February 5, 1999

Legislative & Political Week in Review

• First, the good news: A national study ranks Michigan’s government among the nation’s best. A four-year, grant-funded study at the University of Syracuse gives Michigan an overall grade of B+ for fiscal restraint, a streamlined state work force, and smart use of technology. Only Missouri, Virginia, Utah, and Washington states receive higher scores.
• Now the bad: A 14-year-old state accounting error discovered this week has grown to $154 million in state funds, swamping what officials had thought was a $53 million state surplus from the 1996–97 fiscal year. It started in 1984, when a recession-strapped state government converted its accounting system from a cash to an accrual basis. According to red-faced Department of Management and Budget spokespeople, it appears that the former Department of Mental Health (now part of the Department of Community Health) shifted its revenue—but not its payments—to the new system, with the result that Medicaid payments for services in one fiscal year actually were charged against the next. This created an initially small fiscal imbalance that has grown and munched its way into subsequent state surpluses, leaving them progressively smaller than they were assumed to be. Fortunately, the surplus from the last fiscal year (1997–98) is sufficiently huge to cover this substantial glitch and fund the recently approved Hall of Justice complex west of the Capitol and kick in some $53 million to the state’s rainy day fund. (And yes, the accountants are really, really sure about the math this time.) Perhaps the biggest news in all of this is that the state’s financial position is so comfortable as to make a $154 million shortfall an embarrassment but not an inconvenience.
• Tax-cut fever grips Lansing as lawmakers passed a Republican plan to reduce the state income tax by half a percent over five years. Some 20 bills—many "tie-barred" to one another—passed this week in the chambers as the issue fast-tracks its way to the governor’s desk, presumably before month’s end. Economists quoted in a Lansing State Journal article support Democratic criticism of the plan: that the most well-off state residents will benefit most from the reduction. Most middle-class households, the Journal reports, will feel its effect only barely. Democrats in the legislature argued unsuccessfully that increasing the personal exemption would leave more money in the pockets of taxpayers earning $75,000 or less annually.
• Michigan Democrats are mustering a united front for this weekend’s state convention at which Tipper Gore will be the keynote speaker. Party representatives are making conspicuously measured responses to ex-gubernatorial candidate and headline-grabbing attorney Geoffrey Feiger’s announcement that he may run for the U.S. Senate seat now occupied by Spencer Abraham. Feiger has said that if the Dems don’t warm to his candidacy, he may run as an independent. Meanwhile, party regulars await clearer signals from James Blanchard, former governor and U.S. ambassador to Canada, who also is considering the contest. Newest into this electoral fray is state Sen. Dianne Byrum, who officially announced her candidacy this week, expressing optimism that she can raise the $5–8 million that polls say the race will cost. Senator Abraham’s campaign staff avers that they will collect an estimated $9 million for their candidate’s reelection.
• The first bill of the session to pass either chamber was SB 60, designating Blue Cross/Blue Shield of Michigan as the state’s insurer of last resort. The action passed in the upper chamber makes Michigan compliant with federal requirements that an insurer be identified that is prohibited from denying coverage to residents meeting minimum requirements.
• The deputy director of the Family Independence Agency temporarily will fill the department’s top spot as a national search is launched to replace Marva Livingston Hammons, who left office last week to return to a gubernatorial appointment in Colorado. Newly named FIA Interim Chief Mark Jasonowicz is a 30-year veteran of state government.