LEGISLATIVE/REGULATORY SUMMARY OF ACTIONS IN JULY 2007
In this issue:
HIGHLIGHTS:
Democrats Introduce More Stringent Water Diversion/Use Standards (Back to Top)
Following the passage of a major water withdrawal and use legislative package last year, House Democrats have introduced a legislative package (HB 5065-5073) that would further tighten regulation over water withdrawal and consumptive uses. The action stems from pressure from environmental groups who feel the recently enacted law did not go far enough to protect the Great Lakes from water diversions. The action comes in conjunction with Michigan’s review and approval of the Great Lakes Basin Water Resources Compact among the eight Great Lakes states. The compact is part of recently proposed amendments to the Great Lakes Water Quality Agreement to tighten up withdrawals of Great Lakes water. Included in the legislative package are proposals to:
- Ratify the Great Lakes Basin Water Resources Compact to ban diversion of water outside of the basin
- Remove “bottled water” from the definition of “consumptive use”
- Remove the bottled water exception to the definition of a “diversion” in certain cases
- Impose water conservation measures
- Change established “baseline” for grandfathering existing uses from total withdrawal system capacity to actual use during 2002-2006.
- Amend environmental and public interest involvement in the permit process
- Allow DEQ to promulgate rules to implement controls on large-scale water use.
With Great Lakes water levels down and increased scrutiny of the bottle water industry, look for a contentious battle over increased water regulation.
ENVIRONMENTAL ISSUES:
Rep Agema Introduces Environmental Standard Limit Bill (HB 5038) (Back to Top)
Representative Dave Agema has introduced a bill to require the Department of Environmental Quality to impose no environmental standard or limit greater than that provided by federal standards. Similar legislation passed in Wisconsin recently.
No Further Action On Tipping Fee Spending (HB 4222) and Recycling Report (HB 4484) Bills (Back to Top)
There has been no further action before the House Great Lakes & Environment Committee on bills to establish a Recycling Market Development Fund (HB 4222) to parcel out monies to be collected under a previous House-approved bill (HB 4221) imposing a $7.50 per ton surcharge on solid waste. Business interests and the Michigan Association of Counties opposed the spending bill while the MDEQ, Michigan Townships Association and environmental groups supported it. HB 4484, revising and requiring detailed new reports on solid waste and recycle material collection, has stalled as well. The bills were scheduled to be reported out of committee on June 27th, but were pulled from the agenda for lack of consensus. HB 4221, which would impose a $7.50 per ton tipping fee, has passed the House but has seen no action in the Senate. Landfill moratorium (HB 4485, HB 4486) and solid waste planning bills (HB 4047) have also seen no action in the Senate.
House Strips Fee Increases From DEQ Funding Bills (Back to Top)
The House Appropriations Committee has stripped millions of dollars in proposed fee increases out of the Department of Environmental Quality budget and instead earmarked proposed increases to come out of the general fund. In the mix were proposed fees for air (Title V), water, waste and mineral wells. Proposed increases were for as much as 140-280% in some cases.
Mackinac Center Wants Michigan Environmental Science Board Re-Instated (Back to Top)
The conservative Makinac Center for Public Policy has released an editorial criticizing Governor Granholm for dissolving the Michigan Environmental Science Board by executive order to save money. The editorial suggests the independent science advisory board was cost effective because its voluntary members worked for free. The editorial calls for the revocation of the executive order or rejection of the order by the legislature.
ENERGY:
House Committee Chair Holds First Work Group On Electric Choice (PA 141) (Back to Top)
House Energy Committee chair Frank Accavitti held his first work group meeting to address concerns about PA 141 ---the Customer Choice and Electric Reliability Act of 2000. Major utilities (DTE and Consumers Energy) continue their push to repeal or substantially amend the act which they argue limits their ability to finance/build new base load electric generation capacity on the state. At the initial meeting of the work group, it was clear Accavitti believes the state should return to a regulated monopoly system. What was less clear was the position of Republican vice chair Mike Nofs. Traditionally, Mr. Nofs has appeared to continue to support electric choice in some form, but comments he made during the meeting suggest he may be moving away from that position. Stay tuned as the issue will certainly be heating up in the Fall.
House Workgroup On Proposed Renewable Portfolio Standards Meets (Back to Top)
A House Energy Committee work group on proposed renewable portfolio standards (RPS) met on July 31st to review and discuss pending RPS legislation. The meeting was co-chaired my Rep. Jeff Mayes (Democrat vice chair) and Rep. Dave Palsrok (Republican committee member). Present were representatives from various interest groups including alternative energy people, utilities, environmental groups, etc. The participants stated their various positions on RPS legislation. Of interest were statements by DTE and Consumers Energy that they do not want “off-ramps” in an RPS bill, but definitely want to link Energy Efficiency with an RPS. For the next meeting, participants were asked to prepare statements as to how to increase the use of renewable energy in Michigan and provide arguments in support and refute arguments against their positions. A report back to the full committee is allegedly due by August 15th.
Environmentalists Rally For Renewable Energy/Portfolio Standards (Back to Top)
Environmental advocates are turning up the heat on legislators to act on imposing mandatory renewable portfolio standards calling for 20% renewable by 2020. Environment Michigan staged a rally at the state capitol placing 200 pinwheels on the lawn symbolizing wind energy potential in the state. According to the group, 22 states have already adopted the 20/2020 standard. Bruce Patterson, chair of the Senate Energy Committee has held hearings on legislation calling for mandatory renewable portfolio standards. House Energy Committee chair Frank Accavitti has authored one of the “RPS” bills (HB 4562) currently under consideration by his committee. Currently, about 3% of Michigan’s energy comes from renewable sources---mostly older hydro-electric systems.
TAXES & ECONOMIC DEVELOPMENT:
Governor Signs New Business Tax/Immediate Fix Needed For FASB Problem (Back to Top)
Governor Granholm signed the new Michigan Business Tax (MBT) which will replace the Michigan Single Business Tax (SBT) beginning January 1, 2008. The tax is a combination gross receipts and profits tax designed to replace the $1.8 billion in revenue raised by the SBT. The gross receipts tax is called a “margins tax” of approximately 0.8% on a company’s sales less its purchases of tangible property. The income tax is imposed at the rate of 4.95%. In order to reduce the impact of the tax on companies with in-state operations, there are a number of tax credits provided. There is a compensation credit of 0.37 percent and an investment tax credit of 2.9 percent of the cost of new capital assets, both capped at 65 percent of a company’s tax liability and a 1.9-percent research and development credit, with a cap at 75 percent of tax liability. The new business tax also contains an apportionment factor based on a company’s sales in Michigan.
Shortly after enactment, a flaw in the tax was discovered wherein publicly traded companies expressed concern about a potential problem with Federal Accounting Standards Board Statement 109 (FAS 109) as it relates to the Michigan Business Tax. Apparently, there is concern that companies may need to take a 3rd quarter accounting charge if the law is not corrected. The legislature plans to enact a “trailer” bill to correct the problem prior to the September 30 close of third quarter reporting periods.
State Sets Special Website/”Webinars” To Explain New Business Tax (Back to Top)
The Michigan Department of Treasury is setting up a special website, hold online seminars (webinars) and sponsor a 2-day conference in November to help explain the state’s new Michigan Business Tax (MBT). Rules for the new tax are still under development and possible legislative changes to the tax to fix “problems” are still possible yet this year.
Tax Amnesty Bill To Be Introduced (Back to Top)
A bill to provide tax amnesty to delinquent taxpayers (businesses & individuals) is being prepared for introduction by Representative Geoff Hansen. The bill provides for payment of any tax due without penalties for a prescribed 30-60 day period in 2008.
Discussion Turns To Personal Property Tax After New Business Tax Enacted (Back to Top)
Now that Michigan’s Single Business Tax (SBT) has been replaced with a new Michigan Business Tax (MBT) effective January 1, 2008, discussion has turned to further reducing or eliminating Michigan’s burdensome personal property tax. Local units of government rely heavily on revenues from the personal property tax, but it represents a significant burden and competitive disadvantage to Michigan businesses. How to provide relief and keep local units of government whole has been a nagging problem debated for years without any resolution. Now the Michigan Manufacturers and Michigan Chamber would like to address the personal property tax issue once again. Local units of government want assurances, including a possible Constitutional amendment, that their current revenues would be protected should the current tax be repealed or modified.
HEALTH AND SAFETY:
Workplace Smoking Ban Bill Clears House Committee (Back to Top)
A bill (HB 4163) to ban smoking in all Michigan workplaces (except for cigar bars and retail establishments with 75% revenue from tobacco products) cleared the House Commerce Committee and was reported to the House floor. Several business groups, including the Michigan Licensed Beverage Association, oppose the measure.
Senate Majority Leader Interested In Making Michigan “Right To Work” State (Back to Top)
Senate Majority Leader Mike Bishop will support efforts (SB 607-608) to allow Michigan to become a “right to work” state in order to increase the state’s competitive position and remove the stigma that Michigan is a largely an organized labor state. Success for a change is not likely in legislature, but Bishop will not rule out a statewide ballot initiative.
LANSING POLITICS:
Governor And Senate Leader Far Apart On Process For 2008 Budget (Back to Top)
Governor Granholm wants to start work immediately on the 2007-2008 budget while Republican Senate Majority Leader Mike Bishop wants to look at government reforms and cuts before considering possible tax increases to balance the budget. Republicans dispute Granholm’s claim that the projected deficit could be as much as $1.8 billion and that she already has their agreement to increase taxes by $1.2 billion to cover part of the shortfall. Mr. Bishop recently blasted two budgets (DNR & DEQ) passed by the Democrat-controlled House were part of a plot to force a tax increase. The new budget must be in place for the beginning of the state’s 2007-2008 fiscal year on October 1, 2007.
Agriculture Director Mitch Irwin Steps Down (Back to Top)
Department of Agriculture Director Mitch Irwin announced his resignation after two years as Director of the Michigan Department of Agriculture. Irwin also served as director of the Department of Management and Budget under Governor Granholm. Irwin plans to go back to the private sector. Several people have thrown their hat in the ring for the position including former state senator Don Koivisto.
DHS Director Udow To Depart (Back to Top)
Department of Human Services Director Marianne Udow is leaving her post to assume a new position heading a joint venture between Blue Cross/Blue Shield of Michigan and University of Michigan Health Systems.
Transeth Appointed To MPSC Commissioner Slot (Back to Top)
Steven Transeth, a Legislative Service Bureau attorney, has been appointed by Governor Granholm to replace departing Michigan Public Service Commission chair Peter Lark. The confirmation is subject to Senate approval. One of the three MPSC commissioner slots remains open with the departure of Republican Laura Chappelle in June.
Rep. Fulton Sheen Still Pushing “Fair Tax” Proposal (Back to Top)
Representative Fulton Sheen is still pushing his “Fair Tax” proposal which would replace the current business, income and property taxes with a much higher state sales tax.
NATIONAL INDUSTRY NEWS:
AFS Trade Update: Senate Finance Panel Approves China Currency Measure (Back to Top)
On Thursday, the Senate Finance Committee overwhelmingly passed, the Currency Exchange Rate Oversight Reform Act of 2007 (S. 1607), by a bipartisan vote of 20-1. The vote from the committee that oversees trade sends a strong signal to China, as well as to the Administration, that the currency issue is a matter of major concern to the U.S. Senate and reflects the continuing congressional frustration with the administration's diplomatic approach to China’s currency undervaluation.
The bill, sponsored by Sens. Max Baucus, D-MT, and Charles Grassley, R-IA, would require the secretary of the Treasury to analyze, on a semi-annual basis, the exchange rates of foreign currencies and identify those that are in “fundamental misalignment,” defined as a significant and sustained undervaluation of the prevailing real effective exchange rate. It would establish a series of actions to be taken to remedy the undervalued currencies and would allow the Department of Commerce to take the fundamental misalignment into account in anti-dumping investigations and reviews of merchandise imported from the country in question.
The vote comes before Treasury Secretary Henry Paulson travels to Beijing next week to discuss the currency dispute and other economic issues, such as product safety. The single vote against the bill came from Sen. Maria Cantwell (D-WA).
Countervailing Duties Not Included in Bill
AFS was successful in working to strengthen the bill in several areas, including accelerating the timeline for Treasury to take initial action against offending countries to 90 days, from 180 days in the original bill. However, the Finance Committee measure did not include AFS-supported legislation, HR 792/S. 796, the Fair Currency Act, which would define currency manipulation as a government subsidy and would enable the U.S. to impose tariffs to counteract the subsidy.
Next Steps
Sen. Jim Bunning (R-KY), one of the key sponsors of the Fair Currency Act (S. 796) said he would pursue including the remedy of countervailing duties in the China currency legislation which is expected to be marked up and voted on next week by the Senate Banking Committee. Sen. Charles Schumer (D-N.Y.), who is a member of the Senate Banking Committee, as well as the Financing Committee, said he would support the application of countervailing duties to currency manipulation in the Banking Committee.
Senate Banking Committee Chairman Chris Dodd, D-CT, and Sen. Richard Shelby, R-AL, the top Republican on the panel, have proposed competing legislation. Their bill, S.1677, would tighten the definition of currency manipulation to make it more likely that a country like China would be cited as a manipulator in Treasury reports. A citation would require Treasury to enter negotiations with the country and consult with the International Monetary Found on the issue.
Next week we will target members of the Banking Committee and urge them to support Sen. Bunning's amendment on the CVD provisions. The markup next week by Banking on their currency bill will set up a showdown over which version of the currency bill goes to the Senate floor for a vote.
The Hunter-Ryan bill, as well as other China-related legislation, will be discussed during a House Ways and Means hearing Aug. 2. The House is not expected to act on currency legislation until the Fall, but it is important for AFS members to weigh in on the currency issue now and during the August recess. In the meantime, AFS members should continue to contact their member of Congress (July and August) urging them to pass strong trade legislation this year, including the Ryan-Hunter provisions.
Bill Introduced in Senate to Require Paid Leave (Back to Top)
At the end of June, Senators Christopher Dodd (D-CT) and Ted Stevens (R-AK) introduced legislation that will provide up to 8 weeks of paid leave to workers needing time off due to the birth or adoption of a child, to care for a child, spouse or parent with a serious illness or to care for their own serious illness. Senator Dodd is the author of the original Family and Medical Leave Act (FMLA) and is running for president.
Under the bill, the Family Leave Insurance Act of 2007 (S. 1681), employers would pay leave benefits through their regular payroll and be reimbursed by the Family Leave Insurance Fund, created by this legislation. Employees and employers would both be required to pay a premium into the fund, roughly 0.2 percent of the employee’s earnings. The benefits would be tiered based on the employee’s earned wages. The legislation would require employees to pay insurance premiums for 12 months and have worked for the same employer for 12 months to receive benefits.
Participation in this program would be mandatory for businesses with over 50 employees. Those businesses with less than 50 employees may choose to opt into the program at a 50 percent discount (pay 0.1 percent premiums).
Combating expansion of the FMLA is an AFS priority issue for the association’s government affairs program. During the March 2007 Government Affairs Conference, AFS members advocated against another FMLA bill, the "Healthy Families Act," (S. 910) introduced by Sen. Ted Kennedy (D-MA). The legislation -- which also has a companion bill in the House (H.R. 1542) -- would require small businesses with 15 or more employees to give each employee seven days of paid sick leave. The Senate bill has 22 cosponsors and the House measure has 41 cosponsors. Congress is expected to consider the legislation later this year.
House Energy Chairman Floats Carbon Tax Bill (Back to Top)
Rep. John Dingell, chairman of the House Energy and Commerce Committee, says he will propose a "carbon tax" on all industries that burn energy or produce energy-consuming goods, as well as on the consumers who use those products.
In doing so, Chairman Dingell is trying to show his Democratic colleagues that people in the U.S. are not ready to pay the full costs of fixing global warming and how unpopular it would be. Dingell doesn't really want a widespread energy tax. But neither does he want the automobile industry to bear the full burden of reducing greenhouse gases, and that's the direction Congress has been going.
His proposal would boost the federal gasoline tax by 50 cents a gallon, he said, and establish a "double digit" tax on each ton of carbon dioxide emissions. The federal tax on a gallon of gas is now 18.4 cents and has not risen in 14 years.
Many in Congress, including Democrats and Republicans, prefer a "cap-and-trade" program that sets a mandatory cap on carbon emissions and lets businesses buy and sell the allowances. Such a program was used to limit sulfur dioxide, which contributes to acid rain.
Legislation Introduced to Encourage Business to Implement Workplace Wellness Programs (Back to Top)
This week Senators Tom Harkin (D-IA) and Gordon Smith (R-OR) introduced the Healthy Workforce Act. The bill would provide tax incentives to businesses, particularly small and medium sized employers, that provide opportunities for their employees to lead healthier lives and prevent chronic illnesses. The key provisions of the legislation include:
Wellness Program Tax Credit
- Employers are eligible to receive 50% of the costs paid or incurred in connection with a qualified wellness program up to up to $200 per employee for the first 200 employees and $100 per employee for remaining employees.
- The tax credit is paid through a payroll tax refund, so it benefits all employers who pay wages.
- Employers who do not have a qualified wellness program and implement one as a result of the legislation can receive the tax credit for up to 10 years.
- Employers with existing programs that qualify can receive the tax credit for up to 3 years.
Qualified Wellness ProgramThe Secretary of Health and Human Services, in conjunction with the Centers for Disease Control and Prevention will certify which programs qualify.
All programs must have the following specific features, including at least three of the following four components:
- Health awareness – the dissemination of health information and the opportunity for periodic screenings
- Employee engagement – establishment of a committee to actively engage employees in workplace wellness programs and the tracking of employee participation
- Behavioral change – encouraging healthy living via counseling, seminars, on-line programs. Programs may relate to tobacco use, obesity, stress management, physical fitness, nutrition, substance abuse, depression and mental health promotion.
- Supportive environments – policies at the worksite that promote a healthy lifestyle, including minimizing stress, nutrition and tobacco use. Also includes participation incentives such as an adjustment in health insurance premiums and co-pays.
- Employers must use practices that are consistent with evidence-based research and best practices strategies.
- Programs must focus on employee populations with disproportionate health burdens, be culturally competent and meet employees’ health literacy needs.
- Employers must offer all programs to all employees who work at least 25 hours per week
China Cuts Export-Tax Rebate (Back to Top)
In June, China's Finance Ministry announced that export-tax rebates will be scrapped or reduced on more than 2,000 goods, in the government's latest attempt to address the growing economic and political pressures brought by its massive trade surplus.
The tax changes, which take effect July 1, will focus on goods at the center of trade disputes or which the government deems highly polluting or energy-intensive, the ministry said. The new policy underscores Beijing's efforts to simultaneously cut down on waste, and curb its fast-rising trade surplus, which is flooding the economy with money and hampering efforts to ease breakneck growth.
China's trade surplus for the first five months of 2007 was up 84% from a year earlier to $85.71 billion. Rebates on exported goods of China's 17% value-added tax will be eliminated on 553 categories including aluminum products, salt, cement and fertilizers. Tax rebate cuts on rod, bar, profile and wire will have immediate effect on the Chinese domestic aluminium industry. The proportion of the VAT that is rebated will be cut on 2,268 types of products including shoes, clothing and plastic goods.
China has cut export rebates three times this year. The Chinese tax bureau in April reduced tax breaks on seven products, including stainless steel and cold-rolled coils. On March 28, China eased import rules for 338 products, including steel and plastics, to forestall trade disputes that may come from the nation's record surplus.
Analysts don't expect the latest tax changes to slow the nation's strong export engine soon. China's exports this year are still growing at just over 27%, on pace with 2006, even though the government has reduced or canceled tax rebates for several products over the past year. A formal list of the most recent export-tax rebates has not yet been released.
