Published in Economic Development

Business groups balance priorities with need to solve Flint, DPS problems

BY Sunday, March 06, 2016 02:51pm

As the state grapples with the Flint water crisis and a long-term funding solution for Detroit Public Schools, business advocates hope lawmakers will still be able to tackle policies that keep health care costs down, add transparency and help companies attract talent. 

Those issues appear to top local and statewide business groups’ policy goals for 2016. Sources say they are also keeping a close eye on solutions for Flint and Detroit and how those policies could affect school districts and infrastructure funding in West Michigan.

“I do think those issues are going to consume a lot of the time and attention of the Legislature, and rightly so,” said Andy Johnston, vice president of government affairs for the Grand Rapids Area Chamber of Commerce. “That being said, our Legislature can do multiple things at once.”

REPEALING HICA

Near the top of the list is repealing what business advocates call a burdensome tax on employers.

On Feb. 24, the Senate narrowly voted to extend the Health Insurance Claims Assessment through July 2020. The extension was also approved by the House shortly thereafter, sending it to Gov. Rick Snyder’s desk.

The health insurance claims tax is strongly opposed by both local and statewide business groups. Known as HICA, the tax helps support Medicaid coverage for low-income residents and is paid by employers when health insurance claims are made.

“We’ve had this continuous fight over HICA — it’s clear that it’s not working the way it was intended to,” Johnston said.

Wendy Block, director of health policy and human resources with the Michigan Chamber of Commerce, said the Senate’s three-year extension “really is much better” than the House’s original plan to extend it through 2025. But those involved with the negotiations say there is more work to be done on a long-term solution, which Senate leaders are reportedly interested in.

“The Senate is looking to find a solution that would fully fund Medicaid and allow the state to draw down federal dollars without disincentivizing the purchase of health insurance,” Block said.

Within the coming weeks or month, she added, lawmakers will likely begin looking at a long-term plan to repeal HICA.

“It’s time to look for a better way to fund Medicaid,” she said.

Additionally, Johnston said the Grand Rapids Chamber will also “be on the lookout” for additional health care mandates. He pointed out that Snyder’s proposed budget includes $30 million for a speciality prescriptions reserve fund for new medications coming to the market that tend to be “very expensive.”

SPENDING PRIORITIES

In addition to specific policy proposals, advocates are also closely watching how the state plans to spend its revenue. On Feb. 10, Gov. Rick Snyder presented his fiscal year 2017 budget to lawmakers, who will discuss appropriations in committee before voting on omnibus budgets later this year. The next fiscal year starts on Oct. 1.

In general, business advocates are supportive of Snyder’s $54.9 billion budget proposal. Johnston said Snyder’s request for $165 million to establish a Michigan Infrastructure Fund will be closely watched.

“We definitely want to make sure the voice of West Michigan is part of how those dollars are going to be utilized,” he said.

Jim Holcomb, senior vice president of business advocacy and general counsel for the Michigan Chamber of Commerce, agreed there appears to be “good, stable revenues coming into the state,” but he said there is room for more transparency in the process. Specifically, Holcomb said Michigan Chamber members “strongly feel we need to do away with omnibus budgets.”

During the budget process, lawmakers discuss specific departmental spending but then ultimately vote up or down on omnibus spending budgets for state services and for education. 

“We think every department’s bill should be passed individually,” Holcomb said, adding that lawmakers can be “cajoled” into votes based on what is given up in separate areas of the budget. “We think that’s unfortunate and not good for the process. Issues should be brought up and debated on its merits. That’s the best way to prioritize spending.”

The Michigan Chamber is opposed to at least one budget proposal that would remove a tax credit for nearly 100 auto insurers across the state. The credit would reportedly cost the state $80 million a year going forward.

“I find it ironic that not too long ago, legislators bent over backwards to provide hundreds of millions of dollars in tax breaks for a Las Vegas data center, but now they want to propose a car insurance tax,” Holcomb said.

TALENT ATTRACTION AND LONG-TERM GOALS

Talent retention continues to be a top priority for groups across the state — whether it’s investing in early education, skilled trades or “economic gardening” through the Michigan Economic Development Corp. 

The Grand Rapids Chamber has been active in pushing new third-grade reading standards.

“We believe that’s a critical step to improving Michigan’s education system by addressing that literacy problem,” Johnston said.

He also supports Snyder’s budget proposal that includes an additional $10 million in funding for a skilled trades training fund.

“West Michigan has done a great job of utilizing that through our Michigan Works! program here,” he said.

Tony Stamas, vice president of government relations for the Small Business Association of Michigan, said it’s been “a challenging couple of years” for the MEDC in the state’s budget. Last year, the agency experienced a 27-percent cut in its overall budget, which prompted it to shed 65 employees. Snyder has called for a total of $115.5 million for “business attraction and community revitalization efforts.”

“The long-term reality is that we need to grow small businesses in the state — that’s really our opportunity to grow and expand,” Stamas said. “We want to make sure that’s represented in the budget.”

A longer-term view is also the approach Detroit-based Business Leaders for Michigan takes with its policy goals.

Doug Rothwell, BLM’s president and CEO, said the organization’s top four goals for 2016 center on transforming the auto industry to become more mobility oriented; continuing to stabilize the state’s finances; strengthening economic development programs; and retaining talent in Michigan by “keeping college affordable.”

“We have a slightly different focus,” Rothwell said compared to other business groups whose goals “require immediate attention. We try to focus on issues that will have a five- to 10-year impact in getting Michigan to be a top 10 state.”

Rothwell said Snyder’s budget proposal “largely aligns” with BLM’s priorities, particularly the 4.3-percent boost in public university funding, infrastructure investment and working to pay down unfunded liabilities.

Given the circumstances this legislative session — solving Flint’s water crisis and preventing Detroit Public Schools from crumbling, all during an election year for House lawmakers — Rothwell said it may take a more measured approach for seeing policy victories.

“When you have a couple big issues like Flint and DPS in an election year and you still have to pass a budget on time, those are all very time-consuming issues. We deliberately set an agenda this year that wouldn’t require as much action in the Legislature,” Rothwell said. “You do need to be mindful of the expectations you have when you’re up against all those other issues.” 

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