Lansing Update: June 15, 2007

In this issue of Lansing Update:

  1. State Finalizes Tobacco Securitization Plan
  2. House Committee Hears Testimony on Workplace Smoking Ban
  3. Agreement Announced on New Business Tax

State Finalizes Tobacco Securitization Plan

Legislation securitizing some $415 million in tobacco settlement dollars to partially balance the 2007 budget deficit was enacted this week.

House Bill 4850, now Public Act 18, was instrumental toward balancing a nearly $800 million deficit. Legislative leaders agreed last month to finalize the deal that also included accounting shifts, budget cuts, and the possibility of using up to $100 million intended for college loans.

Tobacco settlement dollars are derived from a 1998 multi-state, multi-billion lawsuit against tobacco companies that sends millions of dollars to several states each year. In order to help alleviate its crippling budget deficits, Michigan has turned to selling off those funds to avoid harsh School Aid and Medicaid cuts.

When the tobacco settlement was finalized the legislature moved to utilize the funds by creating the Michigan Merit Award program, which provides scholarship dollars to high school students based on standardized test scores. The funding structure of the program and its name has since been altered. Now titled the Michigan Promise Scholarship [Link no longer available —Ed.], the program remains essential toward assisting college bound students afford tuition.

Michigan Catholic Conference supported the inception and continuation of the Merit program and has worked with the legislature to ensure the solvency of those funds.

Nine Republicans joined thirteen Democrats in supporting HB 4850 after the legislation passed the House of Representatives 78-29.

House Committee Hears Testimony on Workplace Smoking Ban

Measures banning public smoking have been repeatedly introduced in the legislature, but it was not until this week that the issue received a committee hearing [Link no longer available —Ed.]. House Bill 4163 and Senate Bills 109-110 seek to ban smoking in all workplaces, including bars and restaurants.

The House Commerce Committee [Link no longer available —Ed.] took testimony for nearly two hours from individuals and associations on both sides of the issue. Those opposed to the bill, mostly restaurants and business groups, stated that government should leave the decision to private business owners. Groups supporting the bill, consisting primarily of health organizations, cited reports that second-hand smoke is deadly and urged legislators to protect the health and safety of all people, including children and employees.

The committee did not vote on the bills and stated the issue will again be addressed in two weeks.

Agreement Announced on New Business Tax

Governor Jennifer Granholm, Senate Majority Leader Mike Bishop and Speaker of the House Andy Dillon this week announced that a bipartisan, bicameral workgroup has negotiated a new business tax to replace the outgoing Single Business Tax (SBT), which will be eliminated at the end of the year.

The SBT has been a thorn for small and large business owners alike, who claim that the tax does not rationally assess taxes and has thwarted business development in a state that for several years has been in economic shambles. The new business tax, titled the Michigan Business Tax, will raise the same $1.9 billion as the outgoing SBT and will lower the tax burden for some 73 percent of businesses in the state, according to legislative leaders.

The Single Business Tax is set to expire December 31 after the legislature passed citizen initiated legislation last year. The new Michigan Business Tax relies on combining gross receipts and income tax with “substantial” personal property relief, and includes the following details:

Legislation creating the new Michigan Business Tax is expected to be written and introduced soon, and will likely pass with large bipartisan support.