2011 was a successful year for MMA. We made tremendous progress on our 2011 Legislative & Regulatory Agenda. We appreciate the leadership of the House, Senate and the Snyder Administration in moving many substantive measures that will improve the business climate for manufacturing, the largest sector of Michigan’s economy. Substantial progress was achieved on priority issues proposed in the agenda in the areas of Tax Policy Reform, Employment and Workforce Reform, Competitive Regulatory Reform — including reforms to the unemployment insurance program and the workers’ compensation system — and specific regulatory process reforms. These reforms will reinvent Michigan as they removed many long-standing barriers to competition for Michigan manufacturers. Michigan is moving forward and manufacturing is leading the recover.

Tax Policy Reform

With the new Corporate Income tax, Michigan’s business tax system is now more like the rest of the nation. Gone is the unique value added approach; gone is the anti-manufacturing gross receipts tax; and gone is the Michigan Business Tax (MBT) surcharge. While more work needs to be done to eliminate the Personal Property Tax, the Snyder Administration and the Legislature addressed some key business tax issues in the MMA agenda.

New Tax Structure

The new Corporate Income Tax (CIT) ended Michigan’s long-standing practice of having a different business tax structure than other states. The new tax moves to a simple 6 percent profits tax that is more in line with the rest of the nation. The CIT reduced the business tax burden by $1.7 billion. (HB 4361/PA 38, HB 4362/PA 39 and HB 4479/PA 40)

Elimination of the Gross Receipts Tax

The CIT eliminated the gross receipts tax, ridding the state of a tax that disproportionately burdened manufacturers which, as a sector, tends to have large gross receipts, but low profit margins. (HB 4361/PA 38, HB 4362/PA 39 and HB 4479/PA 40)

Elimination of the MBT Surcharge

The CIT ended the job-killing MBT surcharge, which was a $500 million burden that fell heavily on the manufacturing sector. (HB 4361/PA 38, HB 4362/PA 39 and HB 4479/PA 40)

Fixed the Tax Regulatory Environment

The passage of legislation clarifying that Michigan companies treated as disregarded entities under the federal tax code would be treated the same way in Michigan put an end to the Michigan Department of Treasury’s 2009 “Notice to Taxpayers” that required companies to re-file all MBT returns for all disregarded entities. It also eliminated a multi-year compliance burden for Michigan companies and puts Michigan in line with the rest of the nation. (SB 369/PA 305)

Structural Government Reform

Tremendous strides have been made by the Snyder Administration and the Legislature to streamline government, reduce costs and establish performance based measures and benchmarks. Many key structural reforms were passed in the 2011 Legislative Session.

Benchmarking State and Local Government

MMA called for state government to measure itself in terms of government performance by benchmarking the cost of state and local government and benchmarking the state’s business climate against other states. Early in his administration, Governor Snyder created the Michigan Dashboard, which is available online. The dashboard monitors several performance areas including economic data, education, health & wellness, infrastructure and talent. We applaud Governor Snyder on this key state government performance monitoring tool.

Corrections Spending Reform

With growing corrections spending crowding out other important General Fund expenditures important to manufacturers like higher education, including community college training programs, MMA called for corrections spending reform. The 2011-12 corrections budget was reduced by $70,859,800. Reductions were accomplished through prison closures, a cost-effective housing initiative, privatization of food service and prison stores and other positive management decisions. (HB 4526/PA 63)

State and Local Government Reform

Several pieces of legislation included in our agenda moved to reduce the total cost of government:

• Requiring public employees to pay 20 percent of their health care premiums (SB 7/PA 152)
• Changing the teacher tenure system (HB 4626/PA 100)
• Reforming public employee retirement plans (HB 4480/PA 41 and HB 4481/PA 42)
• Privatizing certain services in prisons and schools (HB 4526/PA 63)
• Incentivizing local government consolidation (SB 8/PA 258, SB 9/PA 259, HB 4534/PA 114, HB 4309/PA 261, HB 4311/PA 262 and HB 4312/PA 263)
• Reforming Public Act 312 to change arbitration standards for police and fire (HB 4522/PA 116)
• Prohibiting state and local governments from requiring Project Labor Agreements (SB 8/PA 258 and SB 9/PA 259)
• Enacting the local government and School District Fiscal Accountability Act (SB 158/PA 9)
• Prohibiting minimum staffing requirements for local governments (SB 485-492/PA 133-140)

Environmental & Regulatory Policy Reform

MMA members helped make significant progress in making our state’s regulatory requirements more competitive. The Legislature passed 13 specific bills to improve Michigan’s regulatory processes. These new laws will better enable Michigan manufacturers to compete in a global economy by improving efficiency and removing many regulatory barriers.

Efficiency Improvement Mechanisms in Regulatory Programs

The Legislature passed legislation requiring the Michigan Department of Environmental Quality (DEQ) to engage in a program of continuing process improvement for its major regulatory and permitting programs. The Governor signed the bill into law in December. (SB 277/PA 248)

Rigorous Cost-Benefit Analysis for All New Regulations

The Legislature passed, and the Governor signed, legislation requiring a more detailed cost-benefit analysis for any new proposed rules. New rules must also be compared to other Great Lakes States to ensure that Michigan’s rules are competitive. (SB 271/PA 242)

Benchmarking of State Regulatory Programs

MMA advocated for specific legislation requiring a state agency to submit a regulatory plan to the Legislature. The regulatory plan prescribed by the legislation, which was adopted, must list all the rules and regulations the department plans to write or amend in the coming year. An annual report must also be given to the Legislature on rules that have been promulgated or amended. (HB 4500/PA 238)

Environmental, Health and Safety Standards Based on Sound Science

Legislation was passed, and approved by the Governor, requiring the DEQ to provide specific, detailed reasons (including applicable scientific reasons) for denying a permit. This ensures government decisions are rooted in sound science. (HB 4042/PA 236)

No More Use of Operational Memoranda as Regulatory Tools

Legislation was passed clarifying that guidance documents developed by state agencies are not binding on the applicant and only provide guidance to the regulated community. The new law also requires that guidance documents be properly labeled as such. This will help prevent agencies from regulating without proper statutory or rule-based authority. (HB 4240/PA 270)

Exceeding Federal Climate Change Requirements

MMA opposed efforts by the DEQ and the federal Environmental Protection Agency (EPA) to promulgate climate change rules that go far beyond state and federal laws. We applaud the efforts of Attorney General Schutte in joining with other states to stop the federal government from imposing these standards on manufacturers without specific Congressional approval. On 12/31/11 the U.S. Court of Appeals, DC Circuit, issued a stay on the Federal Implementation Plans for the Interstate Transport of Fine Particulate Matter and Ozone and Correction of SIP Approvals. (Final Rule, 76 Federal Register 48,208, 8/8/11)

Elimination of Unnecessary Regulations

To keep Michigan competitive with other states and nations the Office of Regulatory Reinvention reviewed existing environmental rules to see what should be changed or eliminated. MMA was appointed to that group, coordinated with MMA members, and proposed over fifty specific regulatory changes.

Employment, Health and Workforce Policy Reform

Several important employment and workforce reforms were accomplished in 2011. Among other key wins, sweeping changes to the unemployment system and the Workers’ Compensation Act represent historic reforms that will yield benefits and cost savings for job providers for many years to come.

Reduction in UI Benefit Weeks

MMA took the lead in crafting an alternative to potentially adverse legislation that would continue up to 99 weeks of federally extended unemployment insurance (UI) benefits. The legislation will save Michigan employers over $300 million per year through a reduction in the state portion of benefits from 26 to 20 weeks. The final legislation also incorporated key fraud-fighting measures that will help identify and prevent $50 to $80 million in fraudulent costs to the unemployment system. (HB 4408/PA 14)

Fixing the UI Trust Fund

Despite the enactment of strong UI reforms, manufacturers still faced escalating tax penalties, solvency taxes and interest related to Michigan’s $3.2 billion indebtedness to the federal government for loans taken out to pay UI benefits. Left unchecked, the federal debt, plus interest, would have triggered substantially higher, across-the-board, state and federal UI tax increases on job providers.

Together with other business organizations, the Snyder Administration and legislative leaders, MMA worked to support the passage of bills which provide a balanced, comprehensive solution to this crisis. Collectively, the legislation utilized capital market solutions and the restoration of a reasonable taxable wage base to restore solvency to the state’s UI Trust Fund and incorporated cost-saving reforms to strengthen the integrity of the system and modernize many of its processes, thereby saving Trust Fund dollars. (SB 483/PA 267, SB 484/PA 268 and SB 806/PA 269)

Reducing Workers’ Compensation Costs by Updating the Act

MMA led the charge for the largest change made in the last 30 years to the Workers’ Compensation Disability Insurance Act through legislation which updated, reformed and modernized key areas of the workers’ compensation law. This effort will provide increased certainty for employees and employers, keep premiums affordable for job providers and create a more efficient and competitive system. For too long, workers’ compensation law has hung in the balance of judicial elections and employers have had to fret that any change in court composition would result in dramatic shifts in interpretation of law. The passage of this historic legislation put an end to this perpetual cycle of indecision, saving employers money on frivolous lawsuits. These dramatic reforms will also reduce employer workers’ compensation costs by closing costly loopholes that previously required job-providers to pay for unfair and exorbitant awards. (HB 5002/PA 266)

Health Care Claims Tax

Legislation signed into law in September repealed the Use Tax applied to Medicaid HMOs and created the new Health Insurance Claims Assessment Act (HICA), a new 1 percent tax on all paid health care insurance claims, which will be used to fund Michigan’s Medicaid program. MMA opposed the legislation as it was introduced, and as it passed the Senate, because the impact of the bill fell disproportionately on manufacturers. The bill did not precisely target the amount required for the Medicaid match nor effectively guard against unintended over-collection of the tax. In addition, early versions of the bill allowed for revenue to be spent on discretionary expenditures other than Medicaid and provided companies with no predictability or limitations on their liability under the tax. However, in the House, through vigorous efforts to educate legislators and the Administration about our serious concerns with the legislation, MMA successfully obtained several specific changes to the legislation that helped constrain the size and scope of the tax, increased accountability, provided greater certainty for businesses, and ultimately limited manufacturers’ liability. (SB 347/PA 141 and SB 348/PA 142)

Blocked Ergonomics Rule

In March, Governor Snyder signed into law the final death knell to the costly and unnecessary ergonomic standard championed by the Granholm Administration. The specter of the proposed rules had been a lingering threat to Michigan’s business climate and MMA was pleased to see the issue finally put to rest after a long-fought battle. The legislation prohibits any state agency from promulgating a state-specific ergonomic standard. (SB 20/PA 10)

Elimination of Unnecessary Workplace Safety Rules

The Office of Regulatory Reinvention’s (ORR) Workplace Safety Advisory Rules Committee, which MMA was appointed to, met throughout 2011 to review every rule enforced by MIOSHA to identify duplicative, obsolete, unnecessary or unduly restrictive workplace safety rules. The Committee completed its systematic review of MIOSHA rules and will submit significant recommendations to the ORR for 2012 action, including numerous rule rescissions, revisions and statutory changes.