Legislative process plods along
With a limited July and August work calendar, it is difficult to see how the Legislature will complete any of the remaining budget issues prior to Labor Day. The next big deadline is October 1, the start of the new fiscal year.
The Legislature proposed meeting throughout the Summer to work on the upcoming fiscal year budgets and released calendars indicating regular three-day session weeks the remainder of July and session every Wednesday throughout August. However, not much was accomplished the last few weeks of July and the House cancelled the August 1 session day signaling to us that those last few days in September are going to be very long indeed.
On the ‘08 FY budget side of things, the House has been passing their first-house budgets to the Senate. However, the Senate Majority Leader blasted the House Democrats for passing budgets predicated on a $1.5 billion tax increase for which the House has not yet acted on. Meanwhile, the Senate has yet to pass a single Senate-originated budget bill—all are on the Senate floor awaiting full-Senate action, including the 07-08 Transportation budget. This slower than usual pace also leads us to predict final resolution occurring in the waning days of September—not August. There has also been talk of continuation budgets which indicate that resolution could be put off until October or November—after the beginning of the new fiscal year!
Nothing has happened on the revenue enhancement side of things yet either. On several occasions, the Senate Majority Leader has indicated that any tax increase must be passed by the House first. Most indications are that the House Democrats will pass an income tax increase from the current rate of 3.9 percent. Each one-tenth of a percent nets approximately $180 to $200 million for the state general fund. Recent estimates peg the 07-08 FY deficit at anywhere from $1.2 billion to $1.8 billion. The income tax rate could be increased statutorily to any amount (4.6 percent is the historical high). However, any effort to create a graduated income tax would require a constitutional change and thus, a vote of the people. Rumors abound that the House Democrats will propose a retro-active tax increase and tie-bar it to a joint resolution placing a graduated income tax proposal before the voters this November. However, in order for this to appear on the November ballot, it would need to pass both Chambers in August. If a plan is placed before the voters, the February Presidential Primary would be the next opportunity. There is also much talk of expanding the sales tax base to incorporate a “luxury” tax on services such as tickets to sporting events and concerts among other things. As of yet, neither body has moved on a broad tax hike.
The Senate Appropriations Committee reported a number of bills necessary to implement pieces of the ‘07 budget agreement, including Senate Bill 656. SB 656 (S-1) amends the General Sales Tax Act permitting $10.2 million dollars to be skimmed from the CTF by redirecting it from the auto-related sales tax revenue to the State general fund. The bill implements two pieces of the agreement. First, it addresses the Governor’s Executive Order 2007-03 which redirects $5 million from the CTF to the general fund by cutting $4 million from the bus capital line and $500,000 each from the rail infrastructure loan and the freight preservation and development lines. The remaining $5.2 million reflects the agreement to transfer funds set aside within the CTF for the Soo Locks expansion matching funds to the State general fund. This portion of the agreement is contained within Public Act 17 of 2007.
(Legislative Update prepared by Bill Zaagman and Don VanSingel of Governmental Consultant Services, Inc., MPTA’s state lobbyists.)