For months Lansing has known there was going to be a budget shortfall for the 2008 Fiscal Year. Since January for those of us who have been around long enough knew there were three items that needed immediate attention. The first was fixing the shortfall for the 2007 fiscal year. The second was finding a replacement for the Single Business Tax (which ends on December 31, 2007) and the third hurdle to jump was the shortfall in the 2008 fiscal year budget. Sometimes it pays to have been a fixture in Lansing for 22 years. At least you know what the major issues are going to be.

Months were spent working on finding a replacement for the Single Business Tax and in the end what was developed was the Michigan Business Tax. Your Government Relations team (Dawn Crandall and Lee Schwartz) spent many hours in meetings with Republicans and Democrats in the House and Senate to lesson the damage to your industry. Will you be better off under the MBT than the SBT – only time will tell. What we can tell you is the damage could have been much worse. We won't know the TRUE effects of the MBT on our industry until the tax bills go out. Please contact Dawn Crandall at the Michigan Association of Home Builders if there is a problem and she will work to correct it.

The second item to be fixed was the 2007 budget shortfall. And finally, what you have been reading about for the last week in the almost daily MAHB Updates from the Capitol* was the struggle to fix the 2008 fiscal year budget which went into effect on October 1, 2007. From day one the House Democrats have suggested the way to fix the problem was with revenue enhancements (read tax increases). Governor Granholm also sided with the House Democrats on tax increases being the best solution.

Senate Republicans believed the best way to solve the problem was through a series of budget cuts and reforms. For those of us who have been involved in Lansing for the last 22 years, we knew at the end of the day the "fix" would result in a mix of the three: revenue enhancements, reforms and budget cuts. The only decision left to make was what form those three items would evolve into.

Let's start with revenue enhancements (tax increases). This is what we know for sure. Beginning immediately (October 1, 2007) the income tax rose from 3.9 percent to 4.35 percent. In 2011 the income tax will begin rolling back 1/10 of a percent and in 2015 the income tax will be back at 3.9 percent.

The other tax increase signed into law is expanding the sales tax on services. Your Government Relations Team (Dawn Crandall and Lee Schwartz) spent tireless hours working with both parties and both chambers to keep the construction industry OFF the list of services to be taxed. The sales tax on services which have been signed into law begin on December 1, 2007. For a complete list of what will be taxed, go to www.buildingmichigan.org under Government Relations of the member's only page. If you have any questions, please contact Dawn Crandall.

The other piece of the puzzle deals with cuts to the budget. Part of the deal is there will be $440 MILLION dollars worth of cuts to the budget. The legislature has until November 1, 2007 to develop, approve and have signed into law. We have not seen a list as of yet. Stay tuned on this piece.

The final piece of the puzzle is the reforms listed below.

Public Employee Health Benefits

Public employee health benefits reforms address the skyrocketing cost of health benefits.

Ø The public employee health benefits reforms will save local governments an estimated $157 million annually, or 8 percent.

· Allows public employers to pool together on a self-insured basis to provide medical, dental and optical benefits coverage.

· Grants access to claims data to ensure accurate quotes.

· Requires employers to competitively bid their health benefits.

· Does not require public employers to join medical pools or require any changes in benefit coverage or benefit providers.

· Are supported by more than two dozen organizations, including the American Federation of Teachers and AFL-CIO.

Ø Keeps savings at the local level to be put back into the classroom.

School Employee Retirement Reforms for New Hires

Ø Reforms school employee retirement by moving new school employees to a graded health care system.

Ø Increases the contribution rate to the pension system for new employees.

Ø Allows for more school funds to be spent in the classroom.

Ø Estimated annual savings of $60 million.

Other Education Reforms

Ø Creating a common school calendar

· Requires all districts with an intermediate school district to use a common calendar.

· Will cut costs by making it easier to share services.

Ø Per-pupil expenditures report

· Requires school districts to publish an annual summary for parents on how much is spent per-pupil in their school district on salaries, benefits and other expenses.

· Will ensure more money makes it into the classroom.

Medicaid Reforms

Ø Encourages healthy lifestyles through healthy-living incentives.

Ø Controls long-term Medicaid health care costs.

Ø Keeps Michigan's safety net fiscally sound.

Government Efficiency

Ø Creates a nine-member, bipartisan government efficiency commission that will issue a report to the Legislature recommending ways to consolidate, streamline, and improve efficiency of state government services.

Ø Creates the Commission on Statutory Mandates, which would review and investigate by Oct. 1, 2008 various state mandates and reporting requirements imposed on local governments to determine the cost of these mandates and reporting requirements.

Double-Dipping Reform

Ø Freezes the retirement payments of a retired state employee if the individual is re-employed directly or indirectly by the state.

Your Government Relations Team will continue to represent you at the Capitol as we start working on issues to help bring home building back strong. We invite you to participate in our Economic Summit taking place at the Capitol on October 24, 2007. Details can be found at www.buildingmichigan.org or by contacting Dawn Crandall at 1.800.748.0432 at the MAHB office.

* If you don't receive email updates, send and email to Dawn Crandall at Crandall.dawn@mahb.com with your name, phone number and email address.