democratic majority is expected to send the bill to Gov. Whitmer, who has urged codifying civil rights protections for LGBTQ persons.

Under the bill, the ELCRA would expand protections against discrimination in employment, public accommodations, and public services. It would also provide protections in educational facilities, housing, and real estate.

Moss told reporters after the vote it has been a long journey for himself and others to reach the point they had arrived at in Michigan on Wednesday.

“This was long overdue; this should have been done years ago,” Moss said, adding without protections there is nowhere to go for members of the LGBTQ community to seek justice in the event of discrimination. “This liberates us. This is a liberation of that oppression, that at long last here in the eyes of our law you cannot be fired, you cannot be evicted, you cannot be denied services and housing because you are LGBTQ, and this is going to save lives.”

Not everyone in the Senate saw things as Moss. Republicans introduced a trio of unsuccessful amendments to the bill seeking to include protections for persons with strongly held religious beliefs. Sen. Ed McBroom (R-Vulcan) then spent 30 minutes speaking about his opposition to the bill.

Sen. Jim Runestad (R-White Lake) introduced an amendment seeking to include religious orientation, identity, and expression language in the ELCRA.

“We can all agree that discrimination has no place in our communities. Likewise, we should all be able to agree that the state should never be able to discriminate against religious conscience,” Runestad said. “My own fear and the fear of many Michiganders with sincerely held religious beliefs is that is we pass SB 4 without clear protections for those practicing their faith, SB 4’s new categories may be used as a sword rather than a shield.”

Sen. Lana Theis (R-Brighton) agreed with Runestad, adding she believes no one should face discrimination.

“Michigan must act to protect the individual right to live out one’s faith without fear or governmental reprisal,” Theis said. “We should not be forced to do things against our will that violate our religious faith.”

Sen. Thomas Albert (R-Lowell) echoed his GOP colleagues, questioning whether religious groups, nonprofits, or individuals could be taken to court for exercising their religious beliefs.

“I cannot support changes to law and create a ‘super right’ to any group where a proposed change itself discriminates against another’s religious beliefs,” Albert said. “At that point, you’re simply trading one form of discrimination for another. It accomplishes nothing.”

Albert questioned whether a Catholic school would be required to hire someone who would promote beliefs different than that of the Catholic faith as well as the implications for school and public restrooms.

In McBroom’s speech, he touched on the nation’s history and issues, including slavery and matters of morals and religion.

Moss, prior to the vote, pushed back on Republican religious arguments, saying religion is already a protected class under ELCRA. He said expanding the act would not require clergy at a church or mosque to marry a Jewish couple or an LGBTQ couple, nor would it require a Catholic priest to marry someone who has previously been divorced.

Speaking after Moss were several members of his caucus who said they were proud to be casting their votes for the bill.

“It’s a proud moment here in the Michigan Senate today. This bill is an embodiment of our best ideals as Americans and as human beings,” Sen. Jeff Irwin (D-Ann Arbor) said.

Sen. Mallory McMorrow (D-Royal Oak) called the bill a way to right a wrong which she said was decades overdue. She said the movement to pass SB 4 sends a message to the rest of the country about Michigan being a welcoming place.

“You will be protected here. You can find a job, a career, doing what you love and a place in a community that you can call home,” McMorrow said.

For Sen. Sue Shink (D-Northfield Township), she said that Republican comments about their religious beliefs justifying discrimination against LGBT people “illustrates exactly why this legislation is necessary.”

“Everyone is entitled to their religious beliefs,” Shink said. “However, no one’s religious beliefs, no matter how sincerely they hold them or how gracious and God blessed they think they are, are an excuse for the oppression of others.”

Sen. Veronica Klinefelt (D-Eastpointe) spoke of how she had to listen to Wednesday’s floor speeches, referring to her son and how to some in the chamber it was clear to her that the way that her son lives his life “violates the conscience of others.”

“It is not my son’s fault that his mere existence interferes with others’ moral order of things, but it is precisely because individuals in this room and elsewhere have that feeling about my son that he needs to be protected against you,” Klinefelt said.

When Moss was asked after session about the religious arguments, such as hiring someone of a different faith to teach at a religious school as Albert had used, he said opponents were speaking in hypotheticals and are ill-informed of how the ELCRA works.

He said government cannot intervene in the religious interactions of a religious institution, daring Albert to try working at a Jewish school and see how long the employment would last if they sought to teach Christianity at such a school.

“There’s parts of this debate I feel like we’re talking about two different things, and the opposition is truly just ill-informed of Elliott-Larsen,” Moss said. “That’s one of the things that has frustrated me for a lot of years is that Elliott-Larsen, in this building has turned into a curse word, when the Act has saved lives.”

When asked what he believed should be next in LGBTQ legislation once SB 4 gets to the governor’s desk, Moss said changes to the state’s hate crimes statute should be an area of focus, as should be updating statue in places including references to marriage being solely between a man and a woman.

Another key focus, he said, would be a statewide vote to update the state Constitution to repeal the 2004 ballot measure that banned same-sex marriage and civil unions in the state. The 2015 U.S. Supreme Court ruling in Obergefell v. Hodges that recognized the right of same-sex couples to marry superseded the state’s marriage law. Moss said after the high court overturned Roe v. Wade, such a vote takes on a new urgency.

Watching the proceedings Wednesday in the Senate gallery was former Republican Rep. Frank Foster of Petosky, who sponsored a bill in the 2013-14 session to expand ELCRA to include sexual orientation. Foster lost a primary election in 2014 to Lee Chatfield, who in part, ran against the incumbent based on his support of expanding ELCRA. Chatfield went on to become House Speaker in the 2019-20 session.

“I’m happy for Jeremy Moss and I’m happy that it’s getting done,” Foster said in a Wednesday interview.

He said he expects to continue his support of the bill as it continues its path through the House and to the governor’s desk.

Several groups issued statements after the Senate adjourned, mostly in support of its actions.

Equality Michigan Executive Director Erin Knott said Michigan will soon join more than 20 states with protections against LGBT discrimination.

“This historic victory would not have been possible without decades of hard work, countless sacrifices, and generations of courageous leaders,” Knott said. “We are witnessing a sea of change toward equality and bringing us closer to ensuring that every person is treated equally under the law.”

Progress Michigan Deputy Director Sam Inglot said his hope is to get the bill to the governor’s desk as soon as possible.

“Expanding the ELCRA is an enormous win delivered by generations of lawmakers and advocates who have worked tirelessly to make our state more inclusive, and we join the majority of Michiganders in celebrating it – but our work doesn’t end here,” Inglot said.

“We remain committed to fighting back against anti-LGBTQ+ propaganda and supporting safe, inclusive education in our schools, and we will not let LGBTQ+ people in other states be left behind.”

Tom Hickson, Michigan Catholic Conference vice president for public policy and advocacy, expressed disappointment in the defeat of the Republican amendments dealing with religious protections.

“By failing to strike a balance and voting against amendments to ensure religious organizations are not targeted for their long-standing religious beliefs about marriage and gender differences, the Senate has signed off on creating a class of citizens against which discrimination and targeted litigation will be likely,” Hickson said.

Michigan State Medical Society President Dr. Thomas Veverka praised the Senate for its vote.

“As an organization that’s fully committed to diversity and inclusion, we are proud of the Senate for taking this critical step towards making Michigan a more inclusive and equitable place for all of its residents,” Veverka said.

Michigan AFL-CIO President Ron Bieber said the labor movement has worked for decades in support to protect LGBTQ people in the workplace.

“Today’s action by the Michigan Senate is a victory for the hundreds of thousands of LGBTQ+ workers across the state who have for too long been without the legal protection they deserve to live freely and authentically,” Bieber said.

The effect the Michigan Reconnect program has had on higher education policy and the next steps for Gov. Whitmer‘s 60 by 30 program were the focus of discussion Wednesday before the House Higher Education Committee.

Representatives from the Department of Labor and Economic Opportunity also detailed various budget recommendations from Whitmer’s proposed fiscal year 2023-34 budget as it related to higher education and growing talent.

Presenting on Michigan Reconnect was Michigan Community College Association President Brandy Johnson, while LEO 60 by 30 Office Director Sarah Szurpicki presented the next steps of the 60 by 30 plan.

Johnson said her association’s aim in the new legislative session was to propose additional opportunities for Michigan Reconnect, such as lowering the eligible age to 21 years old, which she said was something the governor has supported for a few years. She also highlighted opportunities to improve accountability in the system that was amended last year.

The association’s president also highlighted the ways in which the program has helped shape higher education policy, like mandating that colleges implement research-driven best practices and developmental education.

“Community colleges have offered standalone remedial education for students that are coming in underprepared academically, and while this is incredibly well-meaning, there’s little evidence that placing students in standalone remedial education coursework actually helps them ever complete a credential,” Johnson said. “If you’re thinking about working aged adults 25 and older, many of them have been out of the high school game, particularly in math, for a long time. And so they do need some sort of refreshing and catching up, as opposed to placing those students in standalone developmental education that takes time tuition and doesn’t result in credit that counts towards your degree.”

That said, Johnson said most colleges have now embraced a co-requisite model of delivering remedial education where a person that needs additional academic preparation can take some type of catch-up or developmental content put into the same course as, say, a credit-bearing college entry-level math class.

“In 2020, the Legislature, as you know, very appropriately and intelligently said that in order to be eligible for Michigan Reconnect, colleges must use a different model of delivering education than the standalone course,” she said. “I think that will significantly improve our graduation rates. I think it’s a really good example of how these bills have been used, very impactfully to improve student success outcomes.”

Later, Szurpicki extolled the work of the 60 by 30 Office thus far and what its next steps were in achieving the office’s goal of having 60% of working-age holding a post-secondary degree or credential by 2030.

The office has been measuring its success with data generated by the Lumina Foundation, partly because U.S. Census data doesn’t dig into levels below associate degrees. Lumina allows the department to measure those hard-to-find data points on higher education attainment, and while the data lags about two years behind current trends, Szurpicki said the office saw an increase from 49.1 % in growth among associate’s and bachelor’s degrees but far fewer growth in credentials of value.

One of the next steps for the office is to understand some of those factors, but overall, there was positive growth in that attainment tract, she added.

Another goal the office is working toward is closing the skills gap and building out a wide-depth talent pool, which were things driving company decisions on whether they should stay in Michigan or come to the state as new job attraction projects. Doing so would set Michigan apart or at least compete from these jobs.

In terms of other investments, Szurpicki said the achievement scholarships awarded by the Department of Treasury was a vital tool in achieving the 60 by 30 goal, as well as the Futures for Frontliners program.

“It was a grant period that was only open for a few months, and we had more than 120,000. So what that tells me, and what the Reconnect numbers tell me, is that Michiganders are really raising their hands when we’re creating these opportunities,” she said. “So, over 85,000 qualified. We did have to verify that they were indeed on the frontlines during the that time in the pandemic and over 26,000 enrolled 3,500 have since graduated.”

Since Reconnect is geared toward making it easier and more affordable for residents without an associate degree to enroll in a community college, Szurpicki pointed out that, as of launch, more than 114,000 applicants have been accepted, more than 24,000 have enrolled and more than 2,000 have graduated with an associate’s degree or a credential.

“There are around four million Michigan adults who could take it, who would be eligible, we believe for this opportunity,” she said. “So, there’s a lot of opportunity to keep serving those folks.”

The court battle over whether a sweeping reduction to provider reimbursements enacted by the state’s amended auto no-fault laws was constitutional and if it applies retroactively had its day before the Michigan Supreme Court on Thursday.

A decision from the justices to uphold the Court of Appeals in Andary v. USAA Casualty Insurance Company (MSC Docket No. 164772), which agreed that the law does not apply retroactively, could have consequential effects on the implementation of the law, which started in 2020 and applied a new medical fee schedule on care in 2021.

However, a decision to overturn that ruling would let the law be implemented as written, which has had documented dire effects for those receiving intensive and catastrophic post-injury care.

PA 21 of 2019  and PA 22 of 2019  made wholesale changes to the state’s auto no-fault law. Among them were limiting reimbursement for family-provided attendant care to 56 hours per week and capping a health care provider’s reimbursement for services not covered by Medicare to 55 percent of the fees charged as of Jan. 1, 2019.

Those changes took effect in July 2021 and set off a fury among the approximately 17,000 people receiving care under the prior no-fault law, which assured unlimited coverage for “all reasonable charges” needed to provide care for those catastrophically injured as well as the providers.

Reports of providers that say they had to cease providing care for lack of sufficient funds and patients now struggling to find the care they say they need have run rampant. Republican leaders in the Legislature who championed the 2019 law refused to consider changes, questioning the claims of problems and praising the savings the law provided to motorists and insurers. Gov. Whitmer also made the 2019 statute a centerpiece of her reelection campaign, and while she has called for changes has not made the issue a centerpiece of her agenda.

Mark Granzotto, an attorney for the plaintiffs, reiterated his belief that the new medical fee schedule passed through the 2019 reforms and its caps on care was a violation of the contract his clients had for vested benefits and do not apply to those injured before the reforms went into effect. The argument also tried to show justices of the high court that what was left out of the legislation that eventually became PA 21 of 2019, and PA 22 of 2019 spoke volumes to the legislative intent, which was to only have the fee schedule count for injuries that occurred after the reforms took hold.

Meanwhile, Lori McAllister, the attorney for the defendant appellants, argued that benefits were not vested at the time of the injury but rather when they went to seek care, and that applied regardless of when the injury took place. The defendant also argued that the Legislature had a right to regulate the insurance market and the fee schedule, which included a cap on fees.

McAllister, therefore, asked the court to overturn the Court of Appeals’ 2-1 published opinion issued Aug. 2022, which said the Legislature failed to clearly indicate that the law was to be applied retroactively and that it infringed on constitutionally protected contract rights.

“The Constitution does not preclude it when we are dealing with a right that is guaranteed only by statute,” she said. “We respectfully ask that this court to reverse the decision of the Court of Appeals, which we believe was averse to the plain language to the statute and the provisions of the Michigan Constitution.”

Several of the justices grilled the attorneys with questions. In particular, Justice Megan Cavanagh sparred with McAllister on her interpretation of the statute, while Justice David Viviano tested the bounds of Granzotto’s retroactive application argument.

Cavanagh posited that one cannot claim a statutory right in the matter if they don’t have a contract for insurance, and here, the controlling statutory right was an insurance contract.

McAllister argued that wasn’t necessarily true because someone has a contract on rights that others relied upon, again asserting her belief that these were statutory rights and not rights set forth in the Contracts Clause.

Viviano, in testing Granzotto’s argument, said a section of one of the laws states that treatment in this case applies after July 1, 2021, and that while it doesn’t say anything about those injured before, why should it need to say more?

Granzotto tried to counter by citing a concurring opinion of Viviano’s in a previous no-fault case, which he said supports the notion that the law is not to be applied retroactively because the Legislature did not expressly say it did, calling the argument for retroactively application completely erroneous.