Michigan Developments
Eric Rule,
Director of Governmental Affairs

GOP introduces water legislation bills

Three Senate bills to regulate water withdrawals and diversions are making their way to a floor vote. Sen. Patty Birkholz (R-Saugatuck), chair of the Senate Natural Resources Committee, is the primary architect of the package and sponsor of the main bill, SB 850.

Republican sponsors consulted business groups in the drafting of their bills, and the end product reflects that. The bills call for:
• Immediate regulation of all new water withdrawals in excess of two million gallons per day;
• Prohibition on diversions of water through pipeline, barge, rail or other methods of bulk water shipment;
• Focus on new and expanding high-capacity water users on surface water, natural resources and nearby existing wells;
• Creation of a more consistent and accurate water-use reporting system;
• Continued authorization of the Groundwater Conservation Advisory Council to provide ongoing recommendations for improvement.

Birkholz held several workgroups to hash out concerns over the proposal. The bills then had three committee hearings but were not voted out before a session break in mid-November. At press time the bills were expected to be voted out of committee on November 29 and brought up on the House floor on November 30.

The bill package has only Republican sponsors, as the Democrats have put out their own, less business-friendly water proposal.

Granholm Thwarts GOP tax effort

In a surprise move, Governor Jennifer Granholm signed only the jobs investment part of a $3-billion economic stimulus package while vetoing the business tax-cuts part that would have determined the future of the state’s Single Business Tax. She claimed that the legislature had not successfully linked the two parts together.

Republican legislators were disappointed to learn that a legal technicality had allowed the governor to sign the popular jobs investment bills—funded by secur-itizing future tobacco settlement funds—without having to give way on the SBT issue.

In early November the deal appeared to have fallen apart after the leaders—Granholm, House Speaker Craig DeRoche (R-Novi) and Senate Majority Leader Ken Sikkema (R-Wyoming)—couldn’t agree on what they had agreed on regarding the future of the SBT, the state’s main business levy.

The governor and others involved in the negotiations said the plan would repeal the current 2009 sunset of the SBT. Speaker DeRoche claimed the plan left the sunset intact, meaning the SBT would end in 2009.

Both the House and Senate approved the 14 bills in the tax package despite the governor’s threat to veto the measure if it eliminated the SBT. It was their understanding that the governor would have to sign or veto the entire package.

After announcing her move, Granholm sent the legislators “back to work to finish the job,” referring to the controversial tax bills. She remains insistent that bipartisan agreement was reached on the issue of repealing the 2009 sunset of the SBT.

Ergonomics rule under discussion

The Michigan Ergonomics Standard Advisory Committee has been discussing the promulgation of a state-specific ergonomics rule. Such a rule—which could be implemented by the administration without legislative approval—would be harmful to businesses in Michigan. Implementation is estimated to cost close to a half-billion dollars. If Michigan were to implement such a standard, it would be only the second state to do so, after California.

Rep. Rick Jones (R-Grand Ledge) has agreed to sponsor legislation preempting such regulations, however—a bill which MRA will enthusiastically support.

Wine bill compromise possible

A compromise may be in the works on the proposed legislation that restricts direct shipping from wineries. The compromise would leave intact the right for wineries to sell directly to retailers and restaurants.

However, the more restrictive versions of the wine bills—opposed by the Coalition of Michigan Wineries, Retailers and Restaurants—are moving faster than expected, which is of concern. The bills were discharged from committee in mid-November and sent to the Senate Economic Development Committee chaired by Sen. Alan Sanborn (R-Richmond).

Update from Washington
James Goldberg,
MRA Washington Counsel

Tax reform proposal gets tepid response

While the final report of President Bush’s tax reform advisory commission soundly rejects a call for a national sales tax, it generated only a tepid response from key members of congressional tax-writing committees.

Tax experts say changes to the tax code are inevitable, however, because the president’s previously enacted tax cuts expire in 2008 and 2010. Further, pressure is mounting to review the alternative minimum tax (AMT) so that it doesn’t overwhelm average taxpayers.

The AMT, enacted in the 1980s as a way of insuring that wealthy taxpayers pay at least some federal income tax each year, now impacts more than 21 million taxpayers a year, including many in the so-called middle class, whose taxes on the same income level will rise because of the AMT.

The presidential advisory commission recommended repealing the AMT, then offered two alternative approaches for replacing it. Both alternatives are controversial, since they would eliminate deductions for home mortgage interest and state and local income taxes.

The plans would also eliminate the tax-free status currently accorded to health insurance provided by employers or the self-employed; instead health insurance would be purchased with pretax dollars up to a maximum of $11,500 for a family.

One proposal—called the Simplified Income Tax—would replace the current six income tax brackets with four, while the other—called the Growth and Investment Plan—would have only three tax brackets.

Both plans also call for a restructuring of current retirement and savings plans, such as defined-contribution pension plans (for example, 40l(k) plans) and Individual Retirement Accounts.

The advisory commission’s complete report can be found at www.taxreformpanel.org.

Going up: postage and other delivery costs

Needing to cover a $3.1 billion pension escrow payment due in 2006, the Postal Rate Commission has approved a two-cent rate increase for first class mail—to 39 cents—effective in January.

The increase, the first since 2002, will average 5 percent across the board. Postcard stamps will rise to 24 cents, and the cost of priority mail will jump to $4.05 from the current $3.85. The cost of express mail will rise from $13.65 to $14.10.

Meanwhile, FedEx apparently also plans to boost delivery rates by approximately 5.5 percent, the largest increase in nine years. United Parcel Service is expected to follow suit with a rate increase of its own for both air and ground deliveries.

New rest schedules for truck drivers take effect

The Federal Motor Carrier Safety Administration has put into effect a new hours-of-service rule that spells out the length of time commercial truck drivers can operate their vehicles before they are required to take a break. The new rule updates regulations that were last updated in 2003 but were challenged in court.

The new rule prohibits drivers from driving more than 11 hours in a row, working longer than 14 hours in a shift and driving more than 60 hours over a seven-day period or 70 hours over an eight-day period. The rule also requires truckers to rest for at least 10 hours between shifts.

The most important change under the new rule allows short-haul drivers not required to hold a commercial drivers license—such as delivery drivers who work within a 150-mile radius of their starting point—to extend their work day twice a week. They will also no longer have to maintain logbooks.

The change was prompted by safety data that show short-haul drivers make up over half the commercial fleet, yet are involved in less than 7 percent of the country’s fatigue-related fatal truck crashes.

New rest schedules for truck drivers take effect

Many employers have begun to expand their required year-end Form W-2 reporting to employees by including supplemental information that shows the expenses incurred by the employer that don’t show up in the employee’s paycheck. These include the employer share of Social Security, health insurance and other benefits that are either required by law or provided on a voluntary basis.

It’s a good way to show workers what it actually costs the employer to keep them employed.

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