Both returning members and new members are listed in the link below, along with their pictures. We welcome them on behalf of the business community and look forward to working together to continue the progress in making Michigan an attractive place to do business and reside.

Download a PDF here courtesy of Gongwer News Service

By Chuck Moss House Appropriations Chair Representative

The Fiscal Cliff is like the weather: everyone’s talking, but nobody’s doing anything—yet—about it. First off: what is the ‘Fiscal Cliff,’ and why does it matter to Michigan.

‘Fiscal Cliff’ is a phrase meaning the situation the U.S. Government will face at the end of 2012. For years the President and Congress have cobbled together a series of make-do, ad hoc compromises in tax and spending policies, because no one can agree on fundamental issues. What fundamental issues? Taxes, spending, and the proper balance between the two. 

For years we’ve been spending more than we take in, which has led to a multi-trillion dollar deficit. Democrats want to cut the deficit by raising more “revenue,” which means raising taxes. They don’t want to cut a lot of spending, except for Defense. Republicans don’t want to raise taxes, and would cut the deficit by severe spending cuts. The President wants to tax more and spend more, and just won reelection. So what we have is an impasse, which is nothing new, and why we’re in this situation in the first place.

Because the House and the Senate can’t agree with each other or with the President, they’ve put off the day of reckoning by stopgap temporary measures. Biggest is the Budget Control Act of 2011. This law was passed in 2011 and according to Barron’s, over 1,000 government programs – including the defense budget and Medicare are in line for “deep, automatic cuts.” Next biggest is automatic tax hikes: the end of last year’s temporary payroll tax cuts (resulting in a 2% tax increase for workers), the end of certain tax breaks for businesses, shifts in the alternative minimum tax that would take a larger bite, the end of the tax cuts from 2001-2003, and the beginning of taxes related to President Obama’s health care law.

So that’s the Cliff: the combination of higher taxes and spending cuts would reduce the deficit by an estimated $560 billion, cutting gross domestic product (GDP) by four percentage points in 2013, sending the economy into a recession. At the same time, unemployment would rise by almost a full percentage point, with a loss of about two million jobs. In all, the tax increases and spending cuts make up about 3.5% of GDP, with the Bush tax cuts making up about half of that.

So what if you just cancel tax increases and spending cuts?  National bankruptcy. Then the deficit keeps growing, and we end up in the same crisis as Europe. What if we take a middle course: cut a little spending and raise few taxes? Then we address the budget but sacrifice the anemic but real growth. Bottom line: more taxes means less growth and possible recession. Less spending cuts equals higher deficit, leading to fiscal meltdown like Europe. Cutting spending and keeping taxes low isn’t the platform of the guy who just got reelected to the White House. Hiking taxes and gutting the military isn’t the platform of the majority who got elected/reelected to the House of Representatives.  The reelected President isn’t known for his ability to craft bi-partisan compromises—to say the least. Deadlock means disaster. Half-measures mean we limp along. Pick your poison.

What does it mean for Michigan? Well, we’ve seen this dynamic play out here at home, in Governor Jennifer Mulhern Granholm’s second term. Governor Granholm was reelected, but faced an opposition party Senate. She described her plan as “revenue, reforms, and reductions,” but the reforms and reductions never really came: just the ‘revenue enhancements’—taxes hikes. The GOP-led Senate said ‘forget it.’

Unwilling or unable to craft a solution to bring the GOP aboard, Granholm attempted to use her then-reputedly formidable popularity, communication skills, and bully pulpit to bully the opposition into submission. It didn’t work, and the Senate dug in. She then engaged in serious brinkswomanship, taking the state budget right up to the September 30th deadline, and twice into actual shutdown. That didn’t work either.

The Senate stayed dug in. Result: state government budgets were balanced with accounting gimmicks, the legislature’s reputation hit all time lows, and Jennifer Mulhern Granholm’s favorables dropped to the basement as well. In 2010 Michigan elected an un-partisan-ly problem solver, Rick Snyder, and chose a new course. But four years of deadlock and paralysis in the midst of the Crash made Michigan a poster child for decline and failure.

Now there is the possibility that reelected President Obama will channel his inner Bill Clinton (watch out, Michelle!) and triangulate a position to keep taxes low and spending reforms serious. I don’t see that happening, however. Obama is Obama, not Slick Willy. He just got reelected calling for higher taxes and minimal cuts, except for Defense. So let’s assume that Barack Obama stays his course, and calls for higher taxes and smaller cuts…except for Defense. Another possibility is that the Republican House agrees to join President Obama and the Dems for a big group Kumbaya. But after this election, with so many House members voted in to hold the line, I don’t see that either. Best bet: the GOP-led House says “forget it.” Next step: a Granholmian offensive of calling the GOP’ers nasty names–which gets no results. So one of two things happens:

1. Deadlock. Smashup. Off the Cliff. We get hammered with huge sudden tax bites as well as huge automatic spending cuts. The US economy slams into full stop, then rolls in reverse to decline. Consequences for Michigan: back we go to recession-land. Unemployment soars again, and the modest recovery evaporates. Our shy March-like springtime of real estate and housing recovery sees a blizzard. Cities, towns, school districts whose finances are shaky—or worse—continue their slide to insolvency. Welcome back 2010.  
2. Stopgap Half Measures: weak growth. Michigan keeps limping along, but without robust recovery. State government stays on fiscal discipline, which is good. Tax collections stay low, because no one’s making any money, which is bad.  Job growth slowly gains, which is better than decline, but still leaves people behind.

Weak growth means weak business activity in general, which means weak profits, which means weak hiring, which means weak payroll and wages. Weak profits and wages mean weak tax collection and revenue. Local governments and school districts with bad balance sheets and high pension/retiree costs are unable to grow out of their downward spirals, which is bad. We may actually start seeing municipal or school district bankruptcies.

If Michigan’s competitive position relative to other states continues to improve, we’ll do better than say California, New York, or Illinois. But it won’t feel like 1983 or 1993, because it won’t be.

So that’s the Fiscal Cliff: what it is and what it may mean for Michigan. I’m betting on a limp-along-with-half-measures, kick-the-can-down-the road scenario, because decision avoidance trumps catastrophe every time. Here in Michigan, that means no Economic Springtime, but more like a Permanent March. Better than February, but don’t break out the sunscreen, put away the snow shovels, or plant your garden. Summer, it aint. Not yet.

By Larry Grudzien
Attorney At Law

On November 9, the Department of Health and Human Services (HHS) extended the deadline for submission of the State-based Exchange Blueprint application from its original date of Nov. 16 to Dec. 14, 2012. The deadline for submission of the Declaration Letter for a State-based Exchange will remain Friday, Nov. 16, 2012. HHS will approve or conditionally approve a State-based Exchange for 2014 according to the statutory deadline of Jan. 1, 2013.  Please find a copy of the announcement below:
 

Q1: When does a state have to tell the Centers for Medicare & Medicaid Services (CMS) that it wants to establish a State-based Exchange for 2014?
 
A1: In order for CMS to provide a state with technical resources and support necessary to meet the January 1, 2013, approval/conditional approval statutory deadline, a state that intends to establish a State-based Exchange must submit a Declaration Letter by Friday, November 16.
 

Q2: If a state wants to establish a State-based Exchange, when is the Blueprint Application due? What about the Declaration Letter?
 
A2: In order to provide states with more time to create a comprehensive Blueprint Application that is fully representative of their work, the Department of Health and Human Services (HHS) extended the deadline for State-based Exchange Blueprint Applications to Friday, December 14, 2012. Declaration Letters for State-based Exchanges remain due on Friday, November 16, 2012. CMS encourages states to begin working with the Center for Consumer Information and Insurance Oversight (CCIIO) on their Blueprint Applications as early as possible in order to identify any issues early and to receive feedback on their Blueprint Applications. A state may also submit its Blueprint Application prior to the deadline.
 

Q3: My state is ready to declare that it intends to establish a State-based Exchange, but still needs more time to determine whether it will establish and operate Risk Adjustment and Reinsurance programs. What should my state do?
 
A3: If a state knows what Exchange Model it intends to pursue, and who is the appropriate designee to execute the Declaration Letter, CMS encourages each state to submit a Declaration Letter on or before November 16, 2012. If a state has concerns about whether its decisions will be made by mid-November 2012, please talk to your CCIIO State Officer about your options. An interested state must commit to running either program in their Blueprint Application (Sections 5.1 and 5.2) that is due December 14, 2012. Please keep in mind that only a State that has elected to operate a State-based Exchange (not a State that has elected to participate in a State Partnership Exchange) can operate a risk adjustment program, or the State-based Exchange can defer its operation to the federal government. A state may elect to establish and operate a reinsurance program regardless of the Exchange model selected.
 

Q4: My state is not sure it wants to establish and operate a State-based Exchange, but we want to be involved in our Exchange. What options do we have?
 
A4: CMS established the option for states to pursue a State Partnership Exchange, where a state can work with CMS and elect to operate the Plan Management functions, Consumer Assistance functions, or both within the Federally-facilitated Exchange established for your state. States have until Friday, February 15, 2013, to submit a Declaration Letter and Blueprint Application declaring what partnership role they would like to have in operating the Exchange in their states. Ultimately, CMS wants as many states involved in operating Exchange as possible and we encourage states to talk with their CCIIO State Officer to discuss the partnership options.
 

Q5: If a state is ready to submit its Blueprint Application, does it have to wait until December 14, 2012?
 
A5: No, a State may submit its Blueprint Application for State-based Exchanges any time before December 14, 2012, and for State-Partnership Exchanges any time before February 15, 2013.
 

Q6: If a state applies to establish a State-based Exchange and later decides it would rather be a State Partnership Exchange in 2014, can it change its mind?
 
A6: Yes, if a state applies to establish a State-based Exchange for plan year 2014 and later decides it is more prepared to operate as a State Partner, it can move into a State Partnership model. States should contact their CCIIO State Officer as early as possible to begin the transition.
 

Q7: If a state has a State Partnership Exchange in 2014, can it move to a State-based Exchange in 2015?
 
A7: Yes. If a state decides to be a State-based Exchange for plan year 2015, it will have to submit its State-based Exchange Declaration Letter and Blueprint Application, completing all the relevant additional sections. For the 2015 plan year, the Declaration Letter and Blueprint Application are due November 18, 2013, and December 16, 2013, respectively. It can also establish a State-based Exchange in subsequent years.rom 2014 through 2006, each state that operates an Insurance Exchange is required to establish a temporary reinsurance program for the individual market, to which health insurers and group health plans are required to contribute, as provided in PPACA, Pub. L. No. 111-148, Section 1341 (2010), as amended by PPACA, Pub. L. No. 111-148, Section 10104(r) (2010).  This program shifts the risk of covering high expenses from the primary insurer to a reinsurer.  

If you have any comments or questions regarding any of above information, please do not hesitate to call (708) 717-9638 or e-mail larry@larrygrudzien.com.