Clean Water, 3% Withholding and Unemployment Insurance Reform Among Recent Legislative Action
Friday, April 29, 2011
Clean Water Programs See Federal Cuts
There has been final action on the federal FY 2011 Clean Water Appropriations bill and the infrastructure programs saw cuts in funding.
According to the final bill, the Clean Water SRF will be $1.5 billion and the Drinking Water SRF will be $965 million. The initial proposed funding levels in the House budget called for $590 million in Wastewater SRF and $643 million in Drinking Water SRF.
What does this mean for Michigan? The state will see a reduction from $83 million last year to $63 million on the State Revolving Fund and a reduction of the Drinking Water Revolving Fund from $41 million to $28 million. Because MITA negotiated a deal last year with the MI Department of Environmental Quality to spend at least $259 million on SRF projects in 2012, the state will be forced to make up any federal shortfall. As a result, contractors should see a slight uptick in our water and sewer programs for next year, despite federal cuts.
3% Withholding on Federal Contracts Set to Take Effect in 2012
A federal law passed by Congress in 2006 requires public owners to withhold 3% of every payment to contractors beginning in 2012 in order to ensure they are paying their federal taxes in a timely manner. The contractors will receive credit for these payments after they file their quarterly taxes. This requirement will apply to most federally funded projects.
MITA believes this will be a hardship to contractors because it requires them to withhold 3% of subcontractor payments. MITA is working with ARTBA and others on the national level to get a change before the law is implemented in January. Legislation introduced in Congress to repeal this law will be one focus of this year’s Washington Fly-In.
Changes to MI Business Taxes Move Forward
The proposal to scrap the Michigan Business Tax in favor of a 6 percent profits tax for "C" corporations is one step closer to reality, passing the House this week on a 56-53 vote. MITA is once again asking industry financial experts to review the legislation and offer any feedback before final policy decisions are made.
When the original MBT was created in 2008, MITA successfully worked to amend the legislation, creating a tax deduction for material costs and subcontract costs from the gross receipts portion of the tax. These changes saved the industry hundreds of millions of dollars a year. While industry efforts were successful in 2008, it is much more difficult to make changes once tax proposals are signed into law. Your feedback is needed promptly.
A copy of HB 4361 can be found by clicking here. A copy of HB 4362 can be found by clicking here. A legislative analysis can be found here.
Send feedback to Keith Ledbetter, MITA director of legislative affairs at
Chamber Study Identifies $550 million in Unemployment Reforms
This week the MI Chamber of Commerce released a study that proposed reforms to the state’s unemployment insurance system, in an attempt to lower costs on the state’s job providers.
Conducted by the nationally recognized experts at The Lucas Group in Boston, the study found that Michigan’s high unemployment rate explains only about 18 percent of Michigan’s UI problems. In fact, after factoring out the impact of the state's high unemployment rate, Michigan's UI trust fund is still $2.5 billion below where it should be.
The study identifies legislative and administrative changes that will begin to eliminate the debt incurred and put Michigan’s employer-financed UI program on the road to long-term solvency. Because UI taxes vary from state to state and Michigan’s average tax rate on total wages are already 47 percent higher than the US average, the study identifies solutions that aren’t focused on higher taxes on job providers. The Lucas Group identifies ways to strengthen the UI program and eliminate the debt, without creating new impediments to hiring and economic growth. Key areas suggested for reforms include:
· Fraud and overpayments
· Work search
· Seasonal employer definition
· Suitable work requirements
· Disqualification for misconduct
· Waiting week period
· Annual income formula to compute weekly benefits
Taken together, the recommendations have the potential to provide $350 to $500 million in annual savings to Michigan’s employer-financed UI program.
Currently, Michigan’s $3.9 billion debt for its employer-financed UI program is the largest per capita debt in the nation -- and the state’s total debt is the second highest in the nation, behind California ($10 billion). Without reforms, Michigan job providers’ total additional tax burden will increase over the next decade to repay the nearly $4 billion Michigan’s UI system owes to the federal government debt -- plus up to $1 billion interest.
We look forward to using this study to work with the Legislature and the Snyder administration over the coming weeks and months to overhaul the system and offset the need for additional taxes, thereby allowing job providers to redirect their financial resources to rehire those currently receiving assistance and create more jobs statewide.
A copy of the Lucas Study can be found by clicking here.
Reprinted in part with permission from the MI Chamber of Commerce.
For questions, comments or more information about any of these areas, feel free to contact Mike Nystrom at firstname.lastname@example.org, Keith Ledbetter at
email@example.com or call the MITA office at (517) 347-8336