Capital News Service

of the Michigan State University School of Journalism

CNS budget – Oct. 23

To: CNS Editors

From: Eric Freedman & Vic Rauch

For technical problems, contact CNS Webmaster Tricia Bobeda (

ENERGY, LABOR & ECONOMIC GROWTH AHEAD: On Monday, Oct. 26, your correspondents will interview Stanley “Skip” Pruss, director of the Department of Energy, Labor & Economic Growth. Possible topics include alternative energy, economic development, worker safety (and whether employers are taking shortcuts in tough economic times), impact of undocumented workers, and geographic and/or career areas with a shortage of qualified workers.


MINORITY: The proportion of African-American, Hispanic and Native American students at the University of Michigan has been dropping, a trend that affirmative action advocates blame on Proposal 2. The impact varies elsewhere—at Michigan State, Wayne State, Central Michigan and Eastern Michigan universities. A Detroit lawyer and the attorney general’s office discuss a Nov. 17 federal appeals court hearing on Proposal 2’s constitutionality. By Quincy Hodges. FOR MICHIGAN CITIZEN, LANSING, OAKLAND, MACOMB, ROYAL OAK, CLARE & ALL POINTS.

TEENDATINGVIOLENCE: Middle and high schools should teach students how to handle dating violence, some legislators say. Teens are often reluctant to report incidents to adults. We interview the White Pigeon and Constantine superintendents and the Michigan Education Association. Sponsors are from Ann Arbor, Leland, St. Clair Shores, Detroit, Brownstown, Bay City, Salem Township, Lansing and Royal Oak. By Hyonhee Shin. FOR THREE RIVERS, STURGIS, SOUTH BEND, MICHIGAN CITIZEN, MACOMB, OAKLAND, ROYAL OAK, TRAVERSE CITY & ALL POINTS.

FOSTERCARESMOKERS: Foster parents who smoke could lose a bit  of their state subsidy under a proposal by senators from Texas Township and Saugatuck. They say the state has a duty to protect foster children from the health hazards of secondhand smoke. We hear from the American Lung Association and Department of Human Services. By Adam DeLay. FOR SOUTH BEND, HOLLAND, MICHIGAN CITIZEN & ALL POINTS.

UTLITYFORECLOSURES: A Detroit lawmaker wants to prohibit municipal utilities from foreclosing on homes due to unpaid electric, sewer and water bills. Most foreclosures are based on delinquent mortgages or taxes. An Alpena-based housing advocacy group that serves Cheboygan County says a related problem is that tax penalties are tacked on when delinquent city utility bills are transferred to the counties for collection. The Association of Counties warns that the resulting loss of revenue would increase bills for other ratepayers. By Caitlin Costello. FOR ALPENA, CHEBOYGAN, MICHIGAN CITIZEN, GRAND RAPIDS BUSINESS & ALL POINTS.

DISTRICTCONSOLIDATION: A draft commission report recommends empowering the state schools superintendent to require consolidation of local districts to save tax money. A Legislative Commission on Government Efficiency member said districts are unlikely to consolidate—even to save money—on their own because of local interests. Officials from the Manistee and the Mason, Lake and Oceana intermediate districts talk about the proposal. The Education Department says forced consolidations would be a last resort, preferring consolidating services among districts. By Jordan Travis. FOR LUDINGTON, CADILLAC, LANSING & ALL POINTS.

BIGBADBUGS: Asian longhorned beetles and sirex woodwasps and hemlock wooly adelgids – Oh my! Three invaders spotted in Ohio could soon ravage Michigan, and that could prove disastrous. Sirex has been found already in Macomb, Huron, St. Clair and Sanilac counties, and an adelgid infestation was eradicated in Harbor Springs. The Michigan Nursery and Landscape Association in Okemos and Michigan Timbermen’s Association in Newberry are worried, noting the devastating economic impact of an earlier invader, the emerald ash borer. By Emily Lawler. FOR MACOMB, LAPEER, PETOSKEY & ALL POINTS.

w/BIGBADBUGLONGHORNEDBEETLEPHOTO: Asian longhorned beetle. Credit: University of California Riverside.

w/BIGBADBUGSIREXWOODWASPPHOTO: Sirex woodwasp. Credit: Maine Department of Agriculture.

GREENSCHOOLS: New legislation would bolster efforts to encourage “green schools.” About 500 are now “green” statewide. We hear from school officials in Oakland, Macomb and Livingston counties, and advocacy organizations based in Howell, Brighton and Escanaba. Sponsors are from Huntington Woods, Detroit and Howell. By Nick Mordowanec. FOR MACOMB, OAKLAND, ROYAL OAK, MICHIGAN CITIZEN, LANSING, MARQUETTE & ALL POINTS.

FORECLOSURESCAMS: In the minds of home foreclosure scamsters, desperate times call for fraudulent measures. With Michigan ranking eighth nationally in foreclosures, fraudsters can find rich pickings in the state, the Office of Financial and Insurance Regulation and Michigan Foreclosure Task Force warn. An Oakland County nonprofit group counsels families facing loss of their homes. Senate Democrats want to take curb unscrupulous practices. By Vince Bond Jr. FOR GRAND RAPIDS BUSINESS, MICHIGAN CITIZEN, OAKLAND, ROYAL OAK, LANSING & ALL POINTS.

PAYGO: Michigan could get a better handle on its budget by adopting a pay-as-you-go – or PAYGO – approach, some policy experts say. The head of the House Appropriations Committee, from Detroit, likes the idea, but the concept is likely to run into strong partisan opposition. By Nick Mordowanec. FOR LANSING, GRAND RAPIDS BUSINESS, MICHIGAN CITIZEN & ALL POINTS.

MARINAPERMITS: A bill awaiting the governor’s OK would eliminate the need for owners of docks, piers and similar structures to renew existing permits, a move intended to save money for the Department of Environmental Quality and backed by the boating industry. New or expanded “mooring structures” would still need permits. The Tip of the Mitt Watershed Council in Petoskey and Michigan Boating Industries Association in Livonia support the change. Only three lawmakers from St. Clair Shores, West Bloomfield and Detroit opposed it. For news and outdoors desks. By Mehak Bansil. FOR OAKLAND, MACOMB, PETOSKEY, ROYAL OAK, TRAVERSE CITY, CHEBOYGAN, CADILLAC, CLARE, GALDWIN, GREENVILLE, HOLLAND, LUDINGTON, SOUTH BEND & ALL POINTS.

ALTERNATIVEENERGY: From Wixom and Muskegon to Detroit to Orion, Michigan researchers are diving into alternative energy. They include universities such as Wayne State, Grand Valley, Lawrence Tech and Michigan Tech, companies like United Solar Ovonic, DTE and Cobasys, and organizations such as NextEnergy and the Michigan Alternative and Renewable Energy Center. For news and business desks. By Mehak Bansil. FOR OAKLAND, LUDINGTON, ROYAL OAK, MICHIGAN CITIZEN, GRAND RAPIDS BUSINESS, GREENVILLE, MARQUETTE, MACOMB & ALL POINTS.



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Foreclosure scams prosper in hard times

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Capital News Service

LANSING- In the minds of home foreclosure scam artists, desperate times call for fraudulent measures.

With Michigan ranking eighth in the country in foreclosures, anxious homeowners who feel short on options are ripe for the picking by opportunistic scammers.

According to a report, one in every 122 properties in the state received foreclosure filings in the third quarter of 2009.

Banks repossessed 14,997 homes, owners of 11,454 properties received default notices and owners of 10,575 properties were sent notices of sale.

In total, the state had 37,026 foreclosure filings during the period, the report said.

Homeowners in danger of foreclosure should tread carefully if they receive unsolicited mailings from companies claiming they can save their homes, said Jason Moon, public information officer with the Office of Financial and Insurance Regulation (OFIR).

“Scam artists are trying to take advantage of people in desperate times,” Moon said. “If it seems too good to be true, it probably is. We encourage consumers to get their guard up.”

A scam artist begins the courting process by sending a letter to an at-risk homeowner offering to negotiate with a lender or handle payments for a fee.

If the owner responds and pays the fee, the fraudster may then ask the owner to sign over the deed while staying there as a renter.

Moon said schemers give owners false hope by telling them their houses will be sold back to them once the situation is rectified.

Instead, scammers obtain a new mortgage at a higher rate and cash in on the home’s equity.

They then disappear without making mortgage payments or even calling the mortgage company or bank.

Meantime, homeowners think everything is under control until they discover that no payments have been made, Moon said.

“In some cases, the company never existed. You pay money for a service that is never performed,” Moon said.
OFIR receives about 500 calls a year regarding foreclosure fraud.

The money homeowners pay fraudsters could help pay for transitional housing, said Lisa Nuszkowski, co-director of the Michigan Foreclosure Task Force.

“All kinds of companies have sprouted up,” Nuszkowski said. “It’s the worst kind of fraud. It’s a tragedy.”

The Foreclosure Task Force is a statewide collaboration of legal services attorneys, financial institutions and foreclosure prevention counselors that educates homeowners and assists families in danger of losing their homes.

Victims of fraud may end up turning to nonprofit organizations such as the Lighthouse of Oakland County for help.

Greg Sterns, the organization’s manager of financial education and counseling, said nearly 1,900 people attended its foreclosure seminars or took part in one-on-one counseling services in the past year.

Before this year, most clients sought help because they couldn’t afford the rising interest rates of their mortgage.
Nowadays, job losses are forcing people out of their homes, Sterns said.

The seminars include presentations to around 20 to 25 families about available options.

In one-on-one sessions, counselors help people reassess their budgets while planning their next moves.
A successful case isn’t always defined by whether a person keeps his or her home.

Sometimes, helping people “make the transition” to new housing is the best result, Sterns said.
The organization helped 282 county residents keep their homes last year.

“I think it’s extremely effective,” Sterns said. “It’s a very intensive process.”

Tom Lenard, communications director of the Senate Democratic Caucus, said the party has prepared legislation to halt “foreclosure consultant” scams.

The bills would “establish basic qualifications and regulations,” for mortgage companies and “require companies to notify homeowners when a lender sells their mortgage to a third party.”

Lenders also will have to post their foreclosure and loan modification criteria online.

Those struggling with stressful foreclosure proceedings shouldn’t have to worry about someone trying to take advantage of them, Lenard said.

© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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Consolidation just one option in money saving plan for schools

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Capital News Service

LANSING – School district consolidation might be required if legislators follow the draft recommendations of the Legislative Commission on Government Efficiency.

Its report, which is expected to be released before the year’s end, proposes that the state superintendent of public instruction be authorized to mandate school district consolidation to save money.

Martin Ackley, the director of communications for state Superintendent Mike Flannigan, said consolidations would be a last resort. Rather, he said, the superintendent would continue to focus on saving money through consolidating services among districts.

Ackley said that although the new education budget calls for significant cuts in state aid, the Department of Education is working to lessen the impact by giving more flexibility to districts that consolidate services.

“We’re working on parameters now, what we would want to see if the district did commit to consolidating services,” said Ackley.

Consolidation is one of many ideas in the report intended to save the state money in the long term. Titled “Charting a Way Forward,” the report seeks to promote stability through streamlining state institutions.

Mitch Bean, director of the House Fiscal Agency and a commission member, said the goal is to give responsibility for district consolidation to someone with expertise, and the state superintendent was determined to be the best choice.

Consolidation likely wouldn’t happen voluntarily because too many local interests don’t want their local schools to disappear, he said.

Don Wotruba said districts currently merge only if enough residents agree. The deputy director of the Michigan Association of School Boards, said many residents feel that schools give a community identity, and don’t want to lose that.

The association doesn’t oppose considering consolidation, said Wotruba, however, “if a consolidation was mandated, we probably would have an issue with that.”

The state superintendent would need to work with the affected districts in a way that would keep education and efficiency in mind, he said.

Although Robert Olson, the Manistee Area Public Schools superintendent, said he isn’t fully aware of the commission’s proposal, but is concerned about financial differences among districts.
Mismatches among state aid, taxes and district debts might make a consolidation impractical, he said.

His district had looked at merging with Onekama Consolidated Schools in the past, but the state stopped the move over concerns about aid, he said.

“We’re always open to new ideas,” he said. “We just need some answers to do it.”

The draft report also proposes financial to intermediate school districts that consolidate services among their local districts. Services such as transportation and accounting would be shared in an effort to cut spending.

Lawrence Lloyd, the superintendent of Mason, Lake and Oceana county intermediate school districts, said. “I think it’d be wonderful.”

“Collaboration does cost money,” he said. “It does cost money to get these things moving.”

One example is student software used across the three counties. Financial software is also being introduced for the local schools, he said.

© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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How green is your school?

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LANSING – While issues like global warming and air pollution dominate public attention on the environment, some Michigan schools are at the forefront of making environmental changes a reality.

Under a Senate proposal, schools across the state would have the opportunity to be designated as “green.”
The bill would create three levels: green, emerald and evergreen. To achieve a ranking, schools would need to complete a range of activities, such as operating waste-free lunch programs, teaching about alternative energy and composting food and organic wastes.

The number of points earned from enviro-friendly activities would determine a school’s level.

The state’s current green program started in 2006 with 18 schools and now has close to 500 participants. Schools in Wayne, Oakland and Macomb make up the majority of the total number of official green schools in the state.

“Some schools have been asking for more eco-activities and learning opportunities, so we’re adding additional points to the existing law,” said Kristine Moffett, program administrator for Michigan Green Schools, a nonprofit agency initiated by students and teachers in the Hartland Consolidated Schools in Livingston County. “Michigan is one of a handful of states to have an official green school program.

“We also are adding two higher levels of achievement since some schools want to do more than 10 points for official certification during an academic year. The Michigan Green School Foundation feels we should support that,” Moffett said.

Another organization, Michigan GREEN (Group for a Renewable Energy Efficient Nation), based in Brighton and Escanaba, says too many schools need to “be more aggressive about reducing their energy consumption and lowering their utility bills.”

Douglas Russell, its executive director, said, “We’ll continue to keep our focus on getting projects done that result in the installation and utilization of more energy-efficient technologies.”

Not all school officials are keen on the new Senate proposal to use a new point system to designate elite “green” institutions.

Patti Dib, a “green” coordinator from the Macomb County Intermediate School District, said the meaning of “green” is vastly different in various counties, depending on their size and activities.

The Southeast Michigan Green Schools Initiative was instituted to help Wayne, Oakland and Macomb counties, the three most populous , develop their own versions of “green” schools.

“As a region, we are somewhat concerned that spelling out specific ‘green’ activities in the law is too limiting and the activities may not address what is appropriate for counties all over the state,” Dib said.

In Macomb, 44 schools achieved green status.

Many schools in Macomb County run recycling programs, collect funds for endangered species, follow energy efficiency practices, turn lights off during non-use times and plant native gardens.

The three-county program “is a win-win,” said Debby Dunn, project coordinator of capital and building projects and facility operations at the Oakland County Intermediate School District. “It helps the districts save money, and they get the recognition for doing activities many of them have already done for years.”

Oakland currently has 98 designated “green schools,” and Dunn said the goal for the current school year is 200.
The bill is sponsored by Sens. Valde Garcia, R-Howell, Hansen Clarke, D-Detroit, and Gilda Jacobs, D-Huntington Woods. It has been referred to the Committee on Natural Resources and Environmental Affairs.

© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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Bill would ban foreclosures for unpaid utility bills

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LANSING— New legislation could alleviate one source of home foreclosures—delinquent municipal utility bills.

But, the number of foreclosures caused by delinquent municipal utility bills is very low, said Bill Anderson, legislative liaison for the Michigan Townships Association.

When homes go into foreclosure it’s usually for multiple reasons, and most of the overdue money is normally owed to banks and lending institutions, not to the local government, said Anderson.

Although foreclosures because of delinquent water, sewer and power bills are “pretty infrequent,” he said, “at the same point, we don’t want to encourage people to think, oh well, I’m just not going to pay my utility bill.”

If a homeowner simply refuses to pay a bill for whatever reason, counties should still be able to take measures to collect the debt, Anderson said.

Rare situations, like a toilet running for a month, could result in an extremely high sewer and water bills, he said. But most of the time when such things happen, a city treasurer can work with a resident to spread the amount owed over several payments, Anderson said. In large metropolitan areas, however, that’s harder to do and the legislation could help, he said.

Just one foreclosure because of delinquent utility bills is one too many, said Rep. Bettie C. Scott, D-Detroit, the bill’s sponsor.

“Fees are hard for taxpayers to pay already. They should not be additionally burdened by taxes,” she said.

She noted that additional fees are added to delinquent utility bills as well, which would hurt residents.

Michelle LaBar, housing specialist and foreclosure counselor for Northeast Michigan Affordable Housing, a nonprofit organization based in Alpena, said, “After time, delinquent city utility bills are transferred to the county, counties are then responsible for collecting the money owed, including property taxes on the delinquent bill.”

Its service area covers 11 counties, including Cheboygan, Presque Isle and Otsego.

LaBar said there have been no incidents of delinquent utility-based foreclosures in the area recently, but with the economy not improving, that doesn’t mean it won’t happen.

However, losing the tax penalty could hurt local governments and other users of utilities, said Thomas Hickson, director of legislative affairs at the Michigan Association of Counties.

“There is a flat cost to providing utility services, and if that cost is not paid the burden will spread to local government and other homeowners,” he said.

He said the Legislature needs to maintain tools to allow local governments to still collect delinquent payments.

That’s what Scott said she intends to do.

“My bill is not against cities or counties. It will assist them. None of us benefit when homes are foreclosed on, and we have a duty and obligation to protect our residents and homeownership,” she said.

© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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Researchers eye alternative energy opportunities

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LANSING—Alternative energy: As one of the leading manufacturing states, Michigan isn’t idling on the road’s shoulder.

“We see this opportunity to diversify in manufacturing as a way to transform Michigan and the Midwest to be able to go from a rust belt to a green belt,” Gov. Jennifer Granholm said.

The shuttered Ford Motor Co. Wixom plant is undergoing renovation to make batteries, turbines and solar panels, but Michigan also has long-established alternative energy companies.

For example, battery manufacturer Cobasys is based in Orion and solar-energy panel manufacturer United Solar Ovonic has facilities in Rochester Hills, Auburn Hills, Greenville and Battle Creek.

“Cobasys is pleased to be part of Michigan’s growing leadership role in alternative energy research, development and manufacturing,” said Ray Wagner, vice president of marketing and communications. “Our energy storage solutions and engineering teams are enabling hybrid electric vehicles and have the potential to revolutionize emergency back-up power.”

While Cobasys’ nickel metal hydride battery is an improvement on a gasoline-powered engine, it’s not the final step for Michigan researchers.

For example, Professor K. Y. Simon Ng, director of alternative energy technology at Wayne State University’s College of Engineering, received a $2 million state grant for biodiesel fuel development.

Ng said he hopes to solve many of the problems that have made biodiesel a previously unviable fuel source, such as using bio-based additives to remedy the lack of flow in cold weather.

“My goal here is to increase the use of biofuel to lessen our dependence on imported fossil fuels and decrease carbon emissions,” Ng said. “But it’s a very long-term project.”

Detroit-based nonprofit alternative-energy group NextEnergy, a partner in Ng’s project, said the research is setting the standards for biodiesel fuels and giving companies the opportunity to guarantee product quality.

“We’re going to see all different kinds of alternative energy in the future,” said Jim Saber, public relations representative for NextEnergy. “It’ll reach a point where they won’t be alternatives anymore.”

To make that future a reality, other universities like Lawrence Tech, Grand Valley State and Michigan Technological have programs in alternative energy and sustainability research.

One is Michigan Alternative and Renewable Energy Center (MAREC), a partnership among Grand Valley State and Muskegon-based organizations. It’s incorporated some new technologies in the design of its building in Muskegon.

The main source of its electric power comes from carbonate fuel cells and micro turbines. Photovoltaic (solar) panels coat the roof, adding to the electricity created by the fuel cells. The facility added a wind turbine as part of its offshore wind initiative.

MAREC’s project uses turbines that are a variant of older windmills called horizontal axis wind turbines, which need adjustment to the direction of the wind.

DTE Energy focuses its research on some other types of alternative energy. Currently, it is supporting projects in biomass and solar energy, along with operating the Hydrogen Technology Park demonstration project in Southfield.

“We are very excited about the role renewable energies like wind will play in Michigan’s future – and we look forward to hearing from companies that share our enthusiasm,” said Trevor Lauer, vice president of retail marketing for DTE Energy.

© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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Boating permit changes await governor’s OK

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LANSING—A bill awaiting Gov. Jennifer Granholm’s signature would change permit requirements for those who already own a dock, pier or other anchoring structure and those looking to build one in an inland lake or stream.

Under the measure, renewals would no longer be necessary to maintain and operate such facilities, but boaters who don’t already have a permit would still need one.

If a boater wants to build or add to a structure, the Department of Environmental Quality (DEQ) would have to analyze the project to ensure it wouldn’t disrupt natural resources.

Martin Jannereth, DEQ’s chief of lakes, streams and shorelands, said eliminating renewals probably won’t harm inland waters.

“We found there were a few changes over the years but not enough to make it worth all the staff time needed to maintain the program,” he said.

Jannereth said the DEQ’s main interest is to protect property owners’ rights and the ability of others to use lakes and streams for recreational purposes.

The Tip of the Mitt Watershed Council, a nonprofit group based in Petoskey, said the measure will protect natural resources.

“The significant budget cuts on the DEQ over the years have reduced their ability to protect those natural resources and maintain public trust,” said Jennifer McKay, policy specialist for the council.

“This will decrease the amount of money needed by the DEQ to maintain the marinas, but will still allow them to protect the bottomlands and sensitive areas of the lakes and streams,” she said.

The Michigan Boating Industries Association in Livonia also supported the bill.

Although it unanimously passed the Senate, Reps. Lisa Brown, D-West Bloomfield, Sarah Roberts, D-St. Clair Shores, and Rashida Tlaib, D-Detroit, voted against it.

© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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Impact of Proposal 2 varies among state universities

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LANSING — University of Michigan enrollment reached a record level this fall with 41,674 students, but the proportion of African Americans, Hispanics and Native Americans decreased. Undergraduate admission figures show the percentage of students in those categories has dropped for four years straight.

Proponents of affirmative action blame the drop on a change in state law in 2006, when Proposal 2 passed. The constitutional amendment bans programs in public hiring, employment and education that give preferential treatment on the basis of race, gender, ethnicity or national origin.

At Central Michigan University, minority enrollment has stayed consistent in the last five years, averaging between 440 to 451 students, according to the registrar’s office.

Between fall 2006 and fall 2009, Western Michigan University has shown increased minority enrollment from 2,500 students to nearly 3,100 out of 25,000.

Michigan State University has shown a consistent enrollment of minority students between fall 2007 and fall 2009. At Wayne State University, minority enrollment has fluctuated in the last four years, but this year increased in all ethnic categories.

Eastern Michigan University has also seen an increase in its minority enrollment between fall 2006 and fall 2009.

Ted Spencer, the U-M associate vice provost and executive director of undergraduate admissions, said the university competes with other top schools nationwide that still have affirmative action in their programs and scholarships.

But minorities are applying to top schools that still have affirmative action and minority-based scholarships, Spencer said.

By Any Means Necessary (BAMN) is a national pro-affirmative action group that unsuccessfully opposed Proposal 2. BAMN’s national chair. Shanta Drivers, said, “The continuing fall in minority enrollment at Michigan is the direct and disastrous result of Proposal 2.

“With schools closings in Detroit and other urban centers, Proposal 2 is wiping out an entire generation of progress in steps towards equality in higher education,” she said.

“Proposal 2 allows the universities to take in account every form of educational inequality and injustice except racial inequality, which is by far the largest source of inequality in this country,” said George Washington, a lawyer for the United for Equality and Affirmative Action Legal Defense Fund based in Detroit.

“For African-American, Latino and Native American students alone, Proposal 2 establishes a separate and unequal admission system,” Washington said.

But the state’s positions is that the affirmative action ban is constitutional.

“Proposal 2 does not violate the equal protection clause,” of the U.S. Constitution said Nick De Leeuw, a press officer for the Attorney General’s office.

“The people of Michigan spoke loud and clear when they voted to ban affirmative action, and Attorney Gen. Mike Cox is confident that the circuit court will not overturn the amendment,” De Leeuw said.

On. Nov. 17, the U.S. Court of Appeals in Cincinnati will hear challenges to Proposal 2 by BAMN, the American Civil Liberties Union and the NAACP on the grounds that it is unconstitutional.

© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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Experts weigh new state budget principle

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LANSING – A budgeting principle that Michigan may adopt involves paying on the run, but questions abound on how the state might deal with such a change in economic philosophy.

The principle is known as pay-as-you-go, or PAYGO for short. Under that approach, the government would spend money on programs when legislators see fit, based on a specific funding source rather than appropriating and continuing a program in hopes that it will stay successful.

“The appropriations process is the sole province of the Michigan Legislature,” said Craig Thiel of the Citizens Research Council, a nonpartisan organization that researches issues concerning state and local government.

“In exercising this authority, the Legislature – along with the governor – is bound by strict balanced-budget requirements,” he said.

That means lawmakers would have to ensure that planned spending doesn’t exceed the money available, Thiel added.

“The Legislature also can raise taxes. Therefore, in a sense, the balanced budget requirements are a form of pay-as-you-go budgeting already,” he said.

He said a PAYGO-type plan might have benefited, for example, the Promise Scholarships, which are being discontinued in the latest budget. Instead of the state budgeting a specific amount for scholarships, it could provide money based on the number of students who need financial aid over a certain time period.

The PAYGO principle involves numbers more than anything. Since the state functions on a balanced budget to properly meet economic expectations, the PAYGO principle relies on numbers to help meet such constraints.

“The concept is solid: Don’t spend more than you have,” said Craig Ruff, senior policy fellow at Public Sector Consultants, a Lansing-based firm that specializes in research on issues such as health, economics and technology. “The difficulty resides in trying to enforce a PAYGO system in which programs could potentially be cut.”

The federal government tried it in the 1990s, but Congress abandoned it in 2003 because of a big increase in the national debt. However, unlike the state, the federal government does not have to follow a balanced budget year after year.

“There were significant loopholes for the PAYGO system on a federal level, such as the exemption of programs and no appetite to raise taxes,” said Ruff. “If a PAYGO system was still in place in Washington, the stimulus money they have offered during the recession would have to be paid for.”

With PAYGO, it’s the Legislature’s job to decide what it wants to spend money on, meaning that some programs would be favored over others.

“The state brings in $42 billion in total revenue, so spending under that amount is OK if you are on the PAYGO plan,” said Ruff. “An issue would be spending more than the amount in the total revenue.”

Rep. George Cushingberry Jr., D-Detroit, chair of the House Appropriations Committee, said he approves of the PAYGO principle and believes taxes on everyday items like bottled water, for example, could help pay for government programs.

But a PAYGO-like structure might be doomed by partisanship, said Ruff.

One issue, he said, involves Republicans fearing Democrats would take every opportunity to raise taxes. And Democrats would fear that Republicans would try to single out specific areas of government to focus spending on, he added.

Thiel of the Citizens Research Council said, “What I think is being proposed is much more narrow in focus. What is being advocated is more ‘earmarking’ of specific revenues to specific programs and not necessarily a new budgeting process.  Earmarking is being done extensively in Michigan already.”

Earmarking is the practice of reserving revenues from specific sources for specific functions. Earmarking takes two forms: A fixed amount of revenue from a given source or a percentage of the revenue from a given source.

Earmarking is often used when there is a connection between a revenue source and spending. It can help provide stability as lawmakers are aware of the effects of the highs and the lows of financial decisions they make, Thiel said.

© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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Foster parents who smoke might face aid cuts

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LANSING – Foster parents who smoke may soon see a part of their state payments go up in smoke.

A bill by Sen. Tom George, R-Texas Township, would reward non-smoking foster care families by adding 50 cents per day to their payment rates but would deduct 50 cents if a smoker lives in the household.

Although the daily impact is small, it would amount to $182.50 a year per child.

George, a physician, said the goal is to create a healthier environment for children.

“Secondhand smoke is the leading environmental health hazard in Michigan,” he said. “We should encourage foster homes to be smoke-free, and this would send a message to foster parents that they can be rewarded for doing so.”

Gary McMullen, vice president of executive relations for the American Cancer Society Great Lakes Division in East Lansing, said the dangers of secondhand smoke are clear. “Numerous studies have shown that secondhand smoke is dangerous,” he said. “The science is irrefutable.”

McMullen said the cancer society tries to educate parents about the risks of smoking around children.
“Our pulpit is that it’s dangerous,” he said. “We want parents to know the dangers of secondhand smoke that come from smoking around children.”

George said the bill exempts licensed foster parents who are related to their foster children. “The courts have recognized that there is some benefit in having foster kids raised by relatives, for familiarity and continuity, and I don’t want to disturb that.”

The payments that would be affected are the state subsidies foster parents receive to care for children.

Colleen Steinman, a communications representative for the Department of Human Services (DHS), said payments foster parents receive vary.

“Foster children who meet certain criteria can receive subsidies ranging from $18 to $30 per day per child, depending on the needs of the child or children,” she said.

All foster parents must be licensed by DHS unless they’re relatives of the child, but Steinman said that relatives who are not licensed don’t qualify for subsidies.

George said that he understands some families may lie about their smoking habits.

“No system is foolproof, but if parents lie or falsely apply, there’s the potential for them to lose their license,” he said.

According to DHS, there are just under 6,000 children in licensed foster care in the state and about another 6,000 living with licensed or unlicensed relatives. About 1,000 children live in a child caring institution.

Steinman said DHS has yet to decide whether it supports the legislation. “We haven’t had time to come to a decision, but we are studying the bill right now.”

George said that the state has a responsibility to look after foster children.

“If the state pays for the health care and the foster care of these children, then we have a responsibility to encourage parents to provide a smoke-free environment,” he said.

The bill is co-sponsored by Sen. Patty Birkholz, R-Saugatuck, and is pending in the Senate Committee on Families and Human Services.

© 2009, Capital News Service, Michigan State University School of Journalism. Not to be reproduced without permission.

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