Mid January, 2022 Newsletter

‘Astounding’ Revenue Surge Continues

The massive, unanticipated windfall of additional revenues to the state continues with the Consensus Revenue Estimating Conference revising revenues upward Friday by $3.16 billion for the General and School Aid funds combined.

That’s on top of the projected book-closing on the 2020-21 fiscal year that ended September 30, 2021, making available $2.69 billion in revenues above the May 2021 conference forecast – $1.67 billion for the General Fund and $1.02 billion for the School Aid Fund.

And then there’s still the enormous amount of federal aid appropriated to the state. There’s $1.8 billion in passthrough money that automatically goes to certain programs and another $5.3 billion discretionary state relief aid available. And then there’s more than $10 billion the federal government has sent to the state for infrastructure.

"It is astounding. It’s impressive to see what has happened to the economy in the last two to three years," Budget Director Chris Harkins told reporters after the conference. "The swing has been absolutely unbelievable."

However, he cautioned, "a lot of it is one-time in nature."

For the 2021-22 fiscal year, the conference revised revenues upward by $1.73 billion from the May 2021 conference for both the General and School Aid funds combined, an upward revision of $776.6 million for the General Fund and $947.2 million for the School Aid Fund. There will be a slight decrease in revenues overall from the 2020-21 fiscal year, down by 1.6 percent to $28.528 billion for both funds.

For the 2022-23 fiscal year that begins October 1, the conference revised revenues upward by a combined $1.44 billion to both funds: $621.4 million in the General Fund and $819 million in the School Aid Fund. This will represent a 2.1 percent increase from the 2021-22 fiscal year to $29.139 billion for both funds.

For the General Fund, Mr. Harkins said that $621.4 million upward revision for the 2022-23 fiscal year could be seen as the ongoing revenue increase with the rest of the surge being one-time in nature.

Governor Gretchen Whitmer will present her recommendation for the 2022-23 fiscal year in early February.

Lawmakers and the Whitmer administration also will have massive supplemental appropriations to consider.

One lawmaker, Sen. Jim Runestad (R-White Lake), chair of the Senate Finance Committee Track, called for tax cuts.

Rep. Thomas Albert (R-Lowell), chair of the House Appropriations Committee Track, said Friday that he was optimistic about getting a budget done by July 1, remarking, "In the House, we got it done last year."

"I’m only one leg of the stool, and it takes all three to get it done. So, it just kind of depends," Mr. Albert said. "The more money that we’re seeing right now, honestly, does make it more challenging. But if we can limit things to one-time spending for any types of increases and try to just be responsible – that we don’t increase ongoing programming – there’s a lot of risks in the economy. I think we just need to be cautious."

He added that with more money, the Legislature was somewhat in a too-many-cooks situation. The more funding there was available, the more ideas are added to the discussion, Mr. Albert said, which was not always necessarily helpful.

While there is always some degree of that occurring in every budgeting process, he acknowledged, with an unprecedented amount of funding came an increase in funding requests.

Sen. Jim Stamas (R-Midland), chair of the Senate Appropriations Committee Track, seemed to hold a similar view, saying that he certainly hoped to have the budget completed by the July 1 deadline.

"We’d like to have that out for our schools and local governments, at a minimum," he said, adding the reality of it being an election year made completing the budget on time even more crucial.

Given the large number of incumbent lawmakers facing primaries in August, there will surely be little desire to remain in Lansing well into the summer with legislators itching to campaign back home.

Mr. Stamas indicated that there was a positive relationship between himself, Mr. Harkins and Mr. Albert which would benefit any future budgetary work.

As for any movement on the various supplementals, both Mr. Albert and Mr. Stamas seemed optimistic on this front too.

Three supplementals are currently floating within the Legislature, with the COVID-19 early treatment and law enforcement supplementals in the House and the lead service line replacement funding supplemental in the Senate.

"That’s one thing that I think is pretty unique about this year," Mr. Albert said, of the supplementals. "People think of the regular budget … we have a regular process that we do every year. There’s just not any type of process, for supplementals, like that."

He gave no indication as to which supplemental would be likely to pass first between the three, though Mr. Stamas said his chamber was "discussing the health supplemental that the House has sent over," currently.

"We’re trying to get through these as fast as we can, but it just takes time to negotiate," Mr. Albert said. "Hopefully, we can reach some type of agreement with the admin sooner, rather than later."

During the conference, economists detailed the reasons for the historic surge in unanticipated revenues.

Annual and quarterly income tax payments were far, far ahead of the May forecast.

Eric Bussis, chief economist and director of the Department of Treasury’s Office of Revenue and Tax Analysis, said May 2021 saw annual income tax payments underestimated by $1 billion alone.

"We had a huge annual payment surprise," he said.

The federal aid flowing into the state via stimulus checks and enhanced unemployment benefits meant people were spending more money and generally more on goods because the pandemic limited availability of services. This triggered the big increase in sales and use tax revenues, as well as revenues to the Corporate Income Tax and Michigan Business Tax.

Mr. Harkins noted, however, that total revenues in the 2021-22 fiscal year would be less than in the 2020-21 before showing small growth again in the 2022-23 and 2023-24 fiscal years.

"It’s very positive to see that by ’24 we’re projecting growth over this ’21 number, but it first takes a dip in ’22 and we grow from there," he said.

Michigan to Get $563 Million to Fix, Maintain Highway Bridges

More than $563 million in federal dollars is heading to Michigan to fix and maintain highway bridges.

The funding is from the Bridge Replacement, Rehabilitation, Preservation, Protection, and Construction Program and will help repair about 1,240 bridges considered to be in poor condition, the Transportation department said Friday.

Improvements also will be made to more than 5,950 bridges deemed to be in fair condition.

Roughly 15,000 highway bridges across the United States are to be repaired and upgraded as part of the five-year $27 billion program through the infrastructure law approved in November.

It will be administered by the Federal Highway Administration.

Auditors Find Additional Deaths in Long Term Care Facilities

A report from the Office of the Auditor General found that 8,061 deaths occurred at Michigan long-term care facilities from COVID-19 between the time the pandemic began and July 2, 2021 – 2,386 more than the Department of Health and Human Services has reported.

The difference was owed to reviewing homes not required to report information and disputed methodology.

This report was not officially made public by the Office of the Auditor General but leaked to some news organizations.

There was no indication in the report of any attempt by DHHS to falsely minimize the number of deaths in nursing homes, homes for the aged and adult foster care facilities even as Republicans claimed otherwise without evidence. Auditors also said they were unable to analyze which deaths were specific to facilities where residents were transferred to a hub, a Whitmer administration policy from early in the pandemic Republicans criticized. They preferred to see COVID-19 positive patients not requiring hospitalization transferred to unspecified other facilities.

But the report does offer a deeper look at the impact of COVID-19 in long-term care facilities than DHHS has provided so far.

In particular, the report found 1,051 deaths at long-term care facilities not required to report information to DHHS. These are adult foster care facilities licensed for 12 or fewer beds, exempt homes for the aged and hospice-only skilled nursing facilities not subject to reporting information to DHHS.

This was a point heavily emphasized in a letter from DHHS Director Elizabeth Hertel to auditors in which she said that these deaths should have been separated. She noted the federal government sets reporting requirements, not the state.

There are 4,269 facilities in Michigan not required to report information to the state, auditors found, and 1,393 required to report.

The other source of the difference in the death count at long-term care facilities was that auditors used address fields in the Michigan Disease Surveillance System and found 1,511 additional deaths linked to a long-term care facility. DHHS contends the use of address fields in that system is unreliable, but auditors said they corroborated at least 85 percent of the 1,511 addresses using other data fields, Medicaid data in the Bridges system and Medicaid long-term care claims in the CHAMPS system.

Republicans have compared Michigan’s nursing home data reporting to the controversy in New York state but there’s a couple major differences. Staff to former New York Governor Andrew Cuomo, news organizations reported, rewrote health data from that state’s health department to make the number of nursing home deaths lower than they seemed. That state’s attorney general also reported that the state did not count nursing home deaths if the deceased resident was transferred to a hospital and died there.

The letter from the Michigan Office of the Auditor General said Michigan followed U.S. Centers for Disease Control and Prevention definitions and required long-term care facilities to report residents with suspected or confirmed COVID-19 cases who died in the facility or another location. They could exclude those not expected to return to the facility or if the facility was not aware of the COVID diagnosis prior to transfer.

Auditors said the 5,675 deaths the state reported in long-term care facilities due to COVID-19 was accurate based on the methodology the state was using. They also indicated that DHHS is in the process of vetting death numbers with long-term care facilities.

Whitmer Press Secretary Bobby Leddy, in statements to various news organizations, emphasized that auditors found the 5,675 number to be accurate.

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Marijuana News, Updates, & Articles of Interest

THE DCD MARIJUANA TEAM:  YOUR COMPETITIVE EDGE
**Updated Information Regarding Proof of Financial Responsibility Insurance Requirements for Medical Applicants and Licensees**

As previously communicated, PA 160 and PA 161 were signed by the Governor on December 27, 2021. These laws do not take immediate effect and as such the application and process for applicants and licensees will remain unchanged at this time. When the laws take effect on March 30, 2022, the MRA will update the application to align with the requirements of the law. We apologize for any confusion. As always applicants and licensees are encouraged to obtain applications and forms directly from the website to ensure they are using the most up to date materials.

HEARINGS ON HEMP & MARIJUNA BILLS IN REGULTORY REFORM THIS WEEK:

House Bills 5058 to 5061 would amend several acts pertaining to industrial hemp to exclude food and certain products from being considered “adulterated” solely on the basis of containing industrial hemp, limit the liability of growers for violations of the Industrial Hemp Growers Act, and revise or delete defined terms.  These bills, along with HB 5617–requirements for industrial hemp added to food or dietary supplement–will be heard today, 1/18.

DCD will continue to monitor these bills and provide updates as necessary.

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.

We are here to help you with: municipal lobbying, license application writing and assistance, business plans, state required operations manuals and compliance, facility design, corporate structure, and design and branding. 

We are experts in both medical and recreational cannabis policy and have been in the space for over ten years.  We welcome any opportunity to work with you in the future! 

ARTICLES OF CANNABIS INTEREST:

Michigan’s New Cannabis Liability Insurance Requirements Raise Concerns by Licensees, Insurers

Cannabis Compounds Prevent Coronavirus from Entering Human Cells

Michigan Breaks Another Marijuana Sales Record in December

Frustration Builds as Federal Cannabis Reform Stalls

Michigan Marijuana’s 2021 Growing Pains

DCD is rebranding, and our bottom line is your bottom line. We are striving to create and foster strong relationships with clients and lawmakers, deliver results with strong ethics and class, but above all else, out-hustle and out-smart our competition every day to be the very best.

We’re making chess moves while others are playing checkers. Everything we do is with you in mind, we’re doing things we’ve never done before and aggressively pursuing opportunities. The time is now. DCD has taken our firm to the next level and your involvement and investment paired with our knowledge and expertise is going to launch the great state of Michigan forward.