Lansing Update: July 1, 2005

Posted July 1, 2005

In this issue of Lansing Update:

  1. Securitization Includes Protection of Merit Scholarship Funds
  2. Legislation Regulating Payday Lenders Passes House
  3. Senate Passes School Security Bills

Securitization Includes Protection of Merit Scholarship Funds

This week the House of Representatives passed legislation that seeks an immediate, lump-sum payment from the national tobacco settlement in an effort to diversity Michigan’s economy and create a secure pot of funds for the Michigan Merit Award Scholarship.

Called securitization, the state would sell to investors the rights to three-quarters of the annual settlement payment through 2025 when a new national tobacco settlement agreement would need to be negotiated, according to the non-partisan House Fiscal Agency. The state this year expects to receive about $285 million in tobacco settlement revenue and is scheduled to receive another $6.5 billion from 2006–25.

The plan would take $1.5 billion of the securitized tobacco settlement revenues to create a secure pot of funds for the Merit Award, which Governor Granholm has at varying times proposed cutting or reconfiguring. The Merit Award receives its funding from the annual tobacco settlements and grants a $2500 in-state scholarship to students who post passing scores on a state standardized test.

Michigan Catholic Conference since the inception of Merit has supported the award due to its ability to help poor and low-income students afford college.

The Republican-controlled Senate says it will need to study securitization before embracing it.

Legislation Regulating Payday Lenders Passes House

Businesses that issue short-term loans to customers with the money to be repaid when customers receive their paycheck, known as payday loans, would be regulated for the first time under legislation passed this week by the House.

House Bill 4834 bill would set a maximum de facto interest rate on a sliding scale depending on how much the lender borrowed with a maximum loan of $600. Currently, no limit exists on the interest rate, with the Michigan Catholic Conference maintaining that some payday lending institutions charge outlandish interest amounts on loans that are primarily utilized by the poor.

Lenders would pay 15 percent on the first $100 they borrow, 14 percent on the second $100, 13 percent on the third $100, 12 percent on the fourth $100, 11 percent on the fifth $100 and 11 percent on the sixth $100.

If a person were to obtain the maximum loan of $600, they would in effect pay a 12.7 percent fee. The bill also would license payday lending institutions under the Office of Financial and Insurance Services and provide a number of consumer protections.

Michigan Catholic Conference staff will continue to monitor the legislation as it moves through the Senate. Currently, the bill awaits consideration from the Senate Economic Development, Small Business and Regulatory Reform Committee.

Senate Passes School Security Bills

The state Senate this week passed legislation, supported by the Michigan Catholic Conference, which would minimize the chance that a sex offender could come into contact with children in school zones.

The general theme of the of package is to both ensure that background checks of school personnel are conducted, so that no one convicted on criminal sexual offenses is hired by a school, and prohibits a person convicted of sexual crimes from living, working or loitering within 1,000 feet of a school.

The bills require criminal background checks of any individual employed by a school, allow for the salary of teachers convicted of sexual offenses to be escrowed while they undergo tenure proceedings, as well require those teachers to report convictions. Also included in the package is legislation that will: