Mid-February 2025 Newsletter
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Instead of taking up HB 4001and HB 4002, the Senate Regulatory Affairs committee will be taking up Senate Democrats’ SB 15 and SB 8, which also reshape the scheduled changes and minimize their full impacts. At the same time, they don’t provide businesses with the same level of flexibility as the House bills. "The House bills are just a regurgitation of the gutting of the ballot proposals, and I do not support those bills as written," Moss said to MIRS today. "I think (they’re) just a repeat of the actions that got us into the situation that we’re in right now." Testimony on SB 15 – dealing with paid sick time – started on Wednesday and lasted around 90 minutes. Right now, Moss’ committee is scheduled to continue taking up SB 15 around 11 a.m. Feb. 11, and SB 8– dealing with the tipped and minimum wage – on Feb. 12 at 2 p.m. During Wednesday’s meeting, the committee’s minority vice chair, Sen. Roger Hauck (R-Union Twp.), made a motion to report the House bills to the Senate floor, so the full Senate could vote on them as soon as possible because “we’re getting short on the time limit we have for this.” Sen. Dayna Polehanki (D-Livonia), the majority vice chair, objected the motion, and Democrats supported her objection. "We can continue to go down this track to see if we can get to a solution by Feb. 21," Moss said. "If we’re able to have consensus on where we’re going, we’re going to bring that to the floor. That’s the goal." He said there’s nothing like a good deadline to get action done. Meanwhile, when MIRS asked the Governor this evening about the different sets of bills, she said the solution needs to be found somewhere in the middle. "This is an era of divided government," Gov. Gretchen Whitmer said. "I think that there are a lot of good things that we could do together to support business in Michigan, but also to support workers. It’s not one or another, it’s got to be both." Meanwhile, House Speaker Matt Hall (R-Richland Township) said there are about 20 outstanding differences between the House and Senate versions of the legislation. He said he’s going to craft what he believes is an acceptable compromise between what business and labor wants and give it to Senate Majority Floor Leader Sam Singh (D-East Lansing) next week. “My hope is that he’ll meet me in the middle, we’ll come out with something good, and we can pass it by Feb. 21,” Hall said. In July 2024, the Michigan Supreme Court ruled that in 2018, lawmakers unconstitutionally adopted and amended ballot initiatives in the same year, essentially rejecting the original proposals instead of sending them to the statewide ballot. Because of the ruling, the sub-minimum wage for tipped employees – like waitstaff and bartenders – will go from $3.93 to $5.76 per hour on Feb. 21. Additionally, employers with 10 or more workers must immediately provide 72 hours of yearly sick time, with workers needing to have at least 30 hours of worked wages for each hour of sick time. For tipped employees, the sub-minimum wage will be gradually eliminated, transitioning into the full minimum wage by Feb. 21, 2030. The scheduled changes also include raising the minimum wage from present-day $10.33 per hour to $15 in 2028, adjusting automatically afterward to inflation. HB 4001 and HB 4002 have been backed by groups like the National Federation of Independent Business, the Detroit Regional Chamber and the Small Business Association of Michigan. Together, they would maintain Michigan’s tipped credit system as it is, phase in a $15 minimum wage by 2029 and exempt businesses with fewer than 50 workers from the new sick time mandates. "You can look at the vote tally as the bills came out of the House, supported by all Republicans and a handful of Democrats. So, if you look at the dynamics of the Senate, I think we’re going to have to accrue way more bipartisan support for whatever we come up with than what the House did," Moss said. Moss thinks there absolutely needs to be a new earned sick time act, and that it’s important that the minimum wage keeps pace with rising living costs. But, overall, he wants to ensure such things are implemented right. "I think that Democrats are not a monolith on this issue, and (there are) a lot of shades of gray here," he said. When asked who he’s looking out for in his decision-making, Moss mentioned his local gay bar. He described the employees as progressive Democrats who are concerned about how the Michigan Supreme Court’s changes will impact them. "They’re talking to me about the dynamics of what they foresee, the rise in costs," he said. "So I hope there is a landing spot that can take all those things into consideration." MIRS additionally spoke with Grand Rapids-based David Robb, the co-owner of Express Employment Professionals. Their typical clients include employers with 100 to 1,000 workers, providing them with attraction and hiring services, training programs and human resources services. Robb’s own business has about 31 employees. He does like the certainty the House’s earned sick time proposal has around granting exemptions to employers already offering competitive paid time off (PTO) benefits. For example, Robb’s company grants workers three to five weeks of paid time off, which they can use for vacation time, sick days or any other reason. But as his business prepares for Feb. 21, they believe they’ll need to extract 72 hours of that PTO package, so it can be used exclusively for sick time. "So those employees who maybe didn’t need that much sick time are now going to lose out on potential vacation time or paid time off that they could have had more flexibility with," Robb said. He illustrated how "everyone’s been kind of holding off" on updating their earned sick time policies, due to there being so much talk from Lansing about adjusting the court-ordered changes. But now that Feb. 21 is around two weeks away, Robb said “they’re kind of scrambling, and realizing, ‘OK, we probably need to implement this as is.’" "All the employment attorneys are probably getting a lot of business right now, and that’s obviously a big expense just to consult with them and figure out what exactly we need to do," he said. Robb said the HR community is really stressing about setting up systems for tracking the accrual of earned sick time. He illustrated struggles to design a system where, if someone wants to use some of their sick time before clocking in for the day, how that worker should be paid. When he reached out to the businesses his company works for, Robb said Express Employment Professionals ended up collecting about 50 pages of feedback on the court’s scheduled changes. "One was ‘our small team doesn’t have time to track these hours manually, it’s a nightmare.’ Another comment was ‘this law forces us to reduce existing benefits and create rigid policies just to comply – it’s a step backward for employees and employers alike,’" he said. "’ESTA essentially removes our ability to have an attendance policy at all.’" During Wednesday’s committee meeting, Charity Dean – president of the Michigan Black Business Alliance (MBBA) – expressed concerns about how the court-ordered changes will affect Black-owned businesses. Due to a studied lack of access to capital, she explained that a lot of her members don’t have HR departments to follow the new law. "Not only is their payroll going to increase, but the cost of providing paid sick leave – this small restaurant with 13 employees, and there’s no subsidy. There’s no offering from the Legislature to make that easier for small businesses," Dean said. "I think what I’ve seen in the four years of running this organization is over-regulation and under-resource." She personally owns a coffee shop, and although she says her coffee is better than Starbucks, she doesn’t think equity would allow her to be regulated the same way as Starbucks. As for what’s next to come ahead of Feb. 21, Moss told MIRS he thinks Senate Democrats are trying to solve the issue, not politicize it. From Feb. 1 through March 8 of last year, the Michigan Department of Transportation (MDOT) surveyed 19,161 residents, trying to understand their perceptions on RUCs. A "Miles Driven" funding source for roads came in second place when asked what residents felt was the fairest alternative to Michigan’s gas tax, which was 30 cents per gallon last year. Thirty-one percent of survey takers said "General Funds," 25 percent said "Miles Driven" and 23 percent continued to list "Gas Consumption." However, after viewing a video on why MDOT was studying transportation funding and road usage charges, 43 percent of respondents named a "Miles Driven" method as most fair and 34 percent named "Gas Consumption" as the fairest. Now, in the Governor’s budget recommendations for the next fiscal year, Gov. Gretchen Whitmer wants to set aside $7.8 million in restricted transportation funding to go toward an additional study and pilot program on potential RUC revenue options to bankroll infrastructure. "I think there’s an appetite to look at different funding strategies. I think the Legislature is eager to look into these, and we certainly are open to that," Michael Frezell, MDOT’s deputy communications director, said to MIRS today. "We’re just going to gather information as to how such a system could be implemented. What devices would we need? How would that work?" He explained that currently, MDOT is conducting a research project related to several transportation topics. With approximately 170 participants, some are using their vehicles while connected to an app, receiving mock invoices as to what potential charges could be. Other people in the group focus on public transportation. Frezell explained participants can receive "credit" for using public transportation on their day-to-day commutes, like trips to the doctor’s office or work. "And it just gives us an idea out there, if people had that option, would they use public transportation over their vehicle?" Frezell said, describing earlier a connection between the two subjects. "It demonstrates a need for improved transportation if there were road usage changes, if people want to look at alternatives to paying for those charges they could use public transposition." Out of her own appropriations subcommittee overseeing the MDOT, Sen. Veronica Klinefelt (D-Eastpointe) has put forward a RUC pilot program in the 2023 and 2024 budget-making seasons. However, it never made it out of final budget negotiations, as MDOT was seeking out a federal grant they ultimately did not receive. "With cars being more fuel efficient and us having electric vehicles and hybrid vehicles, revenues are falling, and local roads continue to deteriorate, and we need to address local roads," Klinefelt said to MIRS, adding that in her opinion, local roads need to be the state’s number one priority. She said she could write a book about how she’s become unconcerned about the over-government surveillance worry – or the "Big Brother" effect, referring to the dystopian novel "1984." Klinefelt said she’s learned of states like California using a "Smog test," where drivers have their odometers read instead of having their locations tracked. She expressed there are less invasive avenues for gathering information that could go toward a RUC. "But also, if we’re honest, the car companies have tracking devices on all of our vehicles, with the OnStar and everything else. They probably know exactly how many miles every car that’s relatively new has been driven over the last couple of years," she said. In terms of her own vision for a RUC pilot program, she imagines a few residents volunteering to try the method out. Meanwhile, the pilot program would learn about the kinks, complaints and overall programs of a RUC system assisting in Michigan. "This is all preliminary…I haven’t had discussions with my colleagues on my side of the building with respect to this, so I don’t think we really know how the whole Legislature feels," she said, clarifying that she has not had conversations directly with the Governor’s office on her proposal. She is open to discussions on bringing toll roads to Michigan highways. However, she explained the money from toll roads would be exclusive to state roads, and those in the worst condition are local. "If you do toll roads, you’re hitting a small section of the population over and over again, and other areas are never paying," she said. Underscoring the lack of attention-grabbing items in the $83.5 billion ($15.3 billion General Fund) recommendation, Whitmer neither appeared in person for the budget presentation to a joint meeting of the House Appropriations Committee and the Senate Appropriations Committee, nor did she hold a press conference afterward to take questions about her proposals. It’s more of a recent innovation for governors to attend the budget presentation. Former Governor Rick Snyder attended all eight of his, but his predecessors generally did not. This is the third time Whitmer has left it to her budget director to make the presentation (2021 and 2022 the other times). This was the first time since former Governor John Engler’s final budget proposal in 2002 that a governor did not take questions from reporters afterward, however. "My balanced budget recommendation for fiscal year 2026 doubles down on the kitchen table issues that make a real difference in people’s lives," Whitmer said in a statement distributed by her press office. "This commonsense budget will lower costs, create good-paying jobs, grow our economy, improve academic results, and support Michigan seniors. Together, I know we can find common ground and deliver another balanced, bipartisan budget. Let’s get it done." Whitmer was at Grand Rapids Community College on Wednesday morning touring facilities and speaking with Michigan Reconnect graduates, WXMI-TV, the Fox affiliate in Grand Rapids reported. Considerable uncertainty surrounds the budget. There were many questions and no immediate answers at the presentation about the effect President Donald Trump’s actions to withhold federal funding could have on the state. Some 41.7 percent of the $83.5 billion in Whitmer’s budget recommendation comes from federal funds. Budget Director Jen Flood said the budget is built on the assumption federal funding will flow as usual. "There’s obviously been a lot of chaos out of Washington, D.C., the last couple of weeks," Flood said. "Should there be changes, we’re going to have to work together on the next steps." Flood was asked about the possibility of the federal government sending the state money as block grants with fewer restrictions. "I think we’ve got to be prepared for all scenarios," she said. Besides the federal uncertainty, there’s the new dynamic with Republicans in charge of the House. Expectations are House Republicans will push for more spending restraint this year, meaning the final version of the budget will likely look much different than what Whitmer proposed. Whitmer is holding back her biggest budget news until next week when she will offer her first new plan for long-term road funding since her ill-fated 45-cent per gallon fuel tax increase of 2019 that never got traction in the Legislature. Whitmer used the State Transportation Commission to sell $3.5 billion in bonds in 2020 to expedite a large number major projects on state roads, but those funds will soon be exhausted and didn’t help local roads. The budget represents a 1.2 percent increase from the 2024-25 current fiscal year (2 percent General Fund), though the governor also filed a request for a supplemental appropriations bill that would raise current year spending by $510.5 million ($380.4 million General Fund), which if approved would reduce the size of the increase for the 2025-26 fiscal year. The bulk of the supplemental is to accommodate rising Medicaid caseloads. For some of the flagship spending items in the 2025-26 fiscal year, Whitmer recommended slightly above inflation increases:
Whitmer is trying again on a proposed increase on the tipping fee paid for landfilling trash from other states in Michigan. She’s also again proposed making the Recreation Passport an opt-out instead of an opt-in, meaning motorists would automatically pay for the passport that gets them access to all state parks unless they opt out. Currently, motorists must choose to buy the passport. Neither proposal survived the then-Democratic Legislature in 2024. With Republicans in charge of the House this year, both are likely dead-on arrival. Whitmer did offer one new revenue proposal, to tax electronic cigarettes the same as other tobacco products. Flood, speaking to reporters afterward, was asked how the budget proposal squares with Whitmer’s transportation infrastructure plan she intends to unveil next week, given the small ending balances the recommendations would leave if enacted. "We put forward a budget today that’s going to continue to double down on the things that matter most to Michiganders, so that’s cutting taxes for working families, lowering costs of education, protecting seniors and improving student outcomes," she said. "The budget we put forward today is balanced, fiscally responsible. We look forward to picking up conversations on road funding next week." When pressed further on the governor’s road funding proposal, Flood said she would not get out in front of the governor on the details. Flood was asked if residents should be concerned about a budget proposal that, if enacted, would leave about $18 million in the School Aid Fund and $11 million in the General Fund. She said that such numbers are "pretty standard." She added that the proposal takes into account tax cuts put into place from previous sessions, $3 billion in state debt to be paid down during the 2025-26 fiscal year and a rainy day fund deposit. Senate Appropriations Chair Sen. Sarah Anthony (D-Lansing) said more details on the governor’s road funding plan would have been helpful. "Having a road plan baked into the large budget presentation is helpful so we can actually start getting some of these conversations and decisions at a formal negotiations point," Anthony said. "I look forward to hearing more, hopefully in the weeks to come." In 2019, the governor’s fuel tax increase was central to the entire budget. It appears this year, it will not be integrated in the same way. How the math would add up for covering a road funding plan was not clear, Anthony said, when considering the budget proposal outlined Wednesday. As to concerns about federal funding, Anthony said appropriators will need to monitor what is happening at the federal level and prepare accordingly. She was glad the budget office was looking at the issue, but it will be up to lawmakers to craft and adopt any plan if needed. "Our office is also looking at ways that we can fill the gaps, if and when there’s some significant changes on the federal level," Anthony said. Several Republicans pointed to the $83.5 billion budget, noting it was $56.55 billion in the 2017-18 fiscal year. "Since Governor Whitmer has taken office, government spending has grown by 43 percent – this budget proposal continues that trend. We are ready to take a hard look at her proposals, some of which are good ideas, but House Republicans will not grow government at the expense of hardworking taxpayers," House Speaker Matt Hall (R-Richland Township) said in a statement. "Instead of just adding more taxes, fees and hundreds of new bureaucrats, we should be evaluating her new programs – and the programs we already have – to ensure we are providing value for tax dollars. There are clear priorities we must focus on, like investing in a Public Safety Trust Fund, fixing our roads, and reversing the Democrats’ income tax hike." House Appropriations Chair Rep. Ann Bollin (R-Brighton) said she was glad to see the governor express a desire to make life more affordable for Michigan residents, but she questioned how an $83 billion budget would accomplish that. "As we dig into the budget, the (full time employees), what is the efficiency? Are we starting to coalesce around consolidating some of the office buildings? State government costs a lot of money," she said. "Director Flood referred to tax cuts, but I didn’t actually hear about any tax cuts in the presentation, so we’ll be looking for those." Cuts will be needed, Bollin said "We really have to roll back. We have to look at, what are we required to do constitutionally? What are we required to do by court order? Statutorily? Then, what’s a priority and what’s a preference?" she said. "That is the order that I’m going to be looking at the budget and going and building from that baseline. There are a lot of programs that seem very great on the surface, but are they going to give us the best bang for the buck, and are they the role of government?" House Appropriations Majority Vice Chair Rep. Matt Maddock (R-Milford) also advocated for budget cuts. "We have two sister states in this nation, Georgia and North Carolina … each one of those states, our sister states, is still providing the same government services to all their citizens," he said. "Georgia spends $20 billion less than Michigan does, and North Carolina spends $19 billion less than we do." He also criticized the governor for not being in Lansing to present her budget. "Where was she? She’s so proud of her budget, why wasn’t she there?" he said. Bollin said she intended to work on the budget for the state’s core services first, including education, law enforcement and corrections. She again stated that the constitutional requirement for the Legislature was to present and adopt a balanced budget by September 30, though she acknowledged that July 1 was a good target. "But we have a lot of work to do," she said. "There wasn’t a lot of transparency in the last two budget cycles. We spent very few days here in Lansing." Senate Minority Leader Aric Nesbitt (R-Porter Township), a candidate for governor, called for the state to mimic the actions President Donald Trump is taking on federal spending. "President Trump is leading from the front and cutting massive amounts of waste at the federal level," he said in a statement. "It’s time for Michigan Democrats to heed the mandate issued by voters: No more corporate handouts, no more anonymous pet projects, and no more giveaways to radical far-left causes." Farhat said although House Republicans have been tentative about getting a budget in place by July 1, House Democrats on the Appropriations Committee were committed to doing the work to get it done and that the new transparency measures wouldn’t be a hinderance to the process. "We have the experience on the committee with several previous majority chairs," he said. "We got it done the last two years, we can do it again. I’m ready to roll up my sleeves and get to work with Chair Bollin and Chair Anthony to get it done. I know the governor’s team is serious. … We’re all ready. The folks are at the table." 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