Officials Urge Caution at News of Larger Than Expected State Revenues
For the current 2021-22 fiscal year, officials revised revenues up from the January consensus by $2.99 billion combined between the School Aid Fund and the General Fund. Specifically, $1.7 billion in the General Fund and $1.3 billion in the School Aid Fund.
In the upcoming 2022-23 fiscal year, for which lawmakers and the administration are crafting a budget, officials revised revenues up from January by $2.03 billion with the General Fund being $1.1 billion higher and the School Aid Fund $948.7 million higher.
The revisions come as officials with the House Fiscal Agency, the Senate Fiscal Agency and the Department of Treasury are bracing for an end to a pandemic economy in the state that has seen record spending on goods, boosting sales and use tax revenue.
While officials keep expecting that trend to go down, David Zin with SFA said Friday the state saw the most revenue ever from sales and use taxes in April 2022. Officials also said income tax revenue was much higher than expected and business taxes were above estimates.
Still, it is expected spending will go back to normal and consumption tax revenue will decrease. That is what makes the revenue estimates particularly challenging now, officials said.
Treasurer Rachael Eubanks said today before the official vote that it was the most difficult deliberation that she has been part of so far as officials try to pinpoint when the economy will shift to a more pre-pandemic normal (editor’s note: an earlier update misspelled Ms. Eubanks’ first name).
"There are many well-founded and different viewpoints on when that will occur," she said. "We are seeing good news today, but we need to maintain a fair share of caution as we look at the medium and longer term."
House Fiscal Agency Director Mary Ann Cleary agreed, saying it has been difficult as officials continue to grapple with new situations, like a pandemic, unexpected revenue growth and a mixed economy.
"Lots of positives, lots of negatives, what do we do with that?" she said.
Governor Gretchen Whitmer has recommended relatively modest tax cuts that cost about $800 million annually while Republicans have passed tax cuts to the tune of $2.5 billion. Ms. Whitmer has now also called for a $500 check to an undefined group of taxpayers, and it is unclear how much that would cost.
Budget Director Chris Harkins told reporters policy makers are essentially working with a $6 billion surplus as they craft the upcoming budget, but stressed it is one-time money. That is one difference between Ms. Whitmer’s rebate plan and the Legislature’s tax plans.
"A concern that we have as we look at some of those ongoing tax proposals is that really we are still in an area with a lot of economic question. Kind of a COVID bubble, if you will, and we’re not yet sure if we’re out of it. We’re not sure how long we’ll be in it," Mr. Harkins said. "And so making structural long-term tax policy changes while we’re in that COVID bubble are concerning. They’re not impossible."
Ms. Eubanks agreed.
"I think this is a place where those of us economists and revenue forecasters are urging the caution," she said. "Taking into account not just what things look like today, but what they look like next year and in years down the road, so that we can maintain that structural level of budget balance without having to make severe expenditure reductions."
In a statement, Ms. Whitmer touted her proposals to provide checks to taxpayers, expand the Earned Income Tax Credit and reduce income taxes for some seniors.
Sen. Jim Stamas (R-Midland), chair of the Senate Appropriations Committee , told reporters following the meeting he believed any spending approved using the projected increase in funds should be sustainable, given the uncertainty of revenues after the 2022-23 fiscal year.
He also said a key priority should be returning money to taxpayers. When asked about the position of Democrats to provide immediate, up-front assistance in the form of rebates to households rather than a permanent tax cut as the Republicans are proposing, he pointed to the high rate of inflation.
"Using one-time, I think, only accelerates or maintains that going forward versus something stable and ongoing," Mr. Stamas said.
When asked whether he was concerned over the Legislature having to make significant budget changes in the future to sustain tax cuts like those the Republicans are proposing, Mr. Stamas said the Senate calculated in its budget proposal for $1 billion in ongoing funding to sustain the cuts.
"So I’m not as concerned about it," Mr. Stamas said, adding using the governor or the House’s budget proposal he might consider it to be more of a challenge. "But using where we’ve started with as a base, no, I think that we’ve positioned ourselves to make sure we help Michigan families."
Sen. Curtis Hertel Jr. (D-East Lansing), the Senate committee’s minority vice chair, told reporters the revenue projections show revenue is trending in a positive direction, which he said he believes makes it the right time to provide immediate, one-time relief to Michigan families.
"We know inflation is affecting people now, we know the problems that families are facing with the current economy is now, and so what I saw is a strong argument that we can do immediate help for families in this year," Mr. Hertel said.
Mr. Hertel said economists were not quite sure where the economy could be headed beyond the upcoming fiscal year, saying he believes the state should be careful. For the short-term, he said providing targeted help to families now while paying down structural deficits would be the best thing to do with surplus funds.
During Thursday’s debate over a proposed $2.7 billion Republican tax package that passed, Mr. Hertel introduced an amendment that failed along party lines. It would have provided $500 per household plus $100 for each dependent for all households with adjusted gross income of less than $250,000. He told reporters Friday he believed the estimated cost of the proposal was about $2 billion.
Mr. Hertel said a rebate would provide more assistance to households most in need in lower income brackets compared to the proposals the Republicans are proposing which include lowering the personal income tax rate from 4.25 percent to 4 percent.
House Appropriations Committee Chair Rep. Thomas Albert (R-Lowell) said in a statement the state should be careful given all of the uncertainty, but still expressed support for the large tax cuts Republicans have been pushing.
"Projections can be useful and somewhat accurate in times of economic stability. But in the event of a market downturn or economic uncertainty, anything can happen," he said. "I do not want to leave the state in a position where we are making cuts in a matter of months. We should be focused on offering tax relief to families impacted by rising prices, paying down debt, and putting money into savings so we have flexibility moving forward.
Surprise House Hearing on Auto-No Fault Bill Leads to GOP Walkout
House members who left the House Insurance Committee meeting said the bill was not listed on the agenda ahead of time and that Chairwoman Daire Rendon, R-Lake City, did not tell members in advance that the legislation would be discussed, leaving lawmakers no time to review the bill or any accompanying analysis.
The bill, introduced by Rep. Ryan Berman, R-Commerce Township, in March, would increase penalties on insurance companies that delay payments to medical providers providing services to no-fault auto insurance clients.
Rendon’s surprise move to hear testimony on the bill came after House Speaker Jason Wentworth, R-Farwell, said in March there were no plans to change the controversial no-fault auto reform law and that it was "time to move on."
Wentworth was not aware the bill would be taken up in committee, said spokesman Gideon D’Assandro, a rarity when it comes to controversial legislation.
Rep. Beau LaFave, the Iron Mountain Republican who serves as vice chairman for the House Insurance Committee, said members weren’t told of the legislation until the committee had referred out two other bills and went into recess.
"I was not given prompt notice of the prompt pay bill so I promptly left," LaFave said Friday. "Members are not happy when they are not told what is going on and the members of the public and the committee are not given notice about what is happening."
Rep. Matt Hall, R-Comstock Township, said Rendon’s office told him ahead of time that only two bills would be discussed in committee. By the time the third bill was brought up, Hall said he had other commitments including the preparation of his tax relief plan passed out of the House and Senate later that day.
A total of seven Republicans left the meeting during the recess, leaving the committee without the quorum needed to refer the bill to the House floor. Later Thursday evening, the bill was removed from Rendon’s committee and referred to the House Rules and Competitiveness Committee chaired by state Rep. Jim Lilly, R-Park Township.
The transfer to Lilly’s committee occurred because "they do good work," D’Assandro said.
The Michigan Home Care and Hospice Association criticized lawmakers’ "insurance walkout."
"We can only conclude, those members who chose to leave the committee meeting today were listening to legislative leaders influenced by the powerful insurance lobby, and ignoring the growing catastrophic care crisis here in Michigan," said Barry Cargill, president and CEO for the association, in a Thursday statement.
Rendon said she held the hearing on the legislation after listening to catastrophic crash victims and their medical providers affected by the July 1, 2021 fee cut. Many medical providers have still not been paid by insurance companies for their services, she said.
"They’re providing them to patients who cannot move without help and assistance, cannot do simple personal care functions, and they’re being forced to look for another service because their provider has gone out of business or will have to drop them for non-payment," Rendon said. "And that was not part of the deal."
One of the more controversial provisions of the historic 2019 no-fault auto insurance reform was a July 1, 2021 cut to what medical providers could charge insurance companies for providing care to those injured in catastrophic crashes. The rule required providers to cut their costs to 55% of what they charged in January 2019 or, for Medicare reimbursable services, 200% of the Medicare rate.
Auto no-fault survivors and their medical providers have fought the change for months, arguing the cut was too severe to sustain business operations and still provide the level of service their clients had received over the years. Additionally, medical providers have said insurance companies are taking advantage of the complexity of the new fee schedule to delay payments.
Berman’s bill would force the insurance provider to pay three times the amount of the overdue payment if the insurance provider were delaying payment in "bad faith."
Insurance Alliance of Michigan Executive Director Erin McDonough criticized the legislation as a "backdoor way" to avoid the new fee cuts and prevent insurance providers "from investigating fraudulent claims." The association’s member companies, McDonough said, are reporting they’re paying nine out of 10 claims "in a timely manner."
"The existing law already encourages prompt pay by setting strong penalties, including 12% interest, additional monetary fines and the ultimate penalty for an insurer to lose their license to sell insurance in Michigan," she said. "In the remaining cases, insurers are seeing a wide range of changes in certain medical provider billing practices intended to avoid the new medical fee schedule including providers changing their names, increasing charges from 2019 and wrapping up weeks of charges into one line to avoid transparency."
Tammy Hannah of Origami Rehabilitation told lawmakers Thursday that the company’s payment turnaround time doubled to about 4.9 months within a year of the legislation going into place, then grew to 6.3 months in April 2021 and peaked at 8.1 months in December 2021.
"When money is only going out and not coming in, it’s impossible to provide care," Hannah said.
Bob Mlynarek of 1st Call Home Healthcare told lawmakers his company has had to add a second biller and payroll has been difficult to maintain "when our reimbursement system has been so erratic." He said many delays have related to a host of paperwork discrepancies between what’s required under the law and what insurance companies have been demanding of providers.
"It is a constant delay, delay, deny and then litigate," Mlynarek said.
The Michigan Legislature set up a $25 million fund last year for medical providers who could show a "systemic deficit" due to the fee cut to access but, so far, none of the providers have received money from the fund.
Several medical providers contended that the paperwork required and the lack of payments from insurance companies made it nearly impossible to apply for the funding.
Kelley Out of GOP Mackinac Debate; 2 Others Confirm Attendance
Mr. Kelley has now switched from going to not going to going to now not going.
That said, the campaigns of Garrett Soldano and Kevin Rinke confirmed with Gongwer News Service that they still plan to attend. The campaign of former Detroit Police Chief James Craig initially told Gongwer that he would be attending the debate, but later said they hadn’t confirmed their attendance with the Detroit Regional Chamber, adding that they haven’t said no either.
Mr. Kelley had initially said he was not going to attend, believing the debate was subject to the conference’s COVID restrictions. He then on Tuesday agreed to the debate once he learned that the restrictions did not apply to the Michigan Republican Party-sanctioned event as it would be taking place outside.
The candidate had yet another change of heart on Thursday. In an email to supporters, Mr. Kelley said he would be "boycotting" the entire function over its requirement that some attendees for the full conference would have to provide proof of vaccination – which he dubbed as a vaccine passport – or recent a negative COVID PCR test.
"Recently I received an invitation to debate four other governor candidates on Mackinac Island, at the Mackinac Policy conference. This is a great honor and I appreciate the opportunity and respect the significance of this invitation," he wrote. "Although the governor debate is outside and is not requiring proof of vaccination or negative COVID tests, it is an invitation that I must decline. When the Detroit Regional Chamber removes the COVID test and vaccine passport requirements, in their entirety, for all attendees, I will enthusiastically attend the conference and debate."
In response to Mr. Kelley’s announcement, Brad Williams, vice president of government relations with the chamber, said in a statement that the group regrets his lack of participation in the debate, which he called "a critical component of the chamber’s endorsement process."
"Debates and forums at the conference have launched the careers of current and former governors and senators," Mr. Williams said. "The chamber looks forward to a substantive conversation on issues that matter to Michigan with invited candidates. The chamber this year, as announced last month, will also accept a negative PCR test result in lieu of vaccination for attendance at the conference. The chamber is a private entity executing an event at a privately held entity and hopes that Mr. Kelly’s focus on freedoms extends to the private sector as well."
Mr. Kelley’s boycott statement also urged fellow candidates and other Republicans to join and skip the event.
"Republicans, or any freedom loving American, should not be participating in a conference that is requiring these left-wing extremist policies," Mr. Kelley wrote. "Michiganians are ready to move on from the pandemic and COVID tyranny. Republicans that show up to this conference are nodding their approval of these radical left-wing extremist policies."
He added: "I am calling on all Republican candidates to stand with me in opposition to vaccine mandates and join me in this boycott. Let’s have a debate somewhere that respects our freedom, and let’s take our state back."
In response, MIGOP spokesperson Gustavo Portela told Gongwer that Mr. Kelley was missing a potentially great campaign opportunity.
"While we’re disappointed that Mr. Kelley has backed out, this is a missed opportunity given it’s a platform to speak to the small business community that has been rocked by Gretchen Whitmer’s reckless policies," Mr. Portela said. "We’ll continue to work with the candidates that attend so that they are able to make the case to voters as to why the state is better off by moving on from Gretchen Whitmer and her failures."
MIGOP Co-Chair Meshawn Maddock echoed that sentiment on Twitter, writing that every invited candidate should try to attend because of the event’s emphasis on the small business community that deserved to hear from them.
The campaigns for Mr. Soldano and Mr. Rinke said they were all in, while Mr. Johnson’s campaign remained silent on the issue. Mr. Craig’s camp has yet to make a decision, but it is uncertain if he’ll make the ballot due to signature challenges.
Responding to Mr. Kelley’s boycott, Mr. Soldano in a statement said that the debate’s lack of COVID measures was a reason the candidate remained committed to the event.
"Medical freedom is a cornerstone of our platform and an issue of great importance to Michigan," Mr. George said. "We plan to debate given that no COVID-19 vaccine or test is required to attend the debate and any candidate who backs out just is scared to debate. That simple."
Candidates Tudor Dixon, Michael Brown, Ralph Rebandt, Donna Brandenburg and Michael Markey were not invited to the policy conference debate.
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