Early February 2024 Newsletter

EARLY PAYDOWN OF MPSERS DEBT FREES UP $670M FOR UPCOMING BUDGET
The anticipated 100 percent funding of retiree health care obligations for the state’s public school employees means the state can reduce its required annual contribution to the Michigan Public School Employees Retirement System by $670 million in the upcoming 2024-25 fiscal year.

This newly available $670 million gives Governor Gretchen Whitmer additional flexibility in the proposed 2024-25 fiscal year budget her administration will present to a joint meeting next Wednesday of the House Appropriations Committee  and the Senate Appropriations Committee .

Whitmer’s plans to reduce Michigan’s payments from $3.28 billion to $2.62 billion brought praise from supporters of traditional public schools and sharp criticism from Senate Minority Leader Aric Nesbitt (R-Lawton).

The governor in her State of the State speech called for speeding up the full phase-in of making all four-year-olds eligible for the Great Start Readiness Program by two years. Currently only children whose household income is up to 400 percent of the federal poverty level qualify. These additional funds will surely help cover the cost of speeding up the phase-in of that program to all four-year-olds.

"Since I took office, we have enacted five balanced, bipartisan budgets and paid down billions in debt while making strategic investments to save money for a rainy day," Whitmer said in a statement. "In this year’s budget, we will pay down more debt early, freeing up hundreds of millions of dollars for students now while shoring up the retirements of our educators."

The Public School Employees Retirement Act requires annual contributions for other post-employment benefits, like retiree health care, be no less than the prior year unless it is 100 percent funded. The state has determined that based on the most recent valuation of system assets in 2022, the retiree health care portion was 99 percent funded and is forecast to reach 100 percent.

Under the Public School Employees Retirement Act, employers are required to pay no more than 20.96 percent of payroll for the unfunded actuarial accrued liability in combined pension and other post-employment benefits. The Whitmer administration has calculated the amount necessary for the state to cover its payment will drop by $669.4 million.

Chandra Madafferi, president of the Michigan Education Association, praised the announcement.

"Governor Whitmer’s proposed budget pays down MPSERS liabilities early, securing the retirements of countless educators and freeing up more funds to invest in students," she said in a statement distributed by the governor’s communications office. "We are grateful for the governor’s commitment to Michigan’s students and the public school employees who serve them every day."

Peter Spadafore, executive director of the Michigan Alliance for Student Opportunity, a coalition of urban school districts, said the budget proposal will continue to pay down debt and free up money to support students, teachers and schools.

Republicans placed a big emphasis on paying down the unfunded liability in MPSERS in the 2010s.

Nesbitt called Whitmer’s proposal a "raid" on the fund that pays for teacher retirement benefits.

"The state has an obligation to taxpayers to use their dollars appropriately – that includes responsibly paying down our burdensome debts in order to free up future resources and ensure the prosperity of our state," he said.

The MPSERS pension unfunded liability remains high and is nowhere close to full funding. As of the 2021-22 fiscal year, it was 63.8 percent funded, according to the Senate Fiscal Agency.

What the Whitmer administration is proposing would not affect the pension component (subscribers please note: a Midday Update incorrectly stated both pension and retiree health care would be affected, but it is just retiree health care, or other post-employment benefits, where the Whitmer administration plans to propose reducing payments).

The unfunded liability on retiree health care fell from $27.6 billion in the 2009-10 fiscal year to $88.6 million in the 2021-22 fiscal year.

Jase Bolger, policy advisor for the West Michigan Policy Forum, called the move risky.

"Using the governor’s apparent appreciation for ’80s song lyrics, you could say she’s playing ‘Footloose’ with the facts again, leading the state of Michigan into the ‘Danger Zone’ when it comes to paying off our debt," said Bolger, a former House speaker who was at the helm when the state began committing large sums to paying down the unfunded liability at the beginning of the former Governor Rick Snyder era.

RNC COMMITTEE FORMING ‘SOON’ TO DETERMINE MIGOP LEADER
The Republican National Committee is forming a committee to review the situation within the Michigan Republican Party and determine whom it will recognize as chair.

During the last several months, the MIGOP has been plagued with infighting. Kristina Karamo, who was elected chair last February, was ousted by a group of state committee members who conducted a meeting in December 2023.

Karamo has repeatedly asserted that meeting was invalid, and she and her allies were not properly removed. To prove her point, she held a state committee meeting in January where members voted to double down on her position as chair and to dispute the actions of the other group.

In the meantime, though, two separate factions of the MIGOP have been operating the organization as if they were in charge. The anti-Karamo group has selected former U.S. Rep. Pete Hoekstra as chair and attempted to take legal action.

While the RNC has signaled Karamo was properly removed, it hasn’t taken a formal position. Its website currently doesn’t list anyone as chair of the MIGOP.

On Friday, it took another step toward finalizing its position.

A source speaking on background with direct knowledge of the situation said a committee will be formed "very soon," and will include members of the RNC’s Contests Committee along with two chair appointments.

This panel will hear from both sides before making a recommendation to the RNC. Along with determining who the Michigan chair should be, the panel is also reviewing leadership in the Virgin Islands.

Karamo has attacked RNC leadership as biased.

MANUFACTURED HOMES A PARTIAL SOLUTION TO HOUSING SHORTAGE, LEADER SAYS
Amid the push from Governor Gretchen Whitmer and other state leaders to increase the state’s supply of housing stock, the leader of the state’s association on manufactured housing is calling for the Legislature and Whitmer administration to include manufactured housing as part of the solution.

John Lindley, president and CEO of the Michigan Manufactured Housing, RV and Campground Association, said in an interview this week that manufactured housing leaders are looking for greater parity in programs operated by the Michigan State Housing Development Authority and changes to zoning laws. He’s also warning against the Legislature passing bills that would deter new housing.

Local governments tend to want neighborhoods of houses selling for $300,000 and up, Lindley said. And he concurred the state needs more site-built homes.

"We need more of everything," he said. "We also need multifamily housing. We also need manufactured housing."

One concern Lindley voiced is the ineligibility of manufactured housing MSHDA programs like Michigan Downpayment Assistance, the Mortgage Credit Certificate program and the MI Home Loan program.

Lindley said he is putting "a lot of my energy right now" into trying to persuade the state to include manufactured housing in those programs.

MSHDA spokesperson Josh Pugh said Director Amy Hovey agrees "all kinds of different housing" are necessary to surpass the goals the organization has set to meet the housing demand.

The three programs Lindley mentioned are ineligible under federal tax rules because they are considered personal property, and MSHDA is limited in what financing assistance it can offer. The issue is the split in ownership of the lot and the land, Pugh said.

Lindley acknowledged federal rules constrain the state in some instances.

To Lindley’s larger point, Pugh said MSHDA is committed to innovation. He mentioned a program called MSHDA Mod that finances modular home builds. MSHDA also invested in the state’s first 3D-printed home that just went up for sale in Detroit, he said.

"We are all about innovation here at MSHDA," he said. "We need these kinds of creative solutions and different kinds of housing to be sure we’re meeting people’s needs."

Home prices in traditionally affordable Michigan have escalated rapidly in the past couple years.

Lindley noted the average price for a site-built home in Michigan in 2022 was $237,000.

"You can buy a brand new beautiful, manufactured home today, three bedrooms, two baths, that’s rolling off of the assembly line for less than $80,000, probably less than $70,000, today," he said.

Lindley said he recently looked at a listing in Mason, southeast of Lansing, for a 1,400 square foot manufactured home with three bedrooms and two bathrooms for $55,000.

"Go on MLS for any of the surrounding communities and find me a home that’s for sale for $55,000," he said.

Something needs to be done about zoning laws in Michigan, Lindley said, though he cautioned against a broad-brush answer.

"Until all housing options are viewed as a solution and until the not in my backyard, the NIMBY-ism that local units of government and residents is met head on, we’re going to see some of the discriminatory zoning is going to continue to exist," he said.

Particularly concerning when it comes to the overall discussion about housing, not just manufactured housing, are what Lindley called the "dozens of antidevelopment proposals" circulating in the Legislature, like rent controls and tax increases.

He said he’s tracking 55 bills currently.

"As an organization, we’re opposed to 49 of them. That’s not the message that those we want to build baby build should be hearing from those in the state Capitol," he said.

ARTICLES OF POLITICAL INTEREST:

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Biden Meets With UAW, Black Faith Leaders During Michigan Visit

Redistricting Commission Seeks Input From Those Impacted By Redraw

Cash Strapped Michigan Republicans Get $120K Boost From Trump, Other Presidential Hopefuls

Marijuana News, Updates, & Articles of Interest

THE DCD MARIJUANA TEAM:  YOUR COMPETITIVE EDGE!

DCD continues to exist as the premier resource helping municipalities navigate the waters of cannabis policy. We would be more than happy to answer any questions you may have regarding medical or recreational cannabis policy, procedure, and more. DCD is available for presentations to municipal boards, for one-on-one meetings, and for consultations.

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ARTICLES OF CANNABIS INTEREST:

Michigan Marijuana Company Buys 11 Stores From In State Competitor

Suburbanites Are Fighting Commercial Developments–And Sometimes Winning

New Music Venue In West Michigan To Offer Cannabis & Alcohol

Local Dispensaries Reminded About Proper Disposal After Weed Taken By Dumpster Divers

Is Government Finally Abandoning Its ‘Flat Earth’ Marijuana Policies?

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