Businesses, residents, local governments left with uncertainties
LANSING — Business advocates and public-policy researchers say there is a major hole in Michigan’s legislative process that leaves businesses, individuals and local units of government unsure of the costs that might come with new laws.
That’s the main conclusion of an 18-page report issued last month by Citizens Research Council of Michigan, a Lansing-based policy research group that studies ways in which government can operate more efficiently.
For enacted or proposed legislation or administrative rules in the state, the nonpartisan Senate and House fiscal agencies prepare reports saying how spending and revenue would be impacted for state and local governments. Every state except Hawaii has laws or rules formalizing a fiscal analysis process, though they vary among states. Fewer than 10 states account for costs to businesses and only Utah and New Hampshire address costs on individuals, according to the report.
In Michigan, these “fiscal notes” more often than not have “indeterminate” impacts on local units of government and rarely account for impacts on businesses and individuals, said Eric Lupher, president of the CRC.
Moreover, if local units of government are impacted, a fiscal analysis “rarely includes quantitative estimates of impacts and nearly never addresses whether a bill contains a mandate to local governments that would need to be funded” based on the state Constitution. In other words, the Legislature can’t mandate costs to local government without properly funding it.
The report makes the case for expanding fiscal notes to create a more objective and informed discussion around proposed policies.
“For most of the bills that come out that affect local governments, the Legislature just really doesn’t know what it’s going to cost to implement those bills,” Lupher said. “On the business side, the same is true, but there just aren’t as many bills that directly affect businesses, especially when you get past tax laws.”
Lupher said a variety of policy changes could affect the budgets of businesses, individuals or government — whether it’s through personal property tax reform, Right to Work or even mundane changes in requirements of local units of governments’ operations.
“How you estimate the cost of those and the magnitude of what may or may not be reported by fiscal agencies is going to depend on the amount of information available,” Lupher said.
But a major hurdle to determining those impacts is a lack of financial information and uniformity at the individual, business or local government level, according to the report.
Kelly Chesney, spokesperson for the Detroit-based Business Leaders for Michigan, said improving fiscal notes was part of the group’s broader “Michigan Turnaround Plan” from 2009.
“Fiscal notes changes were part of getting our financial house in order,” she said, noting the changes were among other goals the organization had for attracting investment and talent. “We feel it’s important because anytime a law is passed, the Legislature should understand the impact not only on government, but also on businesses and individuals.”
While many of the group’s Turnaround Plan goals have been met — such as starting multi-year budgeting, providing balance sheets for citizens to better know how government budgets work and pushing to improve the state’s business-tax climate — fixing the fiscal notes process is still outstanding, Chesney said.
“It just makes good business sense,” she said. “I represent 80 of the state’s top employers, and they know when they’re making changes in organizations how it will impact them.”
Lupher adds that it’s also better for public policy when more information is available, not less, so legislators can more easily make decisions based on facts rather than ideology.
“When it comes to policymaking, we want there to be as much information as possible so that legislators are making informed decisions on policies that affect everyone in the state,” Lupher said.
Lupher said the business community approached CRC more than a year ago to start looking into the issue. The two state fiscal agencies were aware of the research going on, but Lupher said they didn’t provide input on the report.
As for solutions, the report recommends building up staff levels at the fiscal agencies so they can better reach out to local units of government and the business community. It also recommends rules giving analysts adequate time to study bills before they’re passed, citing the speed at which changes can move through the full-time Legislature.
“Generally, there would be the opportunity to do that information-gathering and come back, but we also know that these more controversial bills get done toward the end of the lame-duck session,” Lupher said. “If things are changing and deals are being made, they might not have an opportunity to revise estimates and bring it up to date.”