State Wide Ballot Proposals 

Primary Election                                                                                     August 6, 2002

Proposal 02-1
Compensation of Certain Elected Officials
 

Proposal 02-2
Investing State Funds for Natural Resources and Parks

On August 6, 2002, Michigan citizens will have the opportunity to vote on two statewide ballot questions. Each issue will ask for a YES or NO response, and each will be decided by a majority of those voting on the specific question. Voters are making these choices because Michigan's constitution gives citizens a direct role, through popular vote, in amending the constitution. Both issues were placed on the ballot by the legislature.

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Proposal 02-1
Official ballot language

A PROPOSAL TO AMEND THE PROVISION OF THE STATE CONSTITUTION GOVERNING THE OPERATION OF THE STATE OFFICERS COMPENSATION COMMISSION (SOCC)

The proposed constitutional amendment would: 
Add Attorney General and Secretary of State to list of state officials whose salaries and expense allowances are determined by the SOCC. The list currently includes the State Legislature, Governor, Lieutenant Governor and Supreme Court Justices. 

Require the legislature to approve by majority vote any salary and expense allowance determinations proposed by the SOCC before determinations go into effect.  Currently, the SOCC’s determinations go into effect unless rejected by a 2/3 vote of the legislature. 

Allow legislature to reduce compensation increases proposed by the SOCC. 

Provide that the SOCC’s salary and expense determinations would take effect after the next general election. 

Should this proposal be adopted?

YES______        NO______
 

Compensation of 
Certain Elected Officials

Proposal 02-1 deals with how salaries are determined for certain public officials. This ballot issue would amend Article IV, Section 12, of the state constitution, requiring that the legislature vote to approve or disapprove or change the salary and expense recommendations from the State Officers Compensation Commission (SOCC). The basic question with this ballot issue is whether it is preferable to require the legislature to vote on the SOCC salary and expense determinations (a yes vote) or to leave the process as it is now, with the legislative vote being optional (a no vote).

Background

Controversy over the salary recommendations from the State Officers Compensation Commission in December 2000 led to the legislative decision to place this issue on the ballot for the 2002 primary election. A two-thirds vote of each house of the legislature is needed to place a proposed constitutional amendment on the ballot. House Joint Resolution E was approved by the House (104-0) and the Senate (33-0) in December 2001.
 


 
 
The State Officers Compensation Commission was established in1968 when Michigan voters approved the addition of Section 12, Article IV, to the constitution. Prior to that amendment, the legislature had been required to set salaries and expense levels by passing a law, subject approval or a veto from the governor. The 1968 amendment specifies that the SOCC will establish the salaries and expenses for the governor, the lieutenant governor, members of the legislature and the justices of the state Supreme Court. The commission’s recommendations will take effect unless the legislature decides, by a two-thirds vote in each house, to reject the proposal.

The 1968 amendment provides for a seven-member commission, appointed by the governor. Implementing legislation specifies that:
SOCC members can be appointed for only one four-year term. Expenses are paid for members, but they receive no salary.

The commission can meet for no more than 15 days after July 1 of even-numbered years. It must file its recommendation during December of that year.

The recommendation takes effect on January 1 of odd-numbered years. The legislature is not required to vote on the SOCC determination. If it does vote, two-thirds of each house must agree to reject the proposal. This rejection must occur by February 1.

The legislature can reject the entire proposal or just the recommendations for specific positions.

The commission has developed a set of criteria to help with its decision making (Legislative Service Bureau Report, January 2001). Members take into account the level of inflationary adjustment, salary comparisons with similar positions in other states and positions with similar responsibility in the private sector, cost-of-living data and the state’s current financial 
 

 

outlook. The commission also considers the public comments from correspondence and public hearings.

The SOCC recommendations have been controversial at times during the past 34 years. In 1991, the legislature voted to reject the proposal in the midst of a downturn in the state’s economy. In 2000, the SOCC members believed that the salary levels were inadequate compared to positions with similar responsibilities. They also felt that the salaries did not reflect economic growth through the years. The recommended salary increases for 2001 included 13.7 percent for the governor ($175,000) and 35.8 percent for legislators ($77,400). The commission recommended a 2.9% increase for all positions in 2002. After considerable public discussion, the SOCC determination was rejected by the House. The Senate did not vote on this proposal, so the commission’s recommendations went into effect, retroactive to January 1, 2001.

Twenty-one states have a compensation commission to help determine legislative salaries, according to the Legislative Service Bureau Report. In some states, the commission’s role is advisory, and the legislature makes the determination. The commission has complete control over setting compensation levels in five states, and in five other states, the commission operates the way it does in Michigan.

The Proposal

If Proposal 02-1 is approved by voters, the legislature will be required to vote on all future salary and expense determinations that are made by the State Officers Compensation Commission. This proposal would amend the state constitution in these ways:

Expand the positions covered by the SOCC determination to include the attorney general and secretary of state. These salaries are now set by the legislature as part of the regular budget process. 

Require the legislature to vote on the recommendation made by the SOCC. A majority vote would be needed to approve the commission's recommendations.


 
Currently, the legislature is not required to take a vote, and if they do, a two-thirds vote is needed to reject the recommendations.  The House and Senate would alternate introducing the concurrent resolution for debating the proposal. 

Change the timeline so that the SOCC recommendations would not take effect until the next legislative session. Currently, the SOCC determinations and the need for a vote come at the beginning of a legislative term (in January of odd-numbered years).

Allow the legislature to reduce the salary and expense recommendations by the same proportion for all positions. However, the legislature could not set levels lower than they were when the SOCC determinations were made. It also could not increase the salary and expense levels.

Make it possible for the legislature to approve legislation that outlines qualifications for members of the State Officers Compensation Commission (e.g., experience in compensation).

Policy Discussion

Establishing the salary and expense levels for public officials is a complex and often controversial undertaking. The responsibilities and public expectations for these positions are different from other occupations, and the length of employment is limited for some positions. Since the State Officers Compensation Commission was established in 1968, criticism has periodically surfaced over the fact that the legislature is not required to vote on the salary and expense determinations. This means that the recommendations take effect automatically unless the legislature decides to vote. The timing of the SOCC recommendations means that, if a vote is scheduled, newly elected legislators are voting on their compensation levels in their first month in office. There has also been criticism because the legislature cannot make any changes in the recommended salary and expense levels. In addition, critics have questioned the lack of any definition of qualifications for SOCC members.
 
 

 

The argument in favor of this proposal is that requiring the vote makes the legislature take responsibility for accepting or rejecting the recommended compensation levels. This appears to provide more opportunity for legislators to respond to public sentiment concerning the recommendations. The ability to reduce the recommendations is also seen as an argument for this proposal.

Concerns have been raised about whether requiring the legislative vote means that the same factors that influence the public perception of legislative pay levels apply to the other public officials. Some have questioned whether it would be better to do away with the State Officers Compensation Commission and make the legislature totally responsible for the decisions on salaries and expenses. Others argue that perhaps there should be an independent commission, with the legislature having no role.

Sources:

-- Citizens Research Council of Michigan, State Ballot Issues on the August Primary Ballot, June 2002
-- Enrolled House Joint Resolution E
-- Gongwer News Report, June 11, 2002
-- House Legislative Analysis of HJR E
-- Michigan Legislative Service Bureau, Compensation of Michigan Legislators, January, 2001
-- Senate Fiscal Agency, 2002 Determination of the State Officers Compensation Commission, by Bill Bowerman, December 2000



Proposal 02-2
Official Ballot Language

A PROPOSAL TO ALLOW CERTAIN PERMANENT AND ENDOWMENT FUNDS TO BE INVESTED AS PROVIDED BY LAW AND INCREASE ALLOWED SPENDING FOR STATE PARKS, LOCAL PARKS AND OUTDOOR RECREATION

The proposed constitutional amendment would:
Allow certain permanent and endowment funds, including Natural Resources Trust Fund, State Parks Endowment Fund and Veterans Trust Fund, to be invested as provided by law, eliminating prior restriction on investing in stock.
 


 
Increase Natural Resources Trust Fund cap on assets from $400 million to $500 million. 

Allow the Natural Resources Trust Fund to continue to annually expend up to 33-1/3% of Fund royalties or other revenues, up to a new asset cap of $500 million. 

Increase allowed State Parks Endowment Fund spending to include interest and earnings and up to 50% of funds received from Natural Resources Trust Fund.

Should this proposal be adopted?

YES______        NO______



Investing State Trust Funds for Natural 
Resources and Parks
 

Proposal 02-2 would make it possible to invest monies in the Natural Resources Trust Fund and the State Parks Endowment Fund in the stock market to increase the resources available to purchase more state lands and improve state parks. This ballot issue would amend several sections of Article IX of the state constitution. Both houses of the legislature approved Senate Joint Resolution T, thus placing the issue on the ballot. Legislation that would help implement this proposal has also been approved by the legislature (Senate Bills 796, 798-801).

Background

In 1984, voters approved a ballot proposal to place Section 35, Article IX, in the state constitution, creating the Michigan Natural Resources Trust Fund. This fund had been established by the legislature in 1976 (Kammer Trust Fund), but the revenues had been used for a variety of other purposes during tight economic times. Proponents of Proposal B in 
 

1984 felt that that a constitutional guarantee was necessary to ensure the use of these funds for acquiring and maintaining public lands.

The Michigan Natural Resources Fund receives revenues from mining operations on state-owned lands as well as revenues from specified oil and gas drilling leases. Implementing legislation (P.A. 101, 1985) specified that in each fiscal year one-third of the revenues from mineral leases, plus interest and earnings from the trust fund can be spent to acquire land for recreational purposes, environmental protection or scenic value. At least 25 percent of the monies available to be spent each fiscal year must be used to acquire land and no more than 25 percent can be used for recreational purposes. Grants are provided to local governments and public authorities, requiring a local match of at least 25 percent. Trust fund monies are also used to make the annual payment in-lieu of taxes to local units of government. 

In 1994, voters approved a ballot proposal to place Section 36(1), Article IX, in the state constitution, creating a long-term funding mechanism for the operation of state parks. This proposal ended the diversion of monies from the Natural Resource Fund for economic development purposes. It specified that those dollars would instead be directed to the parks endowment. The constitutional amendment established an $800 million cap on the endowment fund, estimated to take at least 40 years. The State Parks Endowment Fund annually provides monies to extend programming in parks, improve security, and increase maintenance and repairs.

The Proposal

Proposal 02-2 would allow the state potentially to raise more money that could be used for environmental and recreational purposes. It would also change current limitations on the Natural Resources Trust Fund and the State Parks Endowment Fund.
 


 
Investing State Monies—

The constitution now prohibits the state from holding stock in any corporation, company or association. Retirement funds for state employees and public officials, and also educational and charitable endowments, are exempted from this prohibition. Proposal 02-2 would amend Sections 19, 35, 36 and 37 of Article IX, removing the prohibitions on investing state funds in stocks for state permanent and endowment funds. Legislation has been passed that will take effect if Proposal 02-2 is approved by voters. It would specifically make it possible for the state treasurer to invest in the stock market monies from these six funds: Natural Resources Trust Fund, State Parks Endowment Fund, Veterans Trust Fund, Nongame Fish and Wildlife Fund, Game and Fish Protection Fund and the Michigan Civilian Conservations Corps.

The Michigan Natural Resources Trust Fund—

This proposal would amend Section 35 of Article IX to increase the cap on assets from $400 million to $500 million. When the trust fund reaches the cap, all of the revenues will be placed in the parks endowment. Proposal 02-2 also provides that one-third of the revenues could be appropriated annually until the fund contains $500 million in assets. The constitution currently specifies that when the trust fund principal reaches $200 million, only interest can be spent. The principal balance for the Michigan Natural Resources Trust Fund was $182 million at the end of fiscal year 2001.

According to figures from the Michigan Department of Natural Resources, 80 percent of the funds available to be spent in 2001 were used to acquire land (10 grants for $30 million) and pay administrative costs. Twenty percent of the available funds provided 31 recreation development grants, totaling $7.4 million. 

The State Parks Endowment Fund— 

This proposed amendment would allow monies in the endowment to be spent for acquiring 

state park land as well as continuing to pay for maintenance, operations and capital improvements. Under present constitutional requirements, the State Parks Endowment Fund annually receives $10 million from the Michigan Natural Resources Trust Fund. It is allowed to appropriate $5.0 million each year, adjusted annually for inflation ($7 million in 2001). Proposal 02-2 would amend Section 36 (renumbered as Section 35a) to specify that the parks fund can appropriate interest and earnings plus 50 percent of the annual revenues from the Natural Resources Trust Fund.

Policy Discussion

Supporters of placing Proposal 02-2 on the ballot this year feel that it is important to spend more money to improve state parks and to purchase state lands. Giving the state treasurer the ability to invest the assets of the trust funds in the stock market is seen as a way to more quickly increase the monies in these funds. The House Fiscal Agency (11-2-01) estimates that if the funds are invested in a manner similar to the retirement funds, they would earn about 6.5 percent more each year. The proposal also increases the maximum amount that can be withdrawn and spent. A coalition of business and environmental groups announced support for this proposal.

At this writing, no organized groups have been identified in opposition to the proposal. However, concerns have been raised about the wisdom of investing the assets from these funds in the stock market. There are questions about the volatility and uncertainty of the market, including possibilities for fraud and corruption. Some people are against the acquisition of any additional state land, arguing that more land should be in private rather than public ownership. Questions are also raised about the idea of spending more each year from the parks endowment, thus slowing the accumulation of principal.
 
 
 
 

 


 
Sources:

-- Citizens Research Council of Michigan, State Ballot 
    Issues on the August Primary Ballot, June 2002
-- Enrolled Senate Joint Resolution E
-- Gongwer News Report, June 14, 2002
-- House Legislative Analysis of  SJR T
-- Michigan Natural Resources Trust Fund, 2001 
   Annual Report, January 2002
-- 1984 Statewide Ballot Proposals, MSU Extension,
   Elizabeth Moore
 

-- 1994 Statewide Ballot Proposals, MSU Extension, 
    Elizabeth Moore
-- Senate Fiscal Agency Analysis of  SJR T, 11-1-01

This bulletin was prepared by:

Elizabeth Moore 
Extension Specialist, Public Policy Education, Michigan State University
 

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