Published in Economic Development

Prevailing wage, online gambling among Legislature’s finished, unfinished business

BY Sunday, June 24, 2018 02:00pm

June was a busy month for the Michigan Legislature.

In the lead up to its three-month summer break, the Republican-led House and Senate passed a $56.7 billion budget, repealed Michigan’s prevailing wage law, and approved work requirements for hundreds of thousands of Medicaid recipients.

Only the prevailing wage repeal was formally in place as of press time, since the policy is veto-proof from Gov. Rick Snyder after lawmakers approved the planned ballot initiative on its own.

The Legislature also sent bills to Snyder that would create Department of Environmental Quality oversight panels that — while backed by business groups — saw strong opposition from environmental advocates who remain concerned over corporate influence in rule-making.

House lawmakers also passed bills that would clear the way for online gambling and sports betting, but they face an uncertain future in the Senate and potentially in the courts. Meanwhile, the House advanced bills meant to clarify taxation around alternative energy systems, particularly solar panels, that clean energy groups have supported for years.

Here’s a rundown of what cleared the Legislature before break, and what’s on deck when lawmakers return in September:

THE BUDGET

On June 12, lawmakers approved a $56.7 billion statewide spending plan for the 2019 fiscal year, which includes $100 million for Snyder’s “Marshall Plan” for talent and $330 million in transportation infrastructure projects next year.

“The budget reflects a lot of different priorities when talking about investments in infrastructure. The commitment to infrastructure is just huge,” said Andy Johnston, vice president of government and corporate affairs with the Grand Rapids Area Chamber of Commerce.

On education, the budget includes a per-pupil funding increase for K-12 schools, from $120 to $240. Johnston also noted the Legislature’s passing of S.B. 946, which codifies the state’s Skilled Trades Training Program into the Going Pro Talent Fund Act. The bill removes the need for annually renewing the skilled trades funding.

Johnston said education and workforce training remain an ongoing focus for the Chamber this fall.

“It is hoped that this will make a dent in the skills gap that exists in Michigan and is expected to continue through 2024,” according to a House Fiscal Agency analysis of the bill.

Despite legal concerns over boilerplate budget language surrounding Planned Parenthood funding, Snyder called the budget a “positive collaboration.” As of press time, Snyder had not yet reviewed the omnibus budget, although he hopes to sign it before the end of June, spokesperson Anna Heaton said.

“I thank the Legislature for their leadership and bipartisan cooperation throughout the budgeting process,” Snyder said in a statement.

The Legislature also declined Snyder’s proposal to raise tipping fees at in-state landfills to help offset losses from the Clean Michigan Initiative. Instead, they opted for a one-time $25 million infusion to cover bond funding that had been used for the initiative.

Snyder will “continue working with lawmakers the rest of this year to modernize tipping fees so that Michigan can fund remediation and redevelopment of contaminated sites statewide, and improve our recycling rate,” Heaton said.

PREVAILING WAGE

Perhaps the most contentious topic taken up in June was the Legislature’s anticipated repeal of prevailing wage, which sets union wages for state and public school construction projects.

The group Protecting Michigan Taxpayers had collected enough signatures to send the issue to the November ballot. Republican lawmakers for years were interested in repealing it themselves, but they faced a promised veto from Snyder on the issue, who said it would hinder skilled trades development.

By approving the initiative, the Legislature made the repeal veto-proof. Johnston called it a “big win” against the “anti-competitive” prevailing wage law that first was adopted in 1965.

However, critics say it will lead to lower wages for the type of skilled tradesmen Michigan is trying to attract. And while the goal is to increase competitiveness and lower costs of public projects to the benefit of taxpayers, researchers have noted that repealing prevailing wage is likely to reduce productivity and construction workers’ wages.

Speaking to MiBiz in 2015, leading labor economist Peter Philips of the University of Utah said repeal supporters’ “arithmetic” claiming prevailing wage rates lead to a direct increase in costs does not account for productivity and a decline in the skilled labor force.

“Michigan is poised for continuous economic growth and the professional trades will continue to play an integral role,” Snyder said. “We will continue working to build strong partnerships with the professional trades and encouraging students to train for these high-demand, high-wage positions.”

Heading into the election season, Democrats will likely use the issue to attract union voters who went for Trump in the 2016 election.

MEDICAID WORK REQUIREMENTS

Snyder also announced his support for legislation that would require — upon approval by the Trump administration — an 80-hour-per-month work-related requirement for certain Medicaid recipients in the state’s Healthy Michigan plan. The initial proposal drew strong opposition over provisions that would have effectively forced the requirement on urban counties more than rural counties.

Led by Sen. Mike Shirkey, R-Clarklake, the work requirement follows the lead of 14 other states that are piloting a similar policy or have requested one from the Trump administration. Shirkey estimated that roughly 350,000 of the 680,000 Healthy Michigan participants would be required to work, although state analysts have reportedly said the exact number of exemptions is difficult to determine.

Michigan is expected to submit its application in the fall, but the concept faces an uncertain legal future. A federal judge is expected to rule by July 1 on whether Kentucky’s work requirement violates the law that limits Medicaid projects to those that expand access.

THE ENVIRONMENT

For years, the Michigan Chamber of Commerce sought to reform Michigan’s environmental rule-making processes, saying the rules were too onerous on businesses. On June 12, the Republicandominated Senate voted along party lines to oblige.

“That’s another win we’re happy to see cross the finish line,” said Johnston of the Grand Rapids Chamber.

The three-bill package, which cleared the House in May, creates a committee to review new environmental rules, a permit-appeal panel and a scientific advisory board. The environmental rules committee would be made up of six members from the public and six members from the private sector, leading critics to call it the “fox guarding the henhouse.”

Heaton said the governor will review the final versions of the DEQ bills before deciding whether to sign them.

RENEWABLE ENERGY

Also in June, the House voted 106-3 on a bill to clarify tax exemptions for residential, commercial and industrial renewable energy systems, particularly solar panels. A personal property tax exemption for solar panels ended in 2013, and since then, municipalities across the state have deployed varying assessment practices.

Earlier this year, the State Tax Commission issued a memo classifying residential solar panels as residential real property. “Essentially, installing solar panels on a home would likely lead to increased property taxes beyond the taxable value cap,” according to the House Fiscal Agency.

Supporters say solar panels should be treated like any maintenance or home energy improvement, such as a new furnace or generator.

Groups including the Michigan Agri-Business Association, the Michigan Farm Bureau and the Michigan Energy Innovation Business Council support the bill.

ONLINE GAMBLING

Michigan lawmakers also advanced legislation that would allow online gambling through Detroit’s three casinos and the state’s 23 tribal casinos. Under the three-bill package, residents could register with a casino to play on a home computer or smartphone the games offered at a brick-and-mortar gaming facility.

The House passed the three-bill package on June 12, sending it over to the Senate ahead of the summer break. Amendments to the legislation also create a framework for sports betting that could be regulated by the Michigan Gaming Control Board.

A U.S. Supreme Court ruling earlier this year deemed a provision of the federal Professional and Amateur Sports Protection Act (PASPA) unconstitutional, opening the door for sports betting and internet gaming across the country.

Bill sponsor Rep. Brandt Iden, R-Oshtemo Township, tells MiBiz he is optimistic the Senate will take up the issue, which has similar pending legislation.

“Online gaming has been going on in Michigan for many years, but those websites are all illegal,” Iden said. “This is already happening in the state: Let’s regulate it and track it, which also comes with tax revenue we weren’t collecting.”

However, opponents have raised concerns about the plan’s constitutionality as well as its effects on problem gamblers, underage residents and revenues for the city of Detroit and the state School Aid Fund.

A 2004 constitutional amendment prevented the expansion of gaming in the state outside of the Detroit and tribal casinos without a statewide vote. Attorneys for the Coalition to Stop Internet Gambling believe opening online gaming to anyone in the state — albeit through a regulated or tribal casino — is a clear violation of the constitution.

Iden, who has an opinion in support from former Attorney General Mike Cox, disagrees. He argues the bill’s language makes it clear online gambling would be limited to the Detroit and tribal casinos.

“If we got in a situation where another company that wasn’t a casino tried to do online gambling, I definitely believe it would be an expansion and not constitutional,” Iden said.

It’s also unclear how tribes may respond to the law if passed. The bill would require those interested in online gaming to renegotiate their compacts with the state. Iden said he made concessions with some tribes that give them “90 percent of what they wanted.”

James Nye, a spokesperson for the Gun Lake Casino, declined to comment. Bill Brooks, chief legal officer for the Nottawaseppi Huron Band of the Potawatomi, said he had to consult with the Tribal Council before commenting.

As passed in the House, the bills would create an 8-percent tax on gross internet gaming revenue, which would be split 55-45 percent by the city where the casino is located and a state Internet Gaming Fund, respectively. If adopted, a new online gaming division would be created at the Michigan Gaming Control Board, which would set policies for online gaming and sports betting. The MGCB is neutral on the bills.

“We certainly are prepared to enforce this if it becomes law,” said MGCB spokesperson Mary Kay Bean.

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