Daily Legislative Update - May 17, 2013 - Sine Die

Fri, 17 May 2013 04:00:00 GMT

Daily Legislative Update
Friday, May 17, 2013

SINE DIE

The legislature adjourned today “sine die,” which brings the 89^th General Assembly to an end after 100 days. Unless the Governor calls a special session, the legislature will not meet again until February, 2014 when the fiscal session will convene.

As legislative battles continue to take shape – whether it be in the courts or in the implementation of freshly-minted laws – here are four important dates to watch (with thanks to our bill tracking service that provided much of this information):

July 1st: Third calendar quarter begins; look to Osceola. The legislature authorized the state to issue $125 million in bonds as an incentive for the company to build a new steel mill in Osceola (Mississippi County) that will create over 500 full-time jobs at an average salary of around $75,000 (the text of the legislation itself includes such requirements). The exact timeline is yet to be determined, but the Arkansas Democrat-Gazette quoted a spokesman from the Arkansas Economic Development Commission as saying the deal should be closed in the third quarter. When the groundbreaking occurs, it will inaugurate one of the biggest construction projects the state has seen in years.

August 15th: Most new laws created this session take effect. A good number of the bills passed each session contain an emergency clause, meaning they became incorporated into the Arkansas code as soon the legislation was signed by the Governor. But without an emergency clause or another specified effective date, an act becomes the law of the land 90 calendar days after legislative adjournment sine die — for this year, August 15th. Other acts have a longer time frame for implementation. Most of the tax cuts passed at the end of the session will not go into effect until the 2014 tax year, for example.

October 1st: Enrollment in health care exchanges begins. Much remains to be determined about the shape of the insurance exchanges that the federal Affordable Care Act mandates. It's unclear what the respective roles of state and federal authorities will be: After months of demurring, the legislature approved a measure late in the session that authorizes Arkansas to set up its own state-run exchange in lieu of the state-federal partnership. We do know, however, that the exchange must be operational by October 1st, along with 49 other similar entities across the nation.

January 1, 2014: Voter ID law and some tax cuts go into effect. The law requiring citizens to present photo ID when voting becomes effective at the beginning of 2014, although its first impact won't be felt until primary elections a year from now. Also, several tax cuts passed at the end of the session will begin to phase in with the New Year. These include an across-the-board decrease in the income tax, a cut in the capital gains tax, and exemptions on the sale utilities used by manufacturers and agricultural facilities.

During this session, the House filed 1,300 bills and the Senate filed 1,192 bills. Each chamber also filed 19 resolutions. Of the collective 2,530 bills and resolutions, 1,520 were signed into law. The State Chamber/AIA tracked 613 bills and resolutions. As compared to the 2011 Regular Session, the 2013 session generated 269 more bills and resolutions filed, 278 more bills became law and almost 50 more bills found their way onto our tracking list.

Please visit our tracking site for the complete, searchable list of the bills we tracked. We will publish a Legislative Summary later this summer that will highlight many of these. Below is a summary of the issues we directed the majority of our lobbying efforts towards during the 2013 session.

LOBBYING SUMMARY
In addition to the customary legislative issues, the 89^th General Assembly tackled a series of tough issues not debated in recent memory, if ever. Despite this, the 2013 regular session was a strong one for business and industry in our state. There were several important tax initiatives that will benefit all businesses, but most specifically manufacturers and the agricultural sector. Legislation was passed that will allow 250,000 eligible Arkansans to obtain private health insurance using federal Medicaid dollars, thereby creating a healthier, more productive workforce while saving Arkansas businesses more than $35 million per year in fines that would have been implemented without an Arkansas plan. Additionally, at least 525 jobs and a $1.1 billion investment in the state was approved for northeast Arkansas, as the Legislature authorized investment in the state’s first super project. Details on these topics and others are available below.

Prior to the 2013 legislative session, the State Chamber/AIA membership identified as its top legislative priorities to: (1) continue to lead the effort to completely exempt energy used in manufacturing from sales and use tax; (2) lead the effort to completely exempt partial replacements and repairs of manufacturing machinery and equipment from sales and use tax; (3) protect the education reforms passed in 2003-04; (4) protect the legal reforms enacted by Act 649, the Civil Justice Reform Act of 2003; and (5) protect the workers’ compensation reforms enacted by Act 796 of 1993.

We are pleased to say that we were successful in nearly all of these areas.

Also importantly, the State Chamber/AIA heightened our profile during the session through a daily presence at the State Capitol, and by hosting our Annual Legislative Reception with an overflowing crowd. We hope you are pleased with the work of your State Chamber/AIA.

TAX ISSUES
Two of the five priority items outlined in the State Chamber/AIA 2013 Legislative Agenda centered on tax cuts for manufacturers. The first, a sales tax exemption for energy used directly in manufacturing, represents the culmination of an effort we, and a coalition of others, have been working on for more than six years. SB 791 by Sen. Bill Sample (R-Hot Springs) reduces the sales tax on natural gas and electricity sold to manufacturers classified in NAICS codes 31-32-33 or 115111 to 1 percent beginning July 1, 2014 and to 0 percent beginning July 1, 2015. It also reduces the excise tax rate on the purchase of natural gas used in the production of electricity to 1 percent beginning January 1, 2015. The one-eighth (1/8) of one percent conservation tax and the temporary sales tax of one-half (1/2) of one percent highway tax – both approved at the ballot by the people of Arkansas – will not be eliminated for manufacturers or independent power producers. The annual impact of SB 791 is approximately $17 million.

The second issue, a sales and use tax exemption of replacement and repair parts of manufacturing machinery and equipment, is an issue that has been discussed for several years in the State Chamber/AIA Tax Committee. SB 334 by Sen. Jake Files (R-Fort Smith) and Rep. Tommy Wren (D-Melbourne) provides a refund of sales and use taxes for expenditures on repairs and replacement of certain machinery and equipment used directly in manufacturing. The bill establishes a tax rate of 4.875 percent beginning July 1, 2014, but requires a taxpayer to hold a direct pay sales tax permit from DFA to claim this refund. The one-eighth (1/8) of one percent conservation tax and the temporary sales tax of one-half (1/2) of one percent highway tax – both approved at the ballot by the people of Arkansas – will not be eliminated. SB 334 also creates the mechanism by which the Arkansas Economic Development Commission can fully refund the cost of a replacement or repair project for a company expending at least $3 million on such a project. The annual impact of SB 334 is approximately $6.9 million.

Including SB 791 and SB 334, the 89^th General Assembly approved a package of tax legislation totaling more than $160 million in breaks for businesses, industry and individuals in Arkansas. Most of the measures are designed to phase in with the full fiscal impact not taking effect until fiscal year 2015. Other bills of interest in the tax package include:

HB 1966 by Rep. Davy Carter (R-Cabot) raises the capital gains tax threshold to 50 percent of gains. There is an exemption for capital gains that exceed $10 million. The Annual impact approximately $18.1 million. Reduction or repeal of the capital gains tax rate has been a piece of the State Chamber/AIA Legislative Agenda for several legislative sessions.
SB 299 by Sen. Larry Teague (D-Nashville), a sales tax break for timber harvesting equipment. Annual impact approximately $705,000.
SB 298 by Sen. Jonathan Dismang (R-Beebe), a sales tax break on utilities for grain dryers and storage facilities. Annual impact approximately $3.8 million.
SB 11 by Sen. Gary Stubblefield (R-Branch), a sales tax exemption for wrap/twine for cotton and forage. Annual impact approximately $1.1 million.
HB 1039 by Rep. Jeff Wardlaw (D-Warren), a utility sales tax break on natural gas, liquid petroleum gas and electricity used in the production of poultry, swine, horticulture, aquaculture and dairy. Annual impact approximately $10 million.
SB463 by Sen. Jim Hendren (R-Gravette), an income tax break for active-duty military. Annual impact approximately $7.2 million.
HB 1585 by Rep. Charlie Collins (R-Fayetteville), a personal income tax reform measure that cut one-tenth of a percent off all tax brackets that currently exist. The lowest income tax bracket would be the only category to receive the break in year one. Annual impact approximately $2.5 million in year one, $30.4 million in year two, and $55.7 million in year three.

One piece of legislation we supported that was not as successful was SB 108 by Sen. Keith Ingram (D-West Memphis) and Rep. Jeremy Gillam (R-Judsonia). The bill was an attempt to make Arkansas’s income tax laws more consistent with most other states and the federal government. State and Federal Net Operating Loss (NOL) tax rules apply to businesses that report a taxable loss for a given tax year. These losses can be applied against previous years’ earnings or against future earnings. More than 40 states permit NOL carryovers of 10 – 20 years. Eighteen (18) states permit NOL carry back and carry forward. The IRS permits a carry back of three years and carry forward of 20 years. Arkansas is one of seven states that restrict NOL carry forward to five years only. SB 108 passed the Senate, but was not a part of the tax package that received approval in the final week of the session.

WORKERS’ COMPENSATION
Prior to previous legislative sessions, we have met with leaders of the AFL-CIO to discuss workers’ compensation legislation. Our meetings frequently resulted in an agreed bill or package of legislation, which made only minor adjustments to Arkansas’s workers’ compensation laws. This system has historically worked well for employers and employees. Due to a variety of factors this session, we did not have an agreement with the AFL-CIO going into the legislative session and did not attempt to reach an agreement on legislation during the session.

About a half dozen workers’ compensation bills were filed in the 89^th General Assembly. A bill specifying that owner/operators providing commercial motor vehicles or drivers to a motor carrier under contract are not employees of the carrier but independent contractors for purposes of workers' compensation law is an attempt to clear up ongoing confusion regarding independent contractors and has been signed by the Governor.

Only one bill that we opposed, SB 589 by Sen. Jon Woods (R-Springdale), received any committee activity. The bill sought to define an emergency responder for purposes of workers' compensation for mental injury or illness as a compensated person. Arkansas law requires a physical injury for a mental injury to be compensable unless the employee claims a mental injury as the victim of a crime of violence. Current law considers an emergency responder, responding to a crime to be a victim. Therefore, emergency responders are already entitled to mental injury benefits provided they meet the statutory requirements like all other claimants thereby rendering this legislation unnecessary. After lengthy testimony on both sides, the Senate Judiciary Committee approved the bill. However, Sen. Woods never brought the matter up for consideration on the Senate floor. We expect discussion on this issue during the interim.

The Arkansas Self-Insured Association presented a package of legislation of which two measures were considered in committee. The first, HB 2107 by Rep. Stephanie Malone (R-Fort Smith), sought to amend Workers' Compensation Law to revise employers' rights for actions against liable third parties, providing employers a future credit in a claim if reimbursed by a third party. The State Chamber/AIA supported this bill and testified on its behalf, but the bill failed to gain the support of the House Insurance and Commerce Committee. The second bill, SB 515 by Sen. Cecile Bledsoe, began as a bill we were neutral on, was amended into something we opposed, and then was amended again back into our neutral position as Sen. Bledsoe and several groups attempted to reach a compromise on the legislation. The bill, which was originally filed to provide that an employee who sustains a compensable injury is entitled to benefits during the healing period only if the employer does not have work available with the employee's medical restrictions, was withdrawn from consideration and referred to interim study.

UNEMPLOYMENT INSURANCE
Four members of the State Chamber/AIA Unemployment Insurance (UI) Committee including the organizations’ Executive Vice President participate in the ESD Advisory Council. A nomination for our Committee Chairman is currently pending approval by the Governor’s office. In addition to management representatives, the ESD Advisory Council also includes five representatives of the AFL-CIO and three consumers. This Advisory Council meets quarterly to discuss issues related to the state’s UI system and also negotiates legislative issues.

As we have been reporting for years, the economic downtown had a dramatic impact on the state’s Unemployment Insurance Benefit Trust Fund. The fund and its loans are the responsibility of businesses in Arkansas. To meet the financial needs of the Trust Fund, we agreed to a $2,000 increase in the taxable wage in the 2009 legislative session. Additionally, we supported legislation in the 2011 session that made a series of changes to Arkansas’s UI system resulting in an employer savings of between $60 and $75 million annually. In January, the Arkansas Department of Workforce Services (DWS) estimated the Trust Fund would be out of debt by mid-2014.

Despite an atmosphere going into the 2013 legislative session that appeared ripe for making additional UI system changes, the federal “no-reduction” rule continues to prevent states from cutting state UI benefits. This rule has been extended at least three times and is currently set to expire on 12-31-13. In addition to benefit changes, we are studying revisions to the Stabilization Tax, which is triggered by the trust fund balance. Necessary modifications to the Stabilization Tax are complicated and we believe it is too risky to reduce revenue going into the trust fund before it reaches a point of solvency. With these factors in mind, it was the position of the State Chamber/AIA UI Committee that we would not present UI legislation during the 2013 legislative session.

During the 2013 session, approximately two dozen UI bills were filed. Of those, only one bill we opposed required testimony in committee. HB 1018 by Rep. Jim Nickels (D-Sherwood) would have increased the maximum potential unemployment benefits in a benefit year from 25 to 26 times the worker's weekly benefit amount. This legislation would have reversed a key piece of the UI legislation we worked to help pass during the 2011 regular session. A DWS estimate indicated increasing Arkansas's jobless benefits from 25 to 26 weeks would increase benefit payments and reduce the Trust Fund balance by approximately $6 million per year. HB 1018 failed to receive the support of the House committee.

UI bills of interest that the Governor signed include:

SB 542 by Sen. Missy Thomas Irvin (R-Mountain View) changes the penalties for false statements and misrepresentations in a UI claim. It also requires DWS to track false statements and misrepresentation by applicants for unemployment benefits and provide reports on UI claim fraud upon request by the Legislative Council.
SB 857 by Sen. Alan Clark (R-Lonsdale) requires DWS to enforce provisions concerning ineligibility for extended unemployment benefits for failure to accept or seek work and to report results to the Legislative Council quarterly. It also requires DWS to facilitate electronic reporting of unemployment benefit recipients who refuse to take jobs or fail drug tests and to notify employers with instructions for reporting such cases.
SB 780 by Sen. Cecile Bledsoe (R-Rogers) adds types of employee conduct which can disqualify persons from receiving unemployment benefits when the conduct leads to their termination.
SB 1116 by Sen. Ronald Caldwell (R-Wynne) provides for an increase in an employer's additional contribution assessments of the workers' compensation stabilization tax and allows the stabilization tax to be credited to the separate accounts of each employer.

HEALTHCARE
The most frequently discussed issue heading into the 89^th General Assembly was the possible expansion of Medicaid coverage to 250,000 low-income Arkansans. Legislative leaders in the House and Senate along with the Governor’s office worked tirelessly to create a healthcare expansion model that best serves Arkansas. The result was an innovative compromise that uses federal Medicaid dollars to subsidize private insurance premiums for eligible Arkansans in the upcoming health insurance exchange.

The plan, referred to as the “Private Option,” is projected to save Arkansas millions in Medicaid matching funds, while increasing coverage to Arkansans that need it. This legislation will ensure the viability of our rural hospitals, clinics and other healthcare providers, and spare Arkansas businesses tens of millions of dollars in expected fines, taxes and penalties. The legislation will also institute new business-friendly innovations within the Medicaid-eligible population by creating a preferred Health Savings Account pilot program that could revolutionize how these patients receive care.

HB 1219 by the Joint Budget Committee gives the Department of Human Services authority to spend hundreds of millions in federal funds on the program. HB 1143 by Rep. John Burris (R-Harrison) and SB 1020 by Sen. Jonathan Dismang (R-Beebe) creates the program once it receives final federal approval.

ECONOMIC DEVELOPMENT
A new steel mill in the Northeast Arkansas town of Osceola will be the state's first opportunity to land a super project. Big River Steel, which was announced in late January, will eventually be a $1.1 billion investment and provide a minimum of 525 jobs averaging $75,000 a year. Upwards of 2,000 jobs are anticipated during the construction phase of the project. Lawmakers were asked to approve a $125 million bond issue that would allow for lower financing rates for a $50 million loan and $75 million in grants and incentives to begin the infrastructure for the super project.

Details of the agreement between the State of Arkansas and Big River Steel are outlined in the companion pieces of enabling legislation: HB 1870 by Rep. Monte Hodges (D-Blytheville) and SB 820 by Sen. David Burnett (D-Osceola). In addition to the enabling legislation, a supermajority of legislators in each chamber was required to approve the funding legislation to provide a revenue stream for the $125 million bond package of incentives and loans for the super project. SB 430 by the Joint Budget Committee, which contained the funding authorization, was also the General Improvement appropriation bill for the Arkansas Economic Development Commission (AEDC).

In addition to the Big River Steel appropriation, SB 430 also included:

$50 million for the Governor’s Quick Action Closing Fund;
$3 million for workforce training;
$2 million for rebates for the motion picture industry;
$37.5 million for incentives and rebates for new and existing industry expansions as part of signed financial agreements;
$500,000 for the state’s strategic plan; and
$5 million for the Innovate Arkansas Fund for start-up tech businesses.

TORT REFORM AND LEGAL
We monitor all legislation to identify attempts to weaken the civil justice reforms the State Chamber helped pass in 2003. While no bills to weaken the 2003 act required any effort this session, the proposed constitutional amendments that addressed tort reform did garner a great deal of attention, time and effort on behalf of the business community. SJR 2 by Sen. Jeremy Hutchinson (R-Little Rock) was widely viewed as the tort reform proposal offered by the trial lawyers, while SJR 5 by Sen. Sen. Eddie Joe Williams (R-Cabot) was the business community’s proposal. Despite many long meetings, late nights and multiple amendments to both proposals, the two sides were unable to reach a compromise and we presented our proposal to the Joint Committee on Constitutional Amendments without an agreement. After a lengthy hearing, SJR 5 ended up only one vote shy of receiving the Senate Committee’s approval.

Separate from tort reform, we worked with a small group to secure passage of HB 2022 by Rep. John Vines (D-Hot Springs), which amends the Uniform Contribution Among Tortfeasors Act, providing that all joint tortfeasors are each considered when a jury determines the percentage of responsible of each tortfeasor.

EDUCATION
In June of 2012, Federal District Judge Robert Dawson declared Arkansas’s school choice law unconstitutional. In his ruling, Dawson concluded that a racial component in the law violated the Fourteenth Amendment’s Equal Protection Clause, voiding the entire statute. Dawson’s ruling has been stayed pending appeal, which also gave the legislature time to enact new legislation. Several bills were filed during the session to either amend or completely rewrite Arkansas’s school choice law, but the bill that gained final approval was SB 65 by Sen. Johnny Key (R-Mountain Home). The State’s new school choice law does not take into account a student’s race, though schools under a desegregation court order are exempt. The law caps transfers from a district at three percent of its average daily population, requires the Department of Education to collect transfer data, and will expire on July 1, 2015, forcing the legislature to revisit the law. SB 65 also contains a “grandfather clause” that allows students who have already transferred to remain in their new districts. Nearly 16,000 students currently attend a district other than the one where they live.

GUN LAWS
A few bills related to gun laws, which have floated around for several sessions, reappeared with more momentum during the 89^th General Assembly. Legislation addressing guns in churches and on university campuses has now been signed into law authorizing churches and institutions of higher education to decide whether or not to allow concealed handguns on their premises. On the other hand, legislation that would have allowed Arkansans with a concealed carry permit to carry handguns openly in rural, unincorporated areas of the state narrowly failed to gain the approval of the House Judiciary Committee.

Of particular interest to the business community was HB 1269 by Rep. John Catlett (D-Rover). This bill would allow a concealed handgun licensee to keep a handgun in his or her vehicle on their employer's parking lot. Similar bills have been previously presented, including one filed by Rep. Catlett during the 2011 legislative session that created concern within the business community. The State Chamber/AIA government affairs staff received more member feedback on this legislation than most during the legislative session and we thank you for your comments. At the request of our membership, the State Chamber/AIA opposed HB 1269. Ultimately, the bill was never considered in committee, but the bill sponsor has told us he would like for the bill to be debated in the interim.

CONSTITUTIONAL AMENDMENTS
Arkansas law permits the legislature to refer up to three proposed amendments to the State Constitution. During the 89^th General Assembly, there were 38 proposals filed by legislators; 19 were presented by each chamber. The three proposals chosen to appear on the 2014 General Election ballot are:

HJR 1009 Rep. Warwick Sabin (D-Little Rock) - The Arkansas Elected Officials Ethics, Transparency, and Financial Reform Amendment of 2014. This 21-page proposal involves three different issues. 1) It would allow legislators to serve 16 years total in the Legislature. That time could be served completely in the House or completely in the Senate or a combination of the two, whereas they are now limited to a specific number of years in each chamber. 2) It would create an independent commission to set salaries of state elected officials. 3) It would place limits on lobbying by former legislators and revise ethics and campaign laws to eliminate most gifts and free meals for state legislators with a few exceptions, and eliminate corporate contributions to elected officials.

SJR 7 by Sen. Jonathan Dismang (R-Searcy) - An Amendment Concerning the Review and Approval of Administrative Rules by a Legislative Committee. This proposal would give legislative committees prior review of new state agency rules before they go into effect.

SJR 16 by Sen. Bill Sample (R-Hot Springs) - An Amendment Concerning Initiative and Referendum. The proposal would establish a signature threshold that ballot issue groups must meet if they want more time to collect additional signatures after turning in petitions to the Secretary of State. Petitions would need to contain at least 75 percent of valid signatures for a group to receive more time. Groups are usually given 30 additional days after submitting their original petitions to gather more signatures in case they fall short on the required number to place an issue on the ballot.

CONTACT INFORMATION
State Senators: 501-682-2902
State Representatives: 501-682-6211

To view schedules, calendars, bill information and legislator information, visit: www.arkleg.state.ar.us.

To view live stream video and audio from the Arkansas House of Representatives, visit www.arkansashouse.org.

State Chamber/AIA Staff:
Randy Zook, President/CEO: rzook@arkansasstatechamber.com
Kenny Hall, Executive Vice President: khall@arkansasstatechamber.com
Angela DeLille, Director of Governmental Affairs: adelille@arkansasstatechamber.com
Andrew Parker, Director of Governmental Affairs:aparker@arkansasstatechamber.com

State Chamber/AIA phone: (501) 372-2222
State Chamber/AIA web site: www.arkansasstatechamber.com

Jacksonville Chamber of Commerce News Newswire

Daily Legislative Update - May 17, 2013 - Sine Die

Daily Legislative Update Friday, May 17, 2013

Daily Legislative Update
Friday, May 17, 2013