Michigan lawmakers are writing their own financial disclosure rules. What could go wrong?

• Michigan Democrats work behind closed doors to write new financial disclosure rules for state officials
• A voter-approved ballot proposal will require disclosure to shine light on potential conflicts of interest
• But the proposal leaves plenty of room for lawmaker loopholes

LANSING —  Nearly one year after Michigan voters told elected officials to start disclosing their personal finances, those same officials are now finalizing laws for what — and how much — information they will make public.

Majority Democrats in the state Legislature are working behind closed doors on legislation to implement Proposal 1, which set broad disclosure requirements designed to expose potential conflicts of interest.

The ballot proposal, weakened by lawmakers who used it to sell term limits reform to the public, leaves room for plenty of loopholes. Lawmakers finalizing the rules now have another opportunity to write tougher provisions into state law. 

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The clock is ticking: The voter-approved constitutional amendment requires lawmakers to finish by year’s end. If they don’t, any resident will have the right to sue the state to force action. 

Ten months into their new majorities, Democrats have yet to introduce the required personal financial disclosure legislation. But they will “very soon,” said Senate Elections and Ethics Chairman Jeremy Moss, D-Southfield. 

“You’re going to see legislation that both meets the requirements of the ballot proposal and is stronger in many areas,” he told Bridge. 

Whatever form it takes, the legislation will end Michigan’s dubious reign as one of only two states that does not require officials to disclose finances in any form. In the other state, Idaho, lawmakers last year killed reform legislation. 

The work follows a series of legislative scandals, but the strength of the law remains to be seen. Moss and other Democrats drafting the bills are not yet sharing details, saying they are still fine-tuning them ahead of introduction this month. 

But “it's very hard to get lawmakers to pass very good ethics laws that apply to themselves,” said Delaney Masco, senior legal counsel for ethics at the national nonprofit Campaign Legal Center. 

“Once you have power, you want power, you don't want to be limited.”

Here are some potential loopholes to watch for in the pending legislation: 

Are income and asset values disclosed?

Proposal 1 will require lawmakers and officials including the governor to disclose each year a “description of assets” and sources of both earned and unearned income. 

That will likely force House Appropriations Chair Angela Witwer, D-Delta Township, to disclose whether she is still receiving any income from the consulting firm she co-founded that now has contracts with a state department whose annual funding she helps decide. 

But the constitutional amendment does not require officials to specify how much money they earned from each source, or how much their assets are worth. That matters, said Masco, the Campaign Legal Center attorney. 

“Somebody who's working part-time for a consulting firm and maybe does it ad hoc and is making $20,000 a year is very different than somebody who makes $450,000 working for a big consulting firm,” she said. 

At the federal level, members of Congress are required to specify whether they earned between $1 and $200 on a particular stock or more than $500,000. Some states, like Alaska, require officials to list exact salaries.

Are spouses included?

Proposal 1 is also silent as to whether officials must disclose income sources and assets held by their spouses or dependent children. That’s a requirement at the federal level and many states. 

Michigan officials will have to decide whether to follow suit to require disclosure from spouses like the husband of state Sen. Lana Theis, R-Brighton, who in 2017 ran a nonprofit fund that received payments from an industry group with bills before a committee that his wife chaired. 

“The best practice is to have at least some disclosure for spousal income,” Masco said. “If my husband has stock in Nike, that's the same as me having stock in Nike — and same with dependent children.”

But lawmakers have already expressed hesitation.

State Rep. Mike Harris, a Waterford Township Republican who introduced personal financial disclosure legislation in March, did not include spousal income in his proposal but said he is "open to a conversation." 

"Our spouses (and kids) are not the ones who ran for office," he said. "The scrutiny is on us. The public attention is on us. So I think our focus was to make sure we keep the attention off of the people that are not elected."

What are penalties?

Michigan Secretary of State Jocelyn Benson, a Democrat whose office will be tasked with collecting and publishing the disclosure reports, has spent months urging legislators to build strong enforcement penalties into the law. 

The ballot proposal itself did not specify how or if officials should be penalized if they lie on a financial disclosure report or fail to file one. The amendment says only that they “must” file by April 15, 2024, and every year thereafter. 

If there are violations, there needs to be “clarity to how we can hold folks accountable,” Benson told Bridge this summer. 

“Proposal 1 didn't go far enough …,” she said. “We need to do more to take our state from worst to first in our ethics policy.”

Benson has cited federal rules as a model, but experts say members of Congress often skip periodic transaction reports because the penalty is so minimal: A $200 fine once lawmakers miss the filing deadline by 30 days.

All gifts, or just some gifts?

The summary of Proposal 1 that greeted voters on the ballot last fall promised that the amendment would require officials to disclose "gifts" each year. 

There’s a catch in the fine print: The full text of the amendment only requires lawmakers to report "gifts received and required to be reported by a lobbyist or lobbyist agent, as prescribed by state law."

In other words, unless lawmakers toughen those rules through the pending legislation, officials would only be required to disclose gifts that lobbyists are already required to disclose under state law. 

They wouldn't be required to disclose gifts from other sources, and they would not be required to disclose the kind of secret junkets taken by former House Speaker Lee Chatfield, a Levering Republican who is now under criminal investigation for alleged financial impropriety and sexual assault. 

"The public should know that there are people out there who are maybe giving expensive gifts to a lawmaker, and then the public can decide if they think that's appropriate or not,” said Masco, the Campaign Legal Center attorney.