David Hecker
President

Lois Lofton Doniver Secretary-Treasurer

Louise Somalski
Legislative Coordinator

June, 2007

Links to current Advocacy Campaigns
may be found in the Legislative Action Center

A Tax Vote Necessary for the 2008 Fiscal Year Budget

Before the House and Senate can begin swapping department budgets and holding conference committees, legislative leaders and the Governor need to agree on how much tax revenue will need to be raised to support state budgets for '08 and beyond.

The state's current budget negotiations are at an impasse. The Administration and legislative leaders have agreed to raise revenue at least $1.5 billion. But the Legislature's planned tax vote seems to be collapsing. It is beginning to look like the Fiscal Year 2008 budget negotiations may not include a longer-term solution to the structural deficit.

Revenue negotiations swirl around reaching an agreement on what "cost-saving reforms" can be enacted. Included on the list are school employee health care, pension reforms, and consolidation.

Revenue sources (taxes) must be sufficient to give modest increases to state universities and other General Fund functions, as well as modest inflationary increases to K-12 schools. House Fiscal Agency Director Mitch Bean has been quoted saying he could show lawmakers what an '08 budget would look like based on cuts alone, but the slices to education and public services would be "ugly."

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New Michigan Business Tax Agreement

A new business tax structure for the state that relies on a combination gross receipts and income tax with substantial personal property tax relief will replace the Single Business Tax. The revenue from the new Michigan Business Tax will go into the General Fund, which finances our community college and higher education budgets, not to mention other state budgets.

The proposal will replace the $1.9 billion in revenue that the Single Business Tax would have netted Michigan. Reportedly, 70 percent of the state's businesses would see a tax break compared to the SBT. The SBT ends on December 31. There are still technical details to be completed, with the goal of completing legislative action on the tax by July 1.

The tax structure will be based with two-thirds of revenues coming from a "margins tax" with a rate under .8 percent and one-third coming from business income with a rate of under 5 percent. The legislative agreement is basing the "margins" on a company's sales less its purchases of tangible property.

In terms of the personal property tax credits, industrial companies will see a 65 percent personal tax credit, while commercial businesses will see a 23 percent personal property tax credit.

The proposal also has a three-year revenue trigger to ensure that businesses in general pay no more than they are under the SBT. For the first year, the trigger is set if revenues exceed 5 percent over the 2007-08 base (and that base is defined as the revenue neutral SBT yield plus personal property tax millage reductions "excluding insurance"). In the next two years, the revenue trigger would be the tax's percentage increase over the personal income plus 1 percent. If the revenue trigger is pulled, then half the excess is refunded to businesses and the other half is paid to the Budget Stabilization Fund.

But while more than 70 percent of businesses are estimated to see some tax break, some businesses will see tax increases and those are mostly financially-based companies. The agreement would set the state's insurance premium tax to 1.25 percent plus credits. It would also set a capital stock tax for banks.

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School Retirement Health Benefits: "Graded Premium"

It appears highly likely that some changes in the School Employees' Retirement Act will be part of the overall revenue/budget "deal" for the 2008 fiscal year. Bills reducing benefits and increasing eligibility requirements for future school employees have been heard in committee in the House and Senate recently.

House Bill 4797 (Melton, D-Auburn Hills) and House Bill 4798 (Johnson, D-Highland Park) would amend the Public School Employees Retirement Act to change the way retiree health benefits would be provided to a retirant who first becomes a member after June 30, 2007.

Under House Bills 4797 and 4798, the retirement system would pay up to 90 percent of the monthly premium for health care benefits of a retirant and dependants after 30 years of service credit. For a retirant (or deceased member) with at least 10 years but less than 30 years, the system would pay 3 percent times the years of service (e.g., 30 percent of the monthly premium for ten years, 45 percent for 15 years, etc.)

This would apply to medical, dental, vision, or hearing benefits, or any combination of those benefits. It would apply to members (public school employees) and deferred members (those who leave school employment before reaching the minimum retirement age).

The current system does not grade premiums based on years of service or employment for retirees who retire directly from school employment. Currently, the system pays the costs of medical benefits for a retirant, although an amount equal to the cost chargeable to a Medicare recipient for Part B Medicare is deducted from the retirant's retirement allowance. (For 2007, the monthly deduction is $93.50) In addition, the system pays up to 90 percent of health benefit costs for dependants of retirants. The system also pays 90 percent of hearing, dental, and vision benefits for retirants and dependants.

However, deferred members (those who leave school employment before reaching the minimum retirement age) currently must pay the total premium for health care if they have less than 21 years of service; deferred members with from 21 to 29 years of service receive a partial premium subsidy equal to 10 percent for each year of service credit over 20 years. (For example, a deferred member with 23 years of service would receive a subsidy of 30 percent of premiums and have 70 percent deducted from the monthly pension.) Those with 30 years receive a 90 percent subsidy.

The bills specify that the retirement system would not pay the premiums (or membership or subscription fees) until the retirant or beneficiary requests enrollment in the plans or combination of plans in the manner prescribed by the system.

House Bills 4797 and 4798 would take effect January 1, 2009. The two bills are tie-barred.

These bills would shift some health care costs from local school districts to our members when they retire. According to the Office of Retirement Services, changing the retirement health benefits to a graded premium plan would be cost neutral for the first ten years and would take 30 - 40 years until most or all employees were covered under the new system to fully see cost savings. Some of our members, especially support and part-time staff, will not be able to afford retiree health care coverage under this plan.

House Bills 4797 and 4798 have been re-referred to the House Education Committee, where two hearings have been held for public testimony.

The Senate Education Committee has approved Senate Bills 546 and 547 (Kuipers, R-Holland) which create a graded premium for future school employees similar to the provisions contained in House Bills 4797 and 4798. These bills are currently waiting for action on the floor of the Senate.

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ISD Career & Technical Education

Senate Bill 188 (Van Woerkom, R-Muskegon) would allow career and technical education funding and vocational education millage revenue to be used for the maintenance, repair, and replacement of buildings, land, equipment, and supplies. This bill would free up operating funds that now must be devoted for those purposes, thereby providing more flexibility.

The bill would go into effect on July 1, 2009, and would amend the Revised School Code to do the following:

• Allow an intermediate school district (ISD) to acquire equipment necessary for the operation of ISD programs, and pay for it with operating funds.
  
  
• Expand the purposes for which an ISD may spend vocational-technical (or career and technical) education funds.
  
  
• Require an ISD that used state or federal career and technical education funds to obtain state approval and to establish a program advisory committee for its career and technical education program.
  
  
• Require the Department of Education to develop a process for expediting state approval of programs that recognize local workforce needs and certain other changes in market demands.
  
  
• Prohibit a constituent district from disposing or changing the purpose of an area career and technical education facility without the consent of the ISD board, if the ISD had provided at least 90 percent of the cost of acquiring or constructing the facility.
  
  
• Increase the threshold at which ISDs must obtain competitive bids from $17,932 to $19, 211.

Senate Bill 188 has been approved by the Senate and the House Education Committee and is currently on second reading on the House floor.

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Reading Training

Public Act 110 of 2006, requires a teacher to receive reading instruction within the first six years of teaching in order to qualify for a renewal of a provisional teaching certificate or advancement to a professional teaching certificate. The three-credit course requirement is scheduled to take effect on July 1, 2007.

As of April 2007, a few months before the bill was scheduled to go into effect, the Michigan Department of Education had approved 18 university-based courses, and approval of an additional 22 courses was pending. However, some universities reportedly will not have the required course in place by the July 1, 2007 deadline.

Senate Bill 70 (Cassis, R-Novi) would amend the Revised School Code to do the following:

• Delay from July 1, 2007, to July 1, 2009, the beginning date of a requirement that a certified teacher receive instruction on reading disabilities within the first six years of classroom teaching.
  
  
• Permit a person to complete the required course as part of his or her teachers' preparation training.

Senate Bill 70 has been approved by the Senate and House Education Committees and is currently on second reading on the House floor.

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Personal Curriculum for Transfer Students

In 2006, Statewide high school graduation requirements known as the Michigan Merit Standard were enacted. The Michigan Merit Standard requires a pupil to complete certain credits in English, math, science, social sciences, and other subject areas before receiving a high school diploma.

Although the Revised School Code permits the parent or legal guardian of a pupil to request modifications of those requirements under certain circumstances, there is concern that a pupil transferring from a nonpublic school or from out-of-state might not be able to meet the requirements, or that he or she might have to delay graduation to do so.

To address these concerns, Senate Bill 403 (Kuipers, R-Holland) has been introduced allowing students transferring to Michigan public schools midway through high school or later should be allowed additional modifications of the Michigan Merit Standard.

The bill would do the following:

• Permit the parent or legal guardian of a transfer student who had completed at least two years of high school credit out-of-state, or at a nonpublic school, to request additional modifications of the Michigan Merit Standard as part of his or her personal curriculum.
  
  
• Remove a requirement that the Department of Education develop or select and approve specific assessments that school districts and public school academies may use to determine whether a pupil has successfully completed a credit under the Michigan Merit Standard.

Senate Bill 403 has passed the Senate and is currently before the House Education Committee.

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Criminal Sexual Conduct of School Employees and Volunteers

Senate Bill 386 (Patterson, R-Canton) would basically extend the same Criminal Sexual Conduct prohibitions that apply to all employees, contract service providers, and volunteers working in schools. Senate Bill 386 would:

• Include in criminal sexual conduct offenses, sexual penetration or sexual contact involving any employee or contractual service provider of a school, district, or ISD in which the victim is enrolled or a volunteer who is not a student in any school in kindergarten through 12th grade or is a government employee assigned to provide a service to a school, district, or ISD.
  
  
• Also, sexual penetration or sexual contact with a special education student who is at least 16 years old but under 26 would be criminal sexual conduct if any employee or contractual service provider of the school, district, or ISD from which the other person received special education services or if a volunteer who is not a student in any school in kindergarten through 12th grade or a government employee assigned to provide a service to a school, district, or ISD.

Senate Bill 386 would take effect 90 days after its enactment. This bill has passed the Senate and is currently before the House Judiciary Committee.

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Prohibit School Operation Outside District

House Bill 4924 (Melton, D-Auburn Hills) would prohibit the board of a school district from operating a school, or any other education program, outside the boundaries of that school district, unless the board had the written permission of the board members of the school district in which its school or program was located.

House Bill 4924 has been approved by the House Education Committee and is currently on second reading on the floor of the House.

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Legal Activities Away from Work

House Bill 4532 (Gonzales, D-Flint) establishes the "Employee Privacy Protection Act" which would prohibit an employer from taking certain adverse actions against an individual who is engaging in a lawful activity both (1) off the employer's premises and (2) during non-work hours.

Unless an exception applied, an employer could not do any of the following because of an individual's lawful conduct away from work and off the employer's premises:

• Fail or refuse to hire or recruit
  
  
• Discharge
  
  
• Otherwise discriminate with respect to employment, compensation, or a term, condition, or privilege of employment

Protection includes employees "regarded as" engaging in a non-work activity. House Bill 4532 would protect both individuals who actually do engage in a lawful off-duty, off-premises activity disfavored by the employer, and those whom an employer perceives-rightly or wrongly-as doing so.

An employer would be allowed to refuse to hire, discharge, or otherwise discriminate against an individual for off-duty, off-premises conduct that would:

• Directly impair an established bona fide occupational requirement or an employment activity or responsibility of a particular employee or group of employees.
  
  
• Create a substantial conflict of interest with the core mission of the employer or violate a written conflict of interest policy.
  
  
• Violate an established policy as to property owned or leased by the employer.
  
  
• Violate a state or federal law, regulation, or rule regulating applicable to a particular type of employment.

An employer could not require an applicant or employee to waive any rights under this law. Such a waiver agreement would be invalid and unenforceable.

House Bill 4532 would prohibit retaliation or discrimination because a person (1) filed an action; (2) testified, assisted, or participated in an investigation, proceeding, or action concerning a violation of the law; or (3) opposed a violation of the law. The bill would also ban retaliation or discrimination against persons about to do any of these things.

A person injured by a violation of the law could bring a civil suit to obtain injunctive relief and damages, and to recover costs and reasonable attorney fees, if successful.

House Bill 4532 is currently before the House Labor Committee.

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Job Applicant Credit Privacy Act

House Bill 4887 (Miller, D-Mt. Clemens) would create the "Job Applicant Credit Privacy Act," under which an employer could not:

1. Fail or refuse to hire an individual because of that individual's credit history.
   
   
2. Inquire about a job applicant's or potential job applicant's credit history. (However, the prohibition would not apply to prevent an inquiry or employment action in cases where a good credit history is an established bona fide occupational requirement of a particular position or job classification.)

The bill would prohibit an employer from requiring an individual to waive or limit any protection granted under the bill as a condition of applying for or receiving an offer for employment. An agreement to waive any right or protection under the new act would be deemed contrary to public policy and void and unenforceable.

An individual injured by a violation of the act could bring a civil suit to obtain damages and/or injunctive relief. The court would award costs and reasonable attorney fees to a prevailing plaintiff.

A person could not retaliate or discriminate against an individual who filed a complaint (or was about to) under the act; testified, assisted, or participated in an investigation, proceeding, or action concerning a violation of the act; or opposed a violation of the act.

House Bill 4887 is currently before the House Labor Committee.

bk:opeiu42aflcio - June 25, 2007

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