• SINGLE BUSINESS TAX PASSED IN THE LEGISLATURE
• 06/07 SCHOOL AID FUND FIXED
• 07/08 SCHOOL AID FUND REVENUE DISCUSSION ONGOING
• SENATE PASSES TEACHER RETIREMENT, HEALTH CARE CUED UP
• COMMON SCHOOL CALENDAR BILL PASSES SENATE
• CAREER TECHNICAL EDUCATION REFORM BILL MOVES TO GOVERNOR
• COURT RULING DOES NOT TOUCH MICHIGAN SCHOOLS
• HOUSE, SENATE CUTS VACTAION WEEK SHORT

SINGLE BUSINESS TAX PASSED IN THE LEGISLATURE

Michigan's new business tax sailed through the Legislature last week toward the Governor's desk after getting the overwhelming blessing of both the House and Senate, despite a couple of last-minute hurdles and the hard opposition of one of the state's biggest business organizations.

The bill embodies the agreement legislative leaders and administration struck two weeks ago. As opposed to the value-added Single Business Tax (SBT), the MBT is based two-thirds on a business' gross receipts. The remaining one-third is a business income tax. Personal property taxes are reduced by 12 mills for commercial property and 24 mills for industrial property, with a 35 percent refundable credit.

The legislation stipulates that School Districts will get first full replacement for dollars lost under proposed PPT changes. Additionally, schools will receive a (Detroit CPI) COLA increase every year starting after the enacting date.

The final piece of the 2006-07 fiscal year fix was approved unanimously by the Senate last Thursday. Approved was HB 4851 , which makes a dual transfer of up to $94 million to help close gaps in the general fund. The bill allows for a transfer of funding from the Higher Education Student Loan Authority reserves to the Michigan Merit Award Trust Fund.   That covers money moved from the Merit Award to help fill in the general fund. Once the bill is signed by Governor Jennifer Granholm then all parts of the 2006-07 budget fix announced nearly four weeks ago will be in place, leaving the Legislature and administration to focus on the 2007-08 budget.

07/08 SCHOOL AID FUND REVENUE DISCUSSION ONGOING

Gov. Jennifer Granholm is now pushing to have the House try to pass some sort of new revenue enhancement (higher income tax rate or a sales tax extension) sometime in July, rather than aiming at Independence Day as a deadline. Senate Majority Leader Mike Bishop (R-Rochester) seems to be anticipating the nuts and bolts of the Fiscal Year (FY) 2008 budget coming to a head in August. The Senate is still pushing for further reform measures before voting on any tax increase. Although the legislature is scheduled to come back next week, an FY 08 funding solution is not likely to be resolved until later this summer. Please stay tuned for more information.

SENATE PASSES TEACHER RETIREMENT, HEALTH CARE CUED UP

Senate Republicans tackled the first of several promised budget-balancing government reforms last week by passing legislation designed to make future public school employees kick in more money for their pension and retiree health care benefits.

Less than 18 hours after receiving Gov. Jennifer Granholm's latest to-do list, the Senate passed the school teacher retirement reform bills (SB 0546 and SB 0547 ) along party lines, 20-18 and 20-17, respectively. Sen. Roger Kahn (R-Saginaw), the GOP's most politically vulnerable member and a Michigan Education Association (MEA) supporter, joined Democrats in voting no.

Republicans nearly mustered the votes to move a public employee health care pooling bill, but the effort lost steam after the Republicans needed to jump through some procedural exercises to knock off a Kahn amendment designed to make the legislation more palatable to the MEA and its health care administrative arm, the Michigan Education Special Services Association (MESSA). Sen. Mickey Switalski (D-Roseville) and Senate Minority Leader Mark Schauer (D-Battle Creek) said they could only support public employee reforms as part of a general agreement to raise revenue to balance the Fiscal Year (FY) 2008 budget.

The Senate Republicans' bill did not erase teacher pension in favor of a 401(k) defined contribution plan as the GOP has tried before, but they did raise the amount a teacher who started after July 1, 2008 , would have to pay. In order to participate in the pension system, new full-time school employees would have to pay $510 a year plus 4.3 percent of any annual salary they receive over $15,000 as opposed to the current standard of 3 percent of salary over $15,000.

The bills also create a graduated health care benefits system where new members would ultimately be required to pay at least 10 percent of their health insurance premiums as opposed to MPSERS picking up 100 percent of the cost. The legislation also requires a public school employee 60 or older to have at least 10 years of service before they begin purchasing service credit. Also, in order for retired school employees to receive full health care benefits, they need to put in 30 years of service. Any employee who retires with anything between 11 and 29 years would receive graduated health care coverage under the Michigan Public School Employees Retirement System (MPSERS). Currently, MPSERS pays 90 percent of retiree health care costs.

An approved Sen. Ron Jelenik (R-Three Oaks) amendment allowed any school retiree hired after July 1, 2008 with 30 years of service to receive full health care benefits, not only those over 60.

The changes come as a Standard & Poor's study shows how Michigan 's school benefits system is costing MPSERS $2,165 per student, about 42 percent more than the national average. Whatever small funding increase school districts are receiving from the state, inevitably gets sucked up into paying for rising health care and retirement costs. If current trends continue, benefit costs are projected to chew up 30 percent of the cost of payroll by 2020, up from the current level of 17.7 percent. MPSERS faces $16 billion in unfunded accrued liabilities.

Republicans also tried to move legislation designed to clear the way for SB 0418 , that encourages more local units of government and school districts to pool health care costs as a way to save money. The Senate Republicans made a major concession by approving an amendment that would limit the sharing of health care data to “in the aggregate” as opposed to by individual. Kahn attempted to strengthen these protections further with an amendment that would have made it harder for health care companies to “cherry pick” healthy employees for their pools and leave MESSA with the sicker, more expensive employees.

The amendment was adopted when Jelinek jumped party lines and joined Kahn and the Democrats in support. The Republican majority then needed to use a procedural maneuver to knock all of the amendments off the bill. They then froze the health care pooling bill, SB 0418, for the rest of the day. The bill currently resides on the Senate floor with the Kahn Amendment stripped out. Please contact your Senators and urge them to Support SB 418 and oppose the Kahn amendment which aggregates claims data.

CAREER TECHNICAL EDUCATION REFORM BILL MOVES TO GOVERNOR

 This week the legislature moved SB 188 to the Governor’s desk. This legislation would update antiquated Career and Technical Education statutes and codify current administrative practices into law. Additionally, the legislation would allow for ISD and Business control of local Vocational Education dollars rather that being the only locally levied mileage to get state approval for usage.

COMMON SCHOOL CALENDAR BILL PASSES SENATE

School districts within a common intermediate school district (ISD) would be required to share a common class calendar under legislation that passed the Senate, 20-17, this past week. Starting with the 2008-09 school year, the legislation would require all school districts within the same ISD to keep the same winter break, spring break and professional development days. SB 0549, sponsored by Sen. Ron Jelenik (R-Three Oaks), came as the result of a workgroup with school administrators that saw financial savings in having consistent schedules for planning purposes. The argument being that it's a waste for an ISD to keep a class running, for example, when only one school district is in session. Since then, lawmakers have cited other benefits (sharing of buses, technology, food services and curriculum) to keeping a common calendar, despite concerns from some Democratic lawmakers that the change intrudes on collective bargaining rights.

Because of the labor concern, the bill only passed on a mostly party-line vote of 20-17, with Sen. Bruce Patterson (R-Canton) joining Democrats in voting no and Sen. Mickey Switalski (D-Roseville) joining Republicans in voting yes.

Sen. Gretchen WHITMER (D-East Lansing) questioned why charter schools were not included in the legislation and then sponsored a doomed amendment that attempted to rope them into the bill. Her argument was that it was good public policy to include all taxpayer-funded schools into the bill. If public schools need to request a waiver to get out of a common ISD calendar, so should charter schools Whitmer's amendment failed, 18-19.

Schools that operate on a year-round or trimester program would be exempt from the common calendar. School districts would still be allowed to hold their own mid-winter break or take special extended breaks around Thanksgiving. 

COURT RULING DOES NOT TOUCH MICHIGAN SCHOOLS

Michigan school districts in the future will have to be sure their admissions and placement policies are race-neutral under a U.S. Supreme Court ruling issued Thursday. But that does not appear to mean much of a change from current practices. The 5-4 court ruled that, based on the earlier Brown v. Board of Education case, districts should not consider race at all when they determine which school within the district a child should attend.

Districts around the nation, particularly the districts involved with the case, are scrambling to change placement policies that attempted to make schools racially balanced. But Michigan officials were not aware of any districts in Michigan that had such policies.

The court ruled (Parents Involved in Community Schools v. Seattle School District No. 1, USSC docket No. 05-909) school districts cannot, in most cases, make student placement decisions based solely on race or where race is the deciding factor among other factors. "Classifying and assigning schoolchildren according to a binary conception of race is an extreme approach in light of this Court's precedents and the Nation's history of using race in public schools, and requires more than such an amorphous end to justify it," said Chief Justice John Roberts in the lead opinion joined by Justices Antonin Scalia, Clarence Thomas and Samuel Alito.   Justice Anthony Kennedy, in a concurring opinion that found the two programs at issue unconstitutional, allowed some instances where race could be a factor in program decisions. Mr. Roberts noted two University of Michigan admissions cases recently decided by the court in finding that race was not a legitimate factor for deciding placement. Justice Stephen Breyer, joined by Justices  John Stevens, David Souter and Ruth Bader Ginsburg, would have allowed the districts' programs and argued the majority ruling was opening the nation to a spate of race-related lawsuits.

HOUSE, SENATE CUTS VACTAION WEEK SHORT

The House and Senate are scheduled to reconvene Tuesday, July 10, essentially cutting their previously scheduled two-week summer break by a week. Both chambers are scheduled to begin session at 10 a.m.

The move comes after the chambers came under some executive criticism for taking a two-week vacation without first solving the Fiscal Year (FY) 2008 budget package of reforms before pressuring legislators to vote on additional revenues.