10 Republican Principles Proposed by RNC Leaders

Some members of the Republican National Committee (RNC) signed on to a resolution that will be proposed at the RNC's winter meeting in January, which lists 10 positions Republican candidates should support to demonstrate that they "espouse conservative principles and public policies":

1. We support smaller government, smaller national debt, lower deficits and lower taxes by opposing bills like Obama's "stimulus" bill;
2. We support market-based health care reform and oppose Obama-style government run health care;
3. We support market-based energy reforms by opposing cap and trade legislation;
4. We support workers' right to secret ballot by opposing card check;
5. We support legal immigration and assimilation into American society by opposing amnesty for illegal immigrants;
6. We support victory in Iraq and Afghanistan by supporting military-recommended troop surges;
7. We support containment of Iran and North Korea, particularly effective action to eliminate their nuclear weapons threat;
8. We support retention of the Defense of Marriage Act;
9. We support protecting the lives of vulnerable persons by opposing health care rationing and denial of health care and government funding of abortion; and
10. We support the right to keep and bear arms by opposing government restrictions on gun ownership.

In the spirit of Ronald Reagan "that someone who agreed with him 8 out of 10 times was his friend, not his opponent.", I agree with the 10 principles.

The only one I may not be in total agreement is No. 1, in that I probably would have voted for "a" stimulus bill, as the economy was close to a meltdown. I would have wanted a bill more aimed with tax cuts, rather than spending on pet projects that furthered the Democrats' agenda and paid off some of their campaign debts to many interest groups.

Lifelong Learning

Yesterday I finished listening to the 36 lecture CD series, "Economics", by Timothy Taylor, one of the "Great Courses" from The Teaching College. Even after having taken 27 courses in Economics or Econometrics throughout the years, it was a great refresher, with a very balanced discussion of the pros and cons of many policy issues. I highly recommend it.

I have listened to MANY courses in the Great Courses series, making good use of my drive time, and highly recommend them. Many are available from the Saline District Library.

Anyone who says they cannot afford to get an education is making excuses, because if one wants, he/she can get an education free, just maybe not a college degree. A person can improve their marketability and value in the labor market.

I fully believe, in the long run, one is compensated in direct proportion to the service to others one provides. How much service do you wish to provide?

Gas Tax Increase Acceptable Only if Coupled With Change in Allocation Formula

State’s deteriorating roads could lose almost half of their funding if state can’t find the money to match federal dollars earmarked for Michigan Tom Gantert, reportingmichigan.org, October 18, 2009 reports the following:

According to the Michigan Department of Transportation, the state could lose a combined $1.9 billion in federal dollars in 2011, 2012 and 2013 because the state may not be able to afford the 20-percent matching funds necessary to receive federal support.

“In 2010, the state has $1.2 billion set aside for highway and maintenance programs. Without the federal aid, that annual figure would drop to $477 million in 2011, $524 million in 2012 and $418 million in 2013.

State and federal gas taxes and vehicle registration fees are the primary sources of revenues for the Michigan Transportation Fund. Every consumer pays 19 cents in state taxes and 18.4 cents in federal taxes for every gallon of gas. That 18.4 cents is given back to the states by the federal government with some conditions. The state must provide matching funds to the returned-federal tax. The federal government returns to Michigan all but about eight cents on every dollar.”

Here’s the rub:

“According to the Michigan’s Roads and Bridges 2008 annual report put out by the state’s Michigan Transportation Asset Management Council, more of Michigan’s roads are falling into disrepair every year.

The council says about 17,378 lane miles of federal-aid-eligible roads were classified as in poor condition. Almost 1/3 of the state’s federal-eligible-roads are now in poor condition. That number has jumped from 13.6 percent in 2004 to 31.6 percent in 2008. The council stated that in 2008, only 19.4 percent of the state’s federal-eligible roads were in “good” condition.

Even worse, it’s believed that 43 percent of the state’s non-federal-aid roads (9,223 lane miles) are in “poor” condition.

It would cost $7.2 billion to bring all of the state’s roads up to “good” condition, the council estimated.”

"Doing nothing on this key issue would mean lost jobs, bad roads, sending federal money for Michigan to other states, and a failure to improve public transit — which does not sound like a winning political strategy to me," Michigan Chamber of Commerce CEO Rich Studley has said. The SPECIAL REPORT: Michigan's tax reform playbook, by The Center for Michigan - August 6, 2009.

So how is Michigan to come up with the matching funds?

“Michigan’s flat 19-cents-a-gallon gas tax was last raised in 1997. . . . In a rare show of consensus, Granholm, MDOT officials and the Michigan Chamber all back changing the tax to a percentage of the wholesale price, which means the state would take in more when gas rises and less when it falls. Although the Chamber generally opposes tax increases, Studley said more money for roads is critical for businesses.” The SPECIAL REPORT: Michigan's tax reform playbook, by The Center for Michigan - August 6, 2009.

While I am also not generally in favor of tax increases, a state gas tax increase would be consistent with the basic principle of public finance is that, to the extent possible, users of government services that directly benefit from the provision of such services should pay for the privilege of doing so. That is, user fees are the most defensible form of taxation. And, while gas mileage varies from vehicle to vehicle, the amount of gas consumed is a close approximation of the usage of the roads and highways. Further, if we are not willing to pay for essential government services that we demand and use, what are we willing to pay for?

I would not favor a gas tax increase, however, without a change in the allocation formula for distributing about $2 billion of funds per year from the Michigan Transportation Fund under Public Act 51 of 1951. The current distribution formula is primarily based on the number of miles of roads and highways in the various jurisdictions. The formula does not distinguish between 2-lane and 4-lane roads, nor consider highway utilization factors such as vehicle miles driven or even the physical condition of the roads. Inefficient allocation of scarce resources results, with rural areas with relatively lightly traveled roads getting a disproportionate amount compared with more urban areas. See the Citizens Research Council’s February, 2008 report Improving the Efficiency of Michigan’s Highway Revenue Sharing Formula

To make matters worse from the perspective of the voters of the 55th Legislative District which I expect to represent, Monroe and Washtenaw Counties fare very poorly in the current system. On a per capita basis, Washtenaw County is second to last among the counties, while Monroe County is 4th from last. On a vehicle miles traveled basis, Monroe County is dead last, and Washtenaw County second to last. CRC, pages 8 and 9.

One proposal to raise the gas tax 9 cents per gallon over 3 years and the diesel tax 13 cents over three years would generate an additional $500 million each year for Michigan’s highway system after being fully phased in. If the allocation formula is not changed, some of the additional money would go to counties where the roads are in much better shape than in other counties. The formula must be changed to put more emphasis on highway condition, capacity and utilization, before any increase in the gas tax would be acceptable.

Comments?

Can the Federal government require anyone to buy anything, or is there some Constitutional limit?

In my October 2, 2009 blog entry Constitutional Limits Tested by Health Care Reform? in which I discussed Health-Care Reform and the Constitution: Why hasn't the Commerce Clause been read to allow interstate insurance sales? September 15, 2009 article in the Wall Street Journal by Andrew P. Napolitano, the question was raised, “Can the Federal government require anyone to buy anything, or is there some Constitutional limit?”

The following two well written articles amplify my concerns:

• Freedom's Destruction By Constitutional De-Construction, by Timothy Baldwin, 10/19/09
  
• Can Obama and Congress Order You to Buy Broccoli? by Terry Jeffrey , 10/21/09

With a Constitution written with a multitude of checks and balances, where have the limits gone? We have slipped down the slippery slope inch by inch to the point that most Americans believe we live in a democracy rather than a limited government.

The constitutional limit in question is the Tenth Amendment, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people.” In other words, the principle was that the Federal Government is one of enumerated and limited powers.

The first slippage was the Supreme Court ruling in 1819 in the McColluch v. Maryland case that the federal government had powers to do things that were implied by a more general grant of power to do things. This was an interpretation of the “Necessary and Proper Clause”, i.e., Article One of the United States Constitution, section 8, clause 18: “The Congress shall have Power - To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government of the United States, or in any Department or Officer thereof.”

Then came the “supremacy clause” in which the federal government supersedes any state action that is in conflict with the federal law in the same subject area. In the New Deal era, a major erosion occurred with the extension of the commerce clause to most anything that might somehow cross state lines or otherwise affect interstate commerce. Then, the protection of the “substantive due process” requirement before property could be taken by the government was gutted. The Court ruled that the means to an end that the government could mandate need only have some rational connection to a legitimate government goal or end. Further, the Congress need not actually have made that rational connection at the time of enacting the law but the Court could do so later if in the use of its imagination it could make that connection.

All this begs the question raised in Jeffrey’s article, “If the federal government can mandate the purchase of health insurance, what stops it from requiring people to buy broccoli, or anything else, for that matter?

Why is this important? Without limits, any government that has supreme authority to do anything or take anything from someone is by definition tyranny – whether it be a monarchy, oligarchy, fascist, or a pure, unlimited democracy. As I pointed out in my October 7, 2009 blog entry Robbing Peter to Pay Paul?

“The hazard is that with a reported 47% of Americans not paying income tax, we have reached the point that the receivers (including the public service employees who also benefit from government transfers, and their liberal sympathizers, such as private union members) are a majority that are being supported by a minority of wealth producers. "The government who robs Peter to pay Paul can always depend on the support of Paul," said George Bernard Shaw.” Without limits, the "have-nots" have to power to take anything they want from the "haves".

We must somehow restore some limits to our Constitutional government, or we face a continued bit by bit loss of our freedoms which we enjoy and take for granted in our free society.

A resource that explains this in much greater detail can be found on Wikipedia’s Tenth Amendment to the United States Constitution with its references to The Tenth Amendment Center, which works to preserve and protect Tenth Amendment freedoms through information and education. The center serves as a forum for the study and exploration of states’ rights issues, focusing primarily on the decentralization of federal government power.

Cornell University Law School Legal Information Institute’s CRS Annotated Constitution Tenth Amendment also contains an excellent detailed legal discussion of the court cases.

Comments?

Controlling Public School Employee Benefit Costs

The Detroit News is highlighting ideas from various groups to promote discussion on reform, restructuring government and the economy.

Idea 20 : Cap school employee health benefits and/or enroll them in health savings accounts.

Idea 14: Consolidate health care coverage for all public employees in Michigan in a single insurance pool.

Idea 19: Transition newly hired Michigan teachers to a defined contribution retirement system or 401(k).

All three of these ideas attempt to control costs of benefits, yet in ways that do not infringe on the results of years of collective bargaining between the teachers’ unions and the local school districts.

The typical employee share of the health insurance cost is 5 to 10 percent, compared with an average of 25% in the private sector. With statewide school health insurance expenses of $1.93 billion in 2008, increasing the percentage to that of the private sector would save more than $290 million a year. Moving all school employees to high-deductible Health Savings Account plans would save even more -- as much as $450 million in the first year and $26 billion through 2021, according to a Mackinac Center for Public Policy analysis.

An alternative approach to controlling rising health care costs would be to create a health insurance pool for all public employees which is believed would cut administrative costs and provide a larger number of customers to negotiate lower rates. This was a Republican idea which was going nowhere until House Speaker Andy Dillon (D) came out publicly this summer in favor of such an approach. See the Hays Group 2005 Report on the Feasibility and Cost-Effectiveness of a Consolidated State-wide Health Benefits System for Michigan Public School Employees.

Dillon’s white paper estimated that pooling health insurance would save up to $900 million a year, versus an estimate by the American Federation of Teachers and International Union of Operating Engineers in 2005 of only $156 million to $223 million a year for teachers (or a 7 percent savings). Applying the 7 percent savings across all government and school employees amounts to more than $500 million a year. Whichever estimate is correct, and it is impossible to say ahead of time which will be more correct, as the savings will depend on the details of the proposals enacted, the savings appear worthwhile to achieve.

A second expensive benefit is the teachers’ retirement plan.

The Michigan Public School Employees' Retirement System (MPSERS) provides pension and other post-employment benefits to more than 160,000 retirees and beneficiaries. There are 715 participating employers, including K-12 districts, public school academies, district libraries, tax supported community colleges, and seven universities. Under the current “defined benefit” plan, each of which is required to contribute the full actuarial funding contribution amount to fund pension benefits for its employees. (1.5% times the years of service times the highest three year average compensation, plus qualified retirees get health insurance coverage.) As the investment yield rises and falls, and estimates of retirees’ health care costs fluctuate, the actuaries calculate the contribution necessary to fully fund the plan, with a current rate of almost 17% of each employee’s wages (and projected to rise even higher).

The recommendation is to switch to a “defined contribution” plan, where the employer would contribute a set amount each year, and the ultimate benefit the employee would receive would depend on how well the investment of the contributions do. In short, the risk of market variation is shifted to the employee. The contribution rate might also be somewhat less than current and forecasted contribution rates.

The Citizens Research Council of Michigan in July, 2009 said in Michigan State and Local Government Retirement Systems, page 51:

“Transitioning newly hired Michigan teachers to a defined contribution retirement system would provide a much-needed structural reform to the state budget and prevent long-term legacy costs that are unsustainable for the Michigan education system and state budget. . . .

However, the transition from closing a defined benefit plan to new entrants, and placing all new hires in a defined contribution plan, normally requires ongoing contributions to both plans that may entail an increase in overall pension contributions for a number of years, so careful actuarial and budget analysis is critical to informed decision-making.”

The problem with high and rising MPSERS contribution rates is nothing new, with the Citizens Research Council forecasting significant funding difficulties in its 2004 report Financing Michigan Retired Teacher Pension and Health Care Benefits, A step in the right direction since then has been switching to a more actuarially sound “graded premium” plan for the retirees' health benefits. Under this change, retirees are required to contribute to the health insurance cost on a sliding scale based on the number of years of service, as compared with needing to contribute only 10% once vested after 10 years of service regardless of whether the years of service accrued were 10 or 35.

Nonetheless, the burden of the current plan is far above what private industry carries; in other words, the benefits are far richer than private sector employees enjoy.

The Michigan Education Association, the state's largest teachers and school employee union, already runs its own health insurance pool through the Michigan Education Special Services Association, which covers more than half of public school and community college employees. The MEA opposes any increase in the teachers’ share of the cost, the pooling of the health care plans, and transition to a contributory retirements system.

As much as we all like individual teachers, we must push for every efficiency in government that we can, in light of the scarce dollars we have to spend. Increasing the school funding by raising taxes in the face of an economic downturn to continue unsustainable benefit programs for teachers is not only politically unpalatable, but also counterproductive in encouraging job growth in Michigan.

Comments?

Repeal PA 312 to Eliminate Binding Arbitration for Police and Firefighters?

The Detroit News is highlighting ideas from various groups to promote discussion on reform, restructuring government and the economy.

Idea 2: Eliminate binding arbitration for municipal police and fire workers.

“Why: Public Act [312] is four decades old and prevents police and firefighters from going on strike by mandating that labor disputes be settled by third party, binding arbitration. Arbitrators do not take into consideration the financial status of local governmental units or their ability to pay the awards mandated by the arbitrators. Public safety costs amount to as much as half of an average city budget. Current law prevents money-saving consolidation of police and fire departments and can drive pension benefits to the point where, in some cases, retirement incomes are greater than wages when officers are still on the job.

Benefit: Economic studies estimate that removing binding arbitration could result in a 3 percent to 5 percent reduction in local government expenditures. Local governments in Michigan spent $2 billion on public safety in 2006. A 4 percent reduction would amount to annual savings of $80 million statewide. Not only would repealing Public Act 312 directly reduce costs to municipalities and help them manage their budgets, it would also provide flexibility to achieve efficient and cost-effective consolidation and collaboration among Michigan's 1,800 units of local government.

How: The state Legislature would have to repeal Public Act 312.

Obstacle: Public safety unions (such as the Michigan Association of Police, Michigan Professional Fire Fighters Union and Police Officers Association of Michigan) argue PA 312 does exactly what it was intended to do and this is prevent strikes. They also contend repealing PA 312 is an attempt to solve a problem affecting a small amount of municipalities with a statewide solution.

Sources: Business Leaders for Michigan and Center for Michigan. “

My Comments: We must all be thankful for our police and firefighters who risk their lives in serving us – in protecting our lives and properties. However, that does not mean we need to approve every demand that their unions make. While proper wage and benefits must be paid our public employees, PA 312 has resulted in unsustainable levels of compensation set by arbitrators without regard to the municipalities ability to pay, sometimes simply on the bald assertion that the municipality could always raise taxes.

The Michigan Municipal League has worked for months trying to get a compromise falling far short of complete repeal of the act and yet get greater consideration for the taxpayers' perspective. That faces as much opposition and political backlash as complete repeal, so I simply favor repeal.

There should be checks and balances in every governmental action. PA 312 takes away the taxpayers’ perspective. We must push for every cost control in government that we can, in light of the scarce dollars we have to spend. Increasing taxes to pay for exorbitant wages and benefits for even our most valued public employees in the face of an economic downturn is not only politically unpalatable, but also counterproductive in encouraging job growth in Michigan.

Comments?

Consolidate School Services? Districts?

The Detroit News is highlighting ideas from various groups to promote discussion on reform, restructuring government and the economy.

Idea 11: Intensify school district consolidation. Intensify school district consolidation and service sharing.

Idea 22: Slash school district bureaucracy. Save tax dollars and drive more money into the classroom for students and teachers by reducing excessive administrative overhead in K-12 education.

A law was passed a couple of years ago requiring each Intermediate School District (ISD, or RESA – regional educational service agency, as in the case of Wayne RESA) to prepare a report about potential service sharing opportunities that might save money. The idea was that consolidation of services, without actual consolidation of districts, might create possibilities of economies of scale, and therefore reduce the number of people required to perform many of the support services. Some of this has now occurred, most notable in districts consolidating payroll services and some districts sharing Business Managers. Big savings has not occurred, but every bit of greater efficiency helps.

Resistance to service sharing often comes legitimately because personnel in smaller districts perform multiple tasks. If one of the tasks is contracted out to the ISD, the other tasks still remain to be done. Sometimes, the position can be downgraded to a part-time position, other times it can’t. Until you eliminate the full or partial FTE’s (full time equivalents) of personnel at the local levels, no savings occur. Less defensible, but understandable, resistance comes from the fact that unless you can reduce staff by attrition, layoffs of good people who have become friends must occur, something no one wants to do.

Bottom line: voluntary service sharing will result in very small savings.

Consolidating districts into larger units is another idea promoted by the Detroit News. They mention two ways this might be done:

(1) Pass legislation (patterned after the federal military base closing commission) to establish a School District Streamlining Commission that would conduct public hearings and recommend to the Legislature a 50 percent reduction in the number of school districts from 552 to 276. The recommendation could not be amended and would automatically take effect unless rejected by both houses of the Legislature.

(2) Pass legislation (based on a concept by state Superintendent of Public Instruction Mike Flanagan) that would limit the role of the 552 school districts solely to academic purposes and require the immediate transfer and consolidation of all non-instructional responsibilities to the 57 intermediate school districts.

Either proposed legislation would need to incorporate changes to the Urban Cooperation Act (PA 7 of 1967) which acts as a disincentive to consolidate government entities. It practically requires any intergovernmental service sharing between entities to go to the highest wage and benefit level among the entities, as the act prohibits any employee from being harmed. In other words, all savings is wiped out and often costs would actually increase. That is why the push was to consolidate services via intergovernmental contract, rather than consolidation of entities. Amending the Urban Cooperation Act is promoted by the non-partisan Center for Michigan. See How to save Michigan's local communities.

I have mixed feelings about the consolidation proposals, but come out in favor of such proposals.

1. Voluntary methods are unlikely to work.
   
   
2. Local school district boards and superintendents cannot withstand the pressures from the unions to grant wage and benefits that the districts can’t afford. A more centralized board might.
   
   
3. The model is used in some other states where the school district is the entire county. In other words, opponents can’t attack this as “It will never work.”
   
   
4. Consolidating every district into the county may or may not make sense. After awhile in increasing size of an entity, you begin to have "dis-economies of scale", where instead of efficiencies, you get layer after layer of bureaucracy. Thus the Streamlining Commission approach has some merit, as the Commission could look at consolidation on a case-by-case basis and recommend consolidation only where it would appear to make sense.
   
   
5. On the other hand, a split between instructional and non-instructional services proposed in the Flanagan approach is tough to make. For example, increasing class sizes is one way to save money, but at the expense of educational goals. Similarly, instructional support personnel, such as parapros, can be a great help in the instructional program, but cost money.
   
   My theory while I worked as a school business manager was to look at the instructional goals, and the accompanying instructional strategies and tactics to achieve those goals, and budget around those, rather than try to fit whatever instruction can fit within a given amount of money. That derived from my bottom-line focus from private business management, and my realization that student achievement was the objective in schools.
   
   In short, the instructional objectives are so tied up in the financial decisions, that separating one from the other is almost impossible. Given this difficulty, I would lean in favor of complete consolidation, if the Urban Cooperation Act effects of actually raising costs can be avoided. In some cases, it might make sense to go all the way towards consolidation, and in other cases it might make sense to consolidate the support services of Business Office, Personnel, transportation, custodial, food service and technology support.
   
   
6. Local resistance will be tough, as the concept or “ideal” of local control runs deep in school government. Parents want to feel they have a say in the education of their children. Further, old loyalties die hard. “My granddaddy was an Eagle, my daddy was an Eagle, I was an Eagle, and by God, my kids will be Eagles!” can be heard more times than you care to hear.
   
   
7. Few elected officials will voluntarily give up their positions of power as school board members. For many, this is the most important thing they have ever done in their lives, and the "power" they feel they have is not easily relinquished.

We must push for every efficiency in government that we can, in light of the scarce dollars we have to spend. Increasing the school funding by raising taxes in the face of an economic downturn is not only politically unpalatable, but also counterproductive in encouraging job growth in Michigan.

Comments?