June 14, 2024 | This Week in Government: School Groups Tie OPEB Change Opposition to Economic Development

A proposal moving through the House to provide billions toward economic development during the next decade is facing steep obstacles between Democratic opposition and a coalition of school groups tying the plan to their objection to the budget’s change in other post-employment benefits.

The House Small Business and Economic Development Committee reported legislation that would dedicate funding to the Strategic Outreach Attraction and Reserve Fund Tuesday. However, the proposal faces a tough plan through the full House as Rep. Dylan Wegela (D-Garden City) almost certainly cannot be brought to the yes column.

The impact of Wegela’s opposition intensifies with the opposition of school groups, including the Michigan Education Association, Michigan Association of Superintendents and Administrators, K-12 Alliance of Michigan, and the Michigan Association of School Boards, among others. The letter from the groups to members of the House, the governor, and Budget Director Jen Flood sent shockwaves through the Capitol community and prompted a sharp retort from a spokesperson for Gov. Gretchen Whitmer.

The bills (SB 559, SB 562, HB 5768, HB 5769, and HB 5770) were reported 8-3, along party lines. Rep. David Martin (R-Davison) and Rep. John Roth (R-Interlochen) abstained.

While the bills provide hundreds of millions annually to SOAR for the next decade, they also provide funding for housing, transit, and other community improvements. In a letter, the school groups said that was not enough to support the SOAR portion.

“Bills to extend the SOAR fund will soon be up for a vote. This extension, according to an independent fiscal agency analysis, will come with an annual price tag of $600 million – a strikingly similar amount to the current MPSERS overpayment,” the letter said. “Reenacting SOAR would be the continuation of failed economic policy straight from the Engler and Snyder playbook. While the new package contains some important reforms, it does not change the overall structure, diverting money from public classrooms to businesses.”

Others signing the letter were leaders of AFT-Michigan, the Michigan Association of Intermediate School Administrators, the Michigan Alliance for Student Opportunity, Education Advocates of West Michigan, the School Equity Caucus, the Michigan Association of Administrators of Special Education, the Michigan Association of Secondary School Principals, the Michigan Elementary & Middle School Principals Association and the Michigan School Business Officials.

Whitmer spokesperson Stacey LaRouche panned the letter from traditional allies of the Executive Office. School groups have been sounding the alarm on the proposal from Whitmer’s budget for months, calling instead for the Legislature to continue funding OPEB at the current rate. That, they say, would reduce what school districts spend on retiree health care and mean more money for the classroom.

Whitmer’s budget proposal would redirect $670 million from funding retiree health care for public school employees toward her broader K-12 priorities, an increase to per pupil funding but also accelerating state-funded preschool for all and having the state cover the cost of two years of community college not paid for through other grants, among other newer categorical spending. Whitmer and her budget team have said the retiree health care portion of the Michigan Public School Employee Retirement System will be fully funded in 2025 and want to reduce how much the state pays into that portion of MPSERS.

What the school groups want would make it more difficult for the governor to fund her priorities that are not directly tied to basic K-12 funding.

LaRouche said the letter attempts to spread misinformation and that the $670 million the governor has proposed shifting away from OPEB would all stay in the School Aid Fund, not away from classrooms.

“It’s a false choice to make people choose between education or creating jobs and growing the economy. We can and should do both,” LaRouche said. “That’s why Governor Whitmer’s budget has made historic investments in public education to support Michigan’s children while also laying the blueprint to bring record jobs and investments to communities across the state. We won’t get distracted by misinformation and will continue to set aside politics to pass another record-breaking budget for kids.”

The coalition said that education is a form of economic development that requires public schools to be fully funded.

“Please consider the potential impact of this legislation on our schools and teachers as budget discussions move forward,” the letter said. “This economic opportunity has only been achieved because of the sacrifices of Michigan’s public schools and their employees … We urge you and your colleagues to refrain from voting on any proposal until the historic opportunity to reinvest the entirety of MPSERS cost savings is resolved and this funding is used where it belongs: in Michigan’s public schools for our students, educators, and classrooms.”

Within the Democratic caucus, Wegela said although he was opposed to the legislation overall, there were components he liked.

“I love that this bill attempts to make historic investments in public transportation because we can do that, and we should do that,” he said.

The bills don’t have enough protections against misuse of funding, though, he said.

“The reason I’m opposed to the bills is the lack of guardrails that it has around the housing funding, but more specifically, the additional funding for SOAR projects, or what under this package will be called Make It in Michigan,” he said. “This fund essentially operates as a corporate handout fund giving large payments to corporations. It is important to know that the source of funding was set to sunset at the end of this year … We have decades of evidence that this type of quote, unquote economic development, does not work and does not return the investment that is promised. And at some point, I implore all of us, we have to stop gambling with taxpayer dollars, and we have to stop allowing corporations to hold us hostage and instead invest in the things that we believe in.”

The House committee made significant changes to SB 562, which originally allocated 50% of the SOAR fund to community development.

The bill was gutted, Hoskins said, and now it only contains the Michigan Mobility Fund.

That doesn’t mean the funding for the community development aspect is gone, though, Hoskins said; it’s now just going toward transit, housing, and other existing community development programs.

The committee also adopted a substitute for SB 559 to require local involvement on projects, requiring consideration for high-wage jobs, making sure smaller projects are included, adding a focus on net jobs and including claw backs.

The committee also adopted two Republican amendments to change how members of the transit committee are appointed and to provide more flexibility for transit funding. The committee also adopted an amendment seeking to ensure that transit funding was equitable across the state.

Roth, who put forward the amendments, said he was grateful for the changes and that they got him closer to supporting the package, but he said he’d need more to get him to vote yes on the legislation.

Rep. Greg VanWoerkom (R-Norton Shores) expressed concern that dollars in the fund might be used for bonding.

“We want to make sure that we are putting these dollars for the current projects and not further handcuff the Legislature and extend beyond what these dollars are intended for,” he said.

Roth said he shared those concerns.

“You could see a long-term rail project somewhere where they bond the rest of the money out for the next nine years,” he said. “I’m concerned about that.”

Roth also said he had concerns about funding SOAR for the next decade.

“That’s the sticking point,” he said. “What if the economy takes a dumper? So, we’ve got to work on that to see if we can make some changes. Maybe go five years?”

He also said he wanted assurances that Northern Michigan would see some of the funding.

“We have some ideas Up North, too, but it never seems to find its way up there,” Roth said.

To feel comfortable voting for the bill package, Roth said he’d need five to 10 other Republicans onboard with him. He also said he didn’t feel comfortable moving it before the end of the month.

Rep. Jason Hoskins (D-Southfield) and Rep. Jason Morgan (D-Ann Arbor), two of the lead bill sponsors, said they remain hopeful the bill package could move through the House before the summer recess.

“I really do feel like it pulls together everything that we’ve been talking about different folks wanting, and that’s just rare that you put that forward,” Morgan said.

Whitmer praised the bills after they were reported, saying she looked forward to reviewing them once they reached her desk.

“Today’s progress on economic development delivers on our comprehensive vision to invest in people, uplift places, and win projects,” she said in a statement. “Since I took office, we have announced 38,000 new auto jobs and driven unemployment to historic lows. We have continued our focus on the kitchen-table issues while growing and diversifying our economy. Together, we will secure the future of electric cars, semiconductor chips, technology, and clean energy here in Michigan while delivering historic and long-overdue investments in housing and transit to make our communities better places to live, work, and invest.”

Now that the bills have been reported to the House, caucus-wide conversations are happening. No definitive timeline has been set for voting on the bill package.

DETROIT — Gov. Gretchen Whitmer discussed the delicate state of the Legislature and the practicalities of selling clean energy policies during an election year at a Monday summit in Detroit.

In conversation with former White House communications director Jen Palmieri, Whitmer outlined her path to success during the 2022 election cycle and how the same methods might help secure another term of the current Democratic legislative trifecta in Lansing.

“In 2022, when I was up for reelection, we worked in every county of the state to make sure that we were listening to people and staying focused on what matters, but also building an organization that could not just get me reelected, but hopefully bring a lot of allies into our Legislature,” Whitmer said. “And for the first time in 40 years, we have Democrats in charge of every branch of government and (have been) able to actually get an agenda done.”

Whitmer addressed business leaders and sustainability advocates at the Emerson Collective’s Clean Economy and Community Impact Summit, where panelists throughout the day discussed ways to implement state and federal goals for the transition to clean energy. When asked how she’d convince an average voter of the importance of clean energy policy, Whitmer was frank.

“I would never lead a conversation with anyone outside of this room with ‘let’s talk about clean energy,’” Whitmer said. “I would always lead with ‘This is what we’re doing to make your child’s life better, or your life better, or ideally, all of your lives better.’ A good paying job, more money in your pocket. A brighter future for the children that you love so much. I think that that’s how we should be engaging with people out there who are going to make decisions at the ballot box and everyday decisions that impact the work that we’re all trying to get accomplished here.”

Making the issue of clean energy personal for voters will be the way to transform it into a winning issue, Whitmer said, rather than a burdensome topic that people tend to associate with higher costs or policy changes that negatively affect their day-to-day lives. She said citing the cost-saving aspects of clean energy will be critical to the positive messaging around renewable energy sources.

“As I talk to other moms, I obviously talk about our kids and a brighter future for them,” Whitmer said. “But I will also talk about how the cost of everything has gone up, and this is how we can save more money in your pocket, whether (you put it into) your kids’ education, or maybe it’s a little weekend trip that you put off, these savings are real, and this is how we can help you and your family get ahead.”

Palmieri noted that while Proposal 3 and the overturn of Roe v. Wade largely drove Michigan’s Democratic turnout in 2022, she recalled seeing Whitmer’s campaign revolving around lowering costs and returning money to Michiganders.

Whitmer said she found the campaign successful in emphasizing lowering costs for residents.

“I do think that when you focus on the fundamentals, it’s easier to find common ground and take the politics and make it a second part of the conversation, not the initial one that defines you,” Whitmer said. “At the end of the day, persuading the general public is sometimes a lot more important than persuading public office holders who are less persuadable.”

That focus on fundamentals could be critical after this November when Republicans will have a chance to take back the House. Whitmer said she’s “acutely aware” of the slim majority Democrats hold and the very real possibility it may be no more next year.

“Always being cognizant of that and trying to make a seat at the table and trying to give people an opportunity and a reason to come over and grab part of part of the work we’re doing and share credit, I think that that’s always something we’ve got to do,” Whitmer said. “I don’t know how the next election is going to go. I know how I want it to go. I know that I’m working to make sure of that. But it’s always important to remember that the state can swing.”

The House and Senate Appropriations Committee on Wednesday held separate meetings considering a legislative transfer of $250 million for a manufacturing megasite being planned in Genesee County.

Senators questioned economic development officials, with a key focus being on the buying out of local landowners.

The Senate Appropriations Committee and the House Appropriations Committee discussed but took no action on Legislative Transfer Request 2024-7, which deals with a $250 million grant awarded by the Michigan Strategic Fund Board for the development of a manufacturing megasite in Mundy Township in Genesee County.

The Strategic Fund Board awarded the grant last month from the Strategic Outreach and Attraction Reserve Fund, which supporters and Michigan Economic Development Corporation officials said would make the state more competitive in attracting major economic development projects (See Gongwer Michigan Report, May 21, 2024).

There currently are no corporate partners announced that have planned any facilities on the site.

Grant monies, if given final legislative approval, would go toward land acquisition and early site preparation. Officials have said site preparation before having an identified end-user has been a common practice in other states for years.

Sen. Thomas Albert (R-Lowell) said the site has about 165 homes, an elementary school, and a church located on the acreage.

“Are these residents going to lose their homes?” Albert said. “What type of community outreach has been done in the community?”

Flint and Genesee Economic Alliance Executive Director Tyler Rossmaessler said the area has been appropriately zoned for the proposed use for some time, and community engagement has been ongoing.

“This site provides a lot of opportunity for industry,” Rossmaessler said. “We’ve continued to do lots of different outreach, and we’ll continue to do more.”

Albert pushed back.

“Where in the world are they supposed to move? It’s impossible to find a house right now,” Albert said.

Rossmaessler said they believe this would not have a dramatic effect on the area’s housing market.

Christin Armstrong, senior vice president of business development programs with MEDC, said efforts would be made working with Michigan State Housing Development Authority and other programs to develop options in the region for housing.

“Is this really a good deal for residents?” Albert said.

Rossmaessler said the municipality has sought to go through a thoughtful planning and zoning process. For those who do not sell, there would be requirements for buffers and setbacks around the properties.

He added he believed it would in the long run spur increased tax revenue for schools, roads and other needs.

Sen. Lana Theis (R-Brighton) asked whether eminent domain would be used in furthering the project, saying her understanding is the state could be asked to help in that regard.

“I don’t foresee that we would make that request,” Armstrong said.

About 1,300 acres are to be acquired for the project. Armstrong said some structures would need to be demolished, and site clearing would be conducted, as well.

“What’s the transition plan for the school?” Sen. Sarah Anthony (D-Lansing), the committee chair, said.

Rossmaessler said there have been conversations as to what the transfer would do.

“Part of this transfer would provide opportunities for the school to relocate,” Rossmaessler said.

HOUSE HEARING: Officials told House members the area is “poised for major growth,” and the site is the state’s “premier site.”

“Probably the nation’s premier site,” Tyler Rossmaessler of the Flint and Genesee Economic Alliance said. “It puts Michigan in the game to attract large-scale advanced manufacturers that will create thousands of jobs, pump millions of dollars into our local economy, and create opportunities for young people.”

The Michigan Strategic Fund approved the grant last month for land acquisition and early site preparations, but the site doesn’t have a buyer yet.

“We’re not doing anything that would be specific to an end user. All the work funded here would be usable by anybody who just chose to locate here,” Christen Armstrong of the MEDC said.

The 1,000-acre site is described by the MEDC as a “highly desirable location to attract transformational projects in critical industries” including semiconductor, electric vehicle battery, clean tech and defense or aerospace manufacturing.

Josh Hunt of the MEDC said he could not share any of the companies interested in the site because the project is still underway.

“We are working with multiple companies and have made offers for companies that have considered that site,” Hunt said. “There are multiple brands that have looked at that site.”

Officials also could not provide members with details about what type of incentives might be offered for the final project at the site.

Details were also not available on how the $250 million would be spent.

“That transfer is a really key piece to us to move into that document where you can see a budget line for each of these activities,” Armstrong said. “We can’t get something in advance of the transfer.”

Hunt said the state needed to move forward with the site to take advantage of federal funds.

“Within the CHIPS program office, there is about $6.5 billion of remaining grant funding that is available for projects with the expectation that some of that will go to potentially an additional large fabricator and the expectation that some of the remainder of that will go to downstream companies within the supply chain,” he said. “We know that there are limited amounts of opportunities left within that program, and this site can be competitive for projects in that semiconductor industry.”

Rep. Angela Witwer (D-Delta Township) said she wasn’t concerned about the lack of detail.

“Site readiness is pretty clear. They’re actually making the site ready,” she said. “We have to prepare the land in order to be able to entice companies to be here.”

Witwer went on to say she trusted that MEDC would know what was necessary and best for the state.

“That’s what their job is,” she said. “I want to make sure that we have more jobs in an underserved area.”

Representatives have signed non-disclosure agreements with companies looking at the site. Armstrong told Rep. Sarah Lightner (R-Springport) that those details could be shared later.

Rep. Andrew Fink (R-Hillsdale) asked if this location was the only space available for such site development.

Rossmaessler said transformational projects take up a lot of space.

“A lot of these transformational projects are looking for 1,000 acres or more,” he said.

Rep. Donni Steele asked who would ultimately own the site after a buyer was secured.

“This title cannot be transferred without the consent of the MSF, and what that transaction looks like will depend on the ultimate project we land on,” Armstrong said.

Rossmaessler stressed that the site could have long-term economic benefits for the state and Genesee County.

“When you’re talking about impact on Genesse County, I think it’s pretty self-evident– this is a community when I was born, General Motors had something like 70,000 employees, and today it has 8,000 employees,” he said. “Opportunities for young people is what we’re looking for.”

DTE Energy Company broke ground on a 220-megawatt battery energy storage facility Monday, which it said, when complete, would be the largest such facility of its kind in the Great Lakes region.

The utility held a groundbreaking Monday morning at the site of its former Trenton Channel Power Plant, which retired in 2022.

The Trenton Channel Energy Center is set to be completed in 2026 and would convert part of the retired plant into a 220-megawatt battery energy storage facility.

In a release, the utility stated it would have enough storage capacity to power about 40,000 homes.

“Today, roughly one-third of all electricity generated by DTE comes from carbon-free resources,” Jerry Norcia, chair and chief executive officer of DTE Energy, said in a statement. “Our world-class solar, wind, and nuclear generation facilities are delivering reliable and clean electricity to our customers, and the Trenton Channel Energy Center is a significant milestone in accelerating our clean energy journey.”

DTE, in a release, said the cost of the converted facility would be partially offset by $140 million in tax incentives through the federal Inflation Reduction Act and provisions dealing with infrastructure monies.

DTE spokesperson Christopher Lamphear said the total project cost is about $460 million. In addition to the $140 million offset through the federal tax incentives, another $40 million in savings is expected to be realized through the use of the existing site and interconnection to the grid.

About 100 construction jobs are expected to be created during the project, with about a dozen long-term jobs being created long-term for the operation and monitoring of the facility.

Gov. Gretchen Whitmer, who attended the groundbreaking, praised the utility’s project and its continued push toward increasing its renewable energy portfolio in a statement.

“DTE’s new Trenton Channel Energy Center will help us strengthen our grid and produce more clean power when it’s less costly and store it for later when we need it,” Whitmer said. “Thanks to projects like today’s, strong federal leadership, and the Michigan Legislature’s clean energy and jobs package I signed into law last years, our future is bright.”

The battery storage facility is a major component of a $456 million rate increase request DTE filed in March with the Public Service Commission. DTE has a goal of having capacity for 780 megawatts of energy storage by 2030 and 1,800 megawatts by 2042.

Michigan ranks 41st in the nation for education and 34th for the overall well-being of children, the latest Kids Count Data Book report from the Annie E. Casey Foundation found.

Not only does Michigan rank in the bottom half of states for child well-being and education, but the state also has a 40% chronic school absenteeism rate during the 2021-22 school year (editor’s note: this story has been changed to correct the state’s overall well-being ranking). The national average is 30%. The report also found there were significant disparities by race, with more than half of American Indian and Black children chronically absent.

“Michigan’s high absenteeism rate unfortunately comes as no surprise considering that school absence is linked to childhood poverty and trauma. Here in Michigan, 18% of our state’s children are living in poverty, which is slightly above the national average, and nearly half of our state’s kids have gone through at least one adverse childhood experience,” said Monique Stanton, president and CEO of the Michigan League for Public Policy, in a statement. “These findings underscore the importance of strengthening Michigan families and mitigating childhood poverty through bold state policy decisions so that all of our kids have the solid foundations they need to be present and successful in their classrooms.”

The report presents national and state data from 16 indicators in four domains: economic well-being, education, health, and family and community factors.

A continuing positive trend in Michigan is a decline in teen births, but one in four children live in cost-burdened households that spend more than 30% of their income on housing.

The percentage of high school students not graduating on time increased for the first time after declining steadily for more than a decade, with one in five Michigan students not completing high school on time. Most 4th graders scored below proficient in reading in 2022 at 72%, up 6% from 2019, while 75% of 8th graders scored below proficient in math in 2022, up 9% from 2019.

The report also noted that state averages mask disparities that affect students of color, kids in immigrant families, and children from low-income families or attending low-income schools.

“Kids of all ages and grades must have what they need to learn each day, such as enough food and sleep and a safe way to get to school, as well as the additional resources they might need to perform at their highest potential and thrive, like tutoring and mental health services,” said Lisa Hamilton, president and CEO of the Annie E. Casey Foundation in a statement. “Our policies and priorities have not focused on these factors in preparing young people for the economy, short-changing a whole generation.”

The pandemic is not the sole cause of lower test scores, the report argued. Educators, researchers, policymakers, and employers who track student readiness have been sounding the alarm for decades.

“The United States is not equipping its children with the high-level reading, math, and digital problem-solving skills needed for many of today’s fastest-growing occupations in a highly competitive global economy,” a summary of the report said.

The report added that the lack of preparedness could have serious economic ramifications. Up to $31 trillion in U.S. economic activity relies on helping young people overcome learning loss caused by the pandemic. According to the report, students who don’t advance beyond lower levels of math are more likely to be unemployed after high school. One analysis cited estimates that the drop in math scores between 2019 and 2022 will reduce lifetime earnings by 1.6% for 48 million pandemic-era students, a total of $900 billion in lost income.

The foundation recommended continuing access to universal free meals and ensuring a reliable internet connection, a place to study, and time with friends, teachers, and counselors.

The report also recommended increasing access to intensive, in-person tutoring for students who are behind.

To do so, states should take advantage of their remaining pandemic relief funding to prioritize the social, emotional, academic, and physical well-being of students. Schools have until September 30 of this year to obligate the money received from the Elementary and Secondary School Emergency Relief funding.

The report recommended that lawmakers address chronic absence so that more students are in school to learn. States should gather and report chronic absence data by grade, and lawmakers should embrace positive approaches rather than criminalizing students or parents due to attendance challenges. The report also encouraged policies that provide wraparound support for students and families.