Studies show a lack of positive economic impact
Neal Rubin laments the elimination of Michigan’s film incentive at The Detroit News. But he paints a false picture of the scholarship on this subsidy.
The incentives work — 37 other states currently have them — but at a cost. What cost, and what value, depends on who’s crunching the numbers.
There are plenty of policies where economists can find different effects, but the studies of film incentives are clear. As Dr. Michael Thom, a professor at the University of Southern California, recently wrote:
Think tanks from across the political spectrum — including the liberal Center on Budget and Policy Priorities, conservative American Enterprise Institute, libertarian Reason Foundation, and nonpartisan Tax Foundation — have argued that [film incentives] don’t succeed at creating jobs or growing the economy.
Scholars tend to agree. Multiple peer-reviewed studies suggest that tax incentives targeted at specific industries do not generate long-term growth. They do little more than lure states into a competitive bidding war, where each state tries to outdo the others by spending more and more on tax incentives.
Michigan policymakers closed down a program that cost taxpayers millions. They should look to other of the state’s ostensible “economic development” programs.
Public money funds union activities in many states
Many public unions have negotiated release time into their contracts, allowing publicly employed union officials to receive a salary to spend all or part of their time on union business. A bill that would prevent taxpayers from funding release time was recently introduced in the Michigan Senate.
Release time is not unique to Michigan — it takes place in other states, as well as at the national level, as Fox News recently reported. Mackinac Center Director of Labor Policy F. Vincent Vernuccio commented for their story:
Release time costs local, state and federal governments hundreds of millions of dollars. Figures for states, counties and municipalities are not known, but at the federal level, release time costs taxpayers an estimated $122 million annually, according to the Michigan-based Mackinac Center for Public Policy. While no one disputes there is union business to be conducted, and release time is part of collective bargaining agreements, critics say the practice allows for waste and should be funded by union dues, not taxpayers.…
“It’s extremely troubling to see, when you have examples like union officials say there is not enough money going to public works yet they have teachers collect salaries from districts they don't even work for," Vernuccio said. "This does not help the taxpayer at all.”
The full article is available at the Fox News website.
Examining the future of road funding and income tax cuts
Since the colossal failure of Proposal 1, the state House and state Senate have each released road funding proposals of their own. We now have a debate bounded by two high profile proposals, each with components worthy of applause.
We have written much about both plans but feel compelled to linger over one component in the Senate plan: the income tax cuts.
The Senate plan basically allows for a rollback in personal income taxes every year state revenues exceed inflation. Theoretically at least that means that what we pay in income taxes could drop to zero or near zero over time. This is a commendable goal. (If you’re wondering where the state would get money for its operations, don’t worry; there would still be sales, excise taxes and other sources of revenue.)
The qualification we must offer is that past legislatures also have made promises of future tax cuts, only to prevent them from occurring. One need look back no further than 2007 for an example.
That year, the Granholm administration and the Legislature conspired to raise the personal income tax by 11.5 percent. That increase came with the promise that — in 2011, when the state was expected to be on firmer fiscal footing — Lansing would begin rolling back the tax hike. The rollback never really came to pass. Then the Snyder administration, after cutting the personal income tax by a measly 0.1 percent, prevented more of those promised cuts from occurring.
There are all sorts of ways Lansing politicians could undermine the promise of future income tax cuts. Take for instance the point made by David Zin of the Senate Fiscal Agency. He argued — and was cited by the Gongwer News Service — that any money lawmakers transfer to the state’s rainy day fund from the General Fund wouldn’t count in the calculation of how much the General Fund had grown. Legislators who wished to forestall an income tax cut could simply transfer the cash to the rainy day fund.
There are better and simpler ideas. Why not simply mandate a rollback in the personal income tax rate immediately instead of installing a complex tax-cut formula that may never actually produce a tax cut?
Or the Legislature could link the gas tax increase in the road plan to the proposed personal income tax cuts. That is, if a personal income tax cut does not occur then any road tax increase is reversed. Linking the two might help assure voters that Lansing lawmakers are serious about tax relief and road repair.
Another idea — though more challenging and time consuming — is to enshrine personal income tax cuts in the state constitution, along with the necessary prohibitions on raiding dollars that flow to the treasury faster than, say, a combination of population growth and the inflation rate.
I congratulate each chamber of the Legislature for developing boundary lines in the debate over road finance. Their plans reveal some very good intentions, but more can be done to win back the trust of taxpayers who ultimately foot the road bill.
If this Legislature could prove to taxpayers that its proposed tax cuts are real, maybe Michigan voters will accept its road funding ideas as passionately as they rejected the tax hike offered by Proposal 1.
A millennial reflects on the Legacy Society
I am a child of the liberty movement, blessed with the good fortune to have been born into a close-knit extended family of devout, hard-working and patriotic people, many of whom served as leaders in their communities and heroes our armed forces. My parents and grandparents left my sister, my cousins and me an example of self-reliance, generosity, and financial prudence.
Today, my work at the Mackinac Center acquaints me with many people who remind me of my family. The Center’s friends work conscientiously, prioritize family dinners, vote and pay taxes and keep a budget and plan ahead. They are abreast of current events and are not happy with certain political and cultural trends, but have faith that by imparting good values to their children, the freedoms they have enjoyed will still be available to future generations.
A good number of these friends have taken additional steps to assure themselves of more than just a hope for the future. They have formulated a plan that gives them certainty that there will always be a champion for liberty, even when they have passed on. They do not need to worry whether their children will have time to try to impact the political process. They do not need to worry whether their grandchildren will have resources to counter the liberal bias at their universities. They do not need to worry whether their voice has been loud enough during their lifetime. They have made a bequest for liberty in their will, and have amplified the impact of that bequest by entrusting it to the Mackinac Center for Public Policy.
It is inspiring to meet and talk with these friends, whom we call our Legacy Society. These freedom fighters are dedicated to helping us achieve a freer and more prosperous Michigan for everyone, and are so proud of the many accomplishments that this partnership has made possible, and will make possible. They have taken some of what they have been able to achieve in their lifetime and set it on a path to perpetuate their values into the future with the full force of one of the most powerful state-based think tanks in the country behind it. My gratitude for and admiration of this commitment are surpassed only by the visible sense of fulfillment of the Legacy Society members themselves. They are a truly commendable group.
I never realized how good I had it growing up; I supposed that everyone thought and lived the way we did. Now, as an adult actively engaged in the battle of ideas, I am determined to preserve the best of the past as we find our way into the uncertain future. Government deadlocks and political scandals will come and go, but the commitments of our Legacy Society members ensure that the Mackinac Center will always be ready to defend freedom in my generation and for many to come.
To discuss a bequest to the Mackinac Center, please contact us at (989) 631-0900.
Employer mandate forces schools to privatize services and cut hours
The Affordable Care Act, aka Obamacare, has forced many public schools to cut employee hours or privatize noncore services. At issue is the ACA’s mandate that employers with 50 or more full-time workers provide health insurance to any who work 30 or more hours per week.
The Baraga Area Schools in the western Upper Peninsula is among the many districts in Michigan that are feeling the effects of the law. Superintendent Jennifer Lynn says her district had employed more full-time support staff, but has been forced to cut hours due to the prohibitive cost of the ACA mandate.
Baraga is no outlier. A 2014 survey commissioned by the Association of School Business Officials International found that nearly 50 percent of school districts were concerned about the impact of the ACA’s employer mandate.
An example of the costs involved can be seen in the Parsippany school district in New Jersey, which estimated that providing health insurance for 185 paraprofessionals would cost $4.5 million per year. The school district in Vigo County, Indiana would have to pay $6 million annually to provide coverage for support staff.
These rising costs can have ripple effects. At Michigan’s rural Elkton-Pigeon-Bay Port Laker school district, officials report the health insurance mandate generated cost increases approaching six figures, which forced them to lay off certain staff members. Consequently, classroom sizes rose.
School districts can also avoid the mandate’s costs by shifting more employees to part-time status. That’s how Indiana’s Vigo district managed the problem. It avoided layoffs by trimming more than 500 support staff workers to less than 30 hours per week. Michigan’s Cass City school district hired part-time paraprofessionals and bus drivers.
That’s less of an option with instructional staff, though. School officials say that it’s hard for students to adjust to having multiple part-time educators throughout the day. Chris Johnson, an administrator with the Penn Manor school district in Pennsylvania, told a publication there that, “If you start doing a half day with this person and then a half day with that person, those students don't react well.”
In schools across the country, outsourcing noninstructional services has been on the rise over the last decade. This cost-cutting tool has become even more attractive since the rollout of the ACA mandate, because it lets school officials shift the burdens of compliance to private contractors.
To minimize teacher layoffs, Michigan’s Elkton-Pigeon-Bay Port Laker district privatized some services. Pennsylvania’s Penn Manor district had about 30 part-time aides who worked with special needs students. Rather than cut those aides’ hours further, school officials have chosen to contract out this function to a private firm that will also fill its need for substitute teachers.
An article posted on the Kansas Health Institute news service suggests that for some districts it would be cheaper to just eliminate employee health insurance and pay the $2,000 to $3,000 per employee penalty the law would impose for doing so. Officials at Michigan’s Cass City district say this is not their preference, and privatizing some functions helps them avoid it. Other school districts have formed co-ops with neighboring districts to spread the brunt of the cost, according to Holly Murphy of the Texas Association of School Boards.
There is no one-size-fits-all solution for school districts trying to cope with the ACA, which like many government programs has had consequences not foreseen by its authors, and costs that, in the eyes of many, far exceed the benefits.
Responding to allegations made earlier this week
In a letter to the editor titled "Think tank's efforts to discredit union fails" published earlier this week by The Detroit News, MEA President Steve Cook attacked the Mackinac Center's position as an advocate for worker freedom and educational choice in Michigan.
Mackinac Center Executive Vice President Michael Reitz published a rebuttal in The Detroit News on July 31, reminding readers of Cook's pension spiking deal (a story broken earlier this year by Michigan Capitol Confidential) and explaining reasons why teachers might wish to leave the MEA:
…Steve Cook writes that “public school employees have not been treated well by … special interest groups in recent years.”
Thousands of Michigan teachers agree, but the group they feel mistreated by is Cook’s own union. The MEA is ruining the personal credit scores of the very employees he represents by sending them to collection agencies for exercising their right to opt out of their union. For some who exercised their rights, MEA affiliates published their names in an attempt to publicly shame them and pressure them into paying again.
The full letter to the editor is available at The Detroit News.
Bills on school “adequacy,” secret corporate welfare, police shootings and more
The House and Senate are out for several weeks. Therefore, this report contains several recently introduced bills of interest.
Senate Bill 291: Authorize wrongful imprisonment compensation
Introduced by Sen. Steve Bieda (D), to authorize payment by the state of civil damages to a person wrongfully imprisoned for a crime he or she did not commit. The damages would be $60,000 for each year of wrongful imprisonment, plus “economic damages” including lost wages, plus reasonable attorney fees. Versions of this bill have been introduced in every legislature since at least 2005. Referred to committee, no further action at this time.
Senate Bill 292: Disclose unfunded liabilities in state budget
Introduced by Sen. John Proos (R), to require the constitutionally required executive budget the governor must submit each year to include an accounting by department of the unfunded liabilities incurred to pay future pension and post-retirement health benefits promised to retired employees (legacy costs). Referred to committee, no further action at this time.
Senate Bill 308: Authorize black "Greek letter organizations” specialty plate
Introduced by Sen. Coleman Young, II (D), to authorize a specialty license plate honoring several African American fraternities and sororities specified in the bill, with the premium revenue going to the United Negro College Fund. Referred to committee, no further action at this time.
Senate Bill 311: Ban new charter schools without “certificate of need”
Introduced by Sen. Hoon-Yung Hopgood (D), to prohibit any new charter schools from opening unless the state Board of Education grants a “certificate of need” as defined in the bill. Among other things this would require consideration of a new charter’s “impact on existing public schools” nearby, and impose more rigorous performance and oversight regulations on charter schools and their authorizers (usually state universities). Referred to committee, no further action at this time.
Senate Bill 319: Repeal school “adequacy study” mandate
Introduced by Sen. Mike Shirkey (R), to repeal a law passed as part of the “log-rolling” to get Democratic votes on the since-defeated Proposal 1 tax increase initiative, that requires the state to pay a contractor to study and report on how much money per student is needed to teach public school students sufficiently well to meet state graduation requirements. Referred to committee, no further action at this time.
House Bill 4419: Repeal mandatory minimum sentence for firearms felonies
Introduced by Rep. Kurt Heise (R), to repeal a law that mandates a minimum sentence of two years in prison for a felony firearms conviction, with no chance for parole or probation. Reported from committee, pending on the House floor.
House Bill 4422: Authorize Woodward streetcar property owner subsidies
Introduced by Rep. Andy Schor (D), to authorize “business improvement zone district” subsidies financed by a tax increment financing scheme for property owners near a proposed Woodward Avenue streetcar line in Detroit. This would “capture” from local governments the extra local property tax revenue that (supposedly) results from property value increases generated by the scheme’s selective subsidies and other spending, and use the money to repay the debt incurred by spending. Referred to committee, no further action at this time.
House Bill 4428: Require biannual recertification for government employee unions
Introduced by Rep. Gary Glenn (R), to require government employee unions to be recertified by a majority of the employees in a workplace bargaining unit at least once every two years, as determined by a vote with a secret ballot. Referred to committee, no further action at this time.
House Bill 4429: Exempt schools from "prevailing wage" mandate
Introduced by Rep. Gary Glenn (R), to exempt school construction projects from the state “prevailing wage” law, which prohibits awarding contracts to contractors who submit the lowest bid unless the contractor pays "prevailing wages," which are based on union pay scale reports in a particular geographic region. Referred to committee, no further action at this time.
House Bill 4435: Mandate restaurant allergy notices
Introduced by Rep. Peter Lucido (R), to require restaurants to post a notice that is visible to the public and says, "Before placing your order, please inform your server if a person in your party has a food allergy”. Referred to committee, no further action at this time.
House Bill 4466: Require detailed police shooting and use-of-force reports
Introduced by Rep. Stephanie Chang (D), to revise the monthly crime reports local police agencies are required to submit to the state police so that they include the number and type of use of force complaints made against officers; the number of shooting incidents involving officers; the disposition of use of force and shooting incident investigations; the racial, ethnic, and gender demographic data of individuals who made use of force complaints and individuals involved in police shooting incidents. Referred to committee, no further action at this time.
House Bill 4475: Require disclosure of corporate “economic development” subsidy recipients
Introduced by Rep. Bill LaVoy (D), to require the Department of Treasury to disclose the names of particular businesses and developers granted subsidies and tax breaks under the Michigan Economic Growth Authority law repealed in 2011, and how much they’re getting.
The bill was introduced after it was revealed that these deals have generated $9 billion in unfunded taxpayer liabilities, payable over the next 20 years. Under current law, the identity of these corporate subsidy recipients is kept secret. Referred to committee, no further action at this time.
SOURCE: MichiganVotes.org, a free, non-partisan website created by the Mackinac Center for Public Policy, providing concise, non-partisan, plain-English descriptions of every bill and vote in the Michigan House and Senate. Please visithttp://www.MichiganVotes.org.
Michigan Supreme Court extends right-to-work to state employees
On July 29, the Michigan Supreme Court upheld right-to-work for state employees, ruling that the Michigan Constitution prohibits agency fees for state workers. The Mackinac Center filed an amicus brief in the case, which the court eventually used to come to its decision.
Patrick Wright, vice president for legal affairs at the Mackinac Center, discussed the decision with multiple news outlets in the hours that followed.
"Voluntary unionism is the best idea," said Patrick Wright with the Mackinac Center for Public Policy. "That people should not be forced to pay fees in order to have a job, and so we think this was a right decision."
His interpretation of the ruling is that unions have been collecting dues illegally since 1963.
"We're gonna look into the question of whether or not there's a way to retrieve some of these fees that have been illegally collected over decades."
The full segment is available at the WILX 10 website. Wright also discussed the issue for a segment on Michael Cohen's Capital City Recap on 1320 WILS, available here, and with the Michigan Chronicle.
Additionally, the Washington Examiner quoted Wright on the decision:
"This was an attempt by the UAW to take away the rights of certain workers and force union payments from them, going directly against Michigan law," said Patrick Wright, vice president for legal affairs at the Mackinac Center. "The majority correctly noted that state employees unions have illegally been receiving agency fees from state employees for decades."
The full article is available at the Washington Examiner's website.
Google Hangout on the topic tonight
Policy Analyst Jarrett Skorup took part in a Google Hangout with Congressman Tim Walberg on the issue of civil asset forfeiture. The event was sponsored by Generation Opportunity, a national network that connects young people “promoting economic opportunity and prosperity.”
At the federal level, Walberg has introduced with Sen. Rand Paul and a bipartisan groups of co-sponsors the “Civil Asset Forfeiture Reform Act.” The proposed bill would require a higher burden of proof before property can be forfeited while also changing the “innocent owner defense” away from the government to the property owner. Skorup has an upcoming policy brief about civil forfeiture laws in Michigan and the need for changes. He has testified and written about some reform bills currently going through the legislature.
Unnecessary regulations reduce employment and raise prices
The White House Council of Economic Advisers has released a new report about occupational licensing. It outlines the growth in licensing over the past few decades and argues that this reduces employment, raises prices and lowers wages overall.
The report recommends that states lower or eliminate this barrier to entry by establishing some “best practices.”
The executive summary states:
There is evidence that licensing requirements raise the price of goods and services, restrict employment opportunities, and make it more difficult for workers to take their skills across state lines. Too often, policymakers do not carefully weigh these costs and benefits when making decisions about whether or how to regulate a profession through licensing. In some cases, alternative forms of occupational regulation, such as State certification, may offer a better balance between consumer protections and flexibility for workers.
By one estimate, licensing restrictions cost millions of jobs nationwide and raise consumer expenses by over one hundred billion dollars. The stakes involved are high, and to help our economy grow to its full potential we need to create a 21st century regulatory system — one that protects public health and welfare while promoting economic growth, innovation, competition, and job creation.
The authors recommend that licensing regimes directly and measurable protect "legitimate public health and safety concerns," use more voluntary certification, minimize fees and lowering regulatory hurdles. It also suggests setting up an independent state commission that would conduct cost-benefit analyses of proposed new rules and reduce the number of "unnecessary and overly-restrictive licenses."
In Michigan, fortunately, Gov. Rick Snyder has said he won’t support any new licensing laws that don’t pass similar standards as those listed in this new study. But there are hundreds of mandates currently on the book that burden workers and consumers in Michigan that legislators or an independent commission should look at.
The Institute for Justice, a public interest law firm which has done studies on licensing, has model legislation that would incorporate the suggestions in this study. The bill would eliminate barriers for potential practicioners while still keeping safeguards in place to protect the public when necessary and cost-effective.