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Governer Rick Snyder will sign a bill reforming the Michigan Public School Employee Retirement System, but only if House Speaker Tom Leonard allows a controversial proposal many call corporate welfare to come up for a vote.
That's what the Michigan Association of School Boards claims in a recent video, they say the Governor is playing hardball with Leonard in order to pass the "Good Jobs" bill, legislation giving tax breaks to companies who create jobs supporters argue wouldn't exist otherwise.
Its estimated price tag? $250 million.
Sources tell WMP One Tough Nerd has snagged the support of at least 12 Democrats in order to pass the bill, which already went through the Senate. Snyder hit a roadblock when Leonard decided to keep the legislation from coming up for a vote.
Snyder defended the proposal in a recent Detroit News op/ed.
"The package of bills provides meaningful incentives to employers who create over 250 new jobs and are paying 125 percent or more of the regional average wage, as well as to employers who create over 500 jobs and are paying 100 percent or more of average regional wages," Snyder said.
Snyder also says he understands why critics are skeptical.
"I understand some skepticism toward incentives; prior incentive tools did not have enough accountability measures and the costs ballooned," Snyder said. "But the overall positive impact of bringing in large-scale projects cannot be understated: more supplier jobs, more spinoff jobs, more tax dollars, more tourism, more kids in schools, more families living in our great state. The package of bills has received bipartisan support in the Michigan Senate, bipartisan support in the Michigan House Tax Policy committee, and huge statewide support from businesses, unions and economic developers who are out trying to bring jobs here every day."
Jarret Skorup of the Mackinac Center is one of those critics. He blasted the proposal in recent testimony during a committee hearing:
"Transparent? As we sit here, the MEDC is paying out more than $600 million for past tax credits and will not say who the money is going to or what the money is being used for. The agency is not compliant with reporting requirements on its current programs, but lawmakers are being asked to provide blanket authority to spend $250 million for bureaucrats to select winners and losers. Help small business? These bills are for large firms. Not picking winners and losers? Some companies get breaks, others are on the hook for the cost.
Testifying here today, I feel like I’m in the movie “Groundhog Day.” Michigan has gone the tax credit and subsidy route – in the 1990s under Gov. Engler and in the 2000s under Gov. Granholm. Bill packages promising “good jobs” were passed with wide, bipartisan support. But reviews of those programs showed negative economic results, particularly for the Michigan Economic Growth Authority package, in which fewer than 3 percent of projects met their projections and fewer than 20 percent of promised jobs were created...
For a decade, Michigan was a national leader in what we consider bad economic policy – raising taxes broadly while giving breaks to specific companies or industries. When Republicans took over the House and governorship, it wisely moved away from that. While we still offer subsidy programs, the amount of corporate welfare and tax credits has greatly declined. In those years, Michigan has been a national leader in jobs and income. Let’s not go back to repeating the mistakes of the past."
Reforming MPSERS, which carries $29 billion in unfunded liability, is a priority for Leonard.
According to the Detroit Free Press, changes would include:
"All new teachers and school employees hired after Feb. 1, 2018, would be placed into a defined-contribution retirement plan. The plan would have the school district pay 4% of the employee’s salary into a 401(k) plan. The employee could also contribute, and the state would match up to 3% of the employee’s contribution. The current 401(k) plan that about 20% of new school employees are enrolled in has a 3% employer match. The employees in the current 401(k) plan would begin getting the better benefits on Oct. 1."
It's a difficult test for the Speaker, who must balance reforming the nearly $30 billion retirement system with the optics of passing a $250 million handout to corporations.
Whatever he decides can be spun, but regardless, he will piss some people off.
Brandon Hall is a lifelong political nerd from Grand Haven, and is the Managing Editor of West Michigan Politics.
>>>Email him at WestMIPolitics@Gmail.com