89th General Assembly - One Regular Session in the Books

The Arkansas General Assembly convened on January 14 and wrapped up their official business on April 23.  After more than three months in session The 89th General Assembly filed nearly 2,500 bills and passed 61%, which is a pretty efficient conversion of bills to laws.  Especially when you compare the state legislature with the United States Congress, which rarely passes more than five percent of the bills introduced.  Over the past 25 years the state legislature have averaged passage of 65% of introduced bills (see below).

The Chamber began the session with a modest legislative agenda that focused on its traditional issues of economic development, higher education and transportation.  Below is a recap of how issues included on our agenda fared.

Economic Development Issues:

• Support Quick Action Closing Fund - $50 million included in final budget.  These funds are used to pay for economic development incentives and are very effective in recruiting and retaining jobs in NW Arkansas.
• Support Regional Economic Development Partnership - led an effort to broaden the reach of regional economic development partnerships, which is a state program that encourages regions to work together to proactively recruit new business and industry.
• Promote Legislation that Supports Entrepreneurs - worked with Accelerate Arkansas to advocate for funding of programs that support high-tech, knowledge based start ups.  Nearly $20 million dedicated to related programs intended to promote these "new economy" companies.
• Tax Cuts for Manufacturers - advocated for tax reductions in utilities and repair/replacement parts for manufacturers.  The General Assembly approved reduction of both taxes, which will save Arkansas manufacturers nearly $25 million per year thus making them more competitive in an increasingly global marketplace.   

Infrastructure Issues:

• Technical Corrections to Regional Mobility Authority - led effort to modify regional mobility authority legislation to clarify issues related to issuance of bonds.  
• Increase Flexibility for County/City Turnback - cities and counties receive 15% each from the recently enacted 0.5% temporary highway sales tax.  The General Assembly authorized cities and counties to bond these turnback funds if approved by voters.
• Incentives to Attract Low Cost Air Carrier to XNA - a signficiant cost for business in NW Arkansas is continued high cost of airfare.  The region sought assistance from the state to develop incentives to recruit a low-cost carrier like Frontier Airlines to XNA.  State legislators in the region designated funding to attract a low-cost carrier in an effort to reduce airfares for all NW Arkansas residents.
• FOIA Exemption for Water Systems - supported efforts by water systems to permanently exempt security-related documents from Freedom Of Information Act requirements.  Legislation passed by General Assembly.

Higher Education:

• Increased Funding for Higher Education - NWACC increased their general revenue funding by more than $500,000 and received $4.7 million in general improvement funding to pay for needed facility and program improvements.

Other Issues:

• Big River Steel - A new steel mill in Osceola will be the state's first opportunity to land a super-project.  BRS creates more than 500 jobs and brings more than $1 billion in investment to the state.  The project found support from legislators around the state for this Northeast Arkansas project.  The Chamber supported the project and the state's investment of $125 million in incentives.  The Chamber thanks all those legislators that supported the Big River Steel project.
• Private Option Healthcare - the major issue heading into the 89th General Assembly was how to deal with possible expansion of Medicaid coverage to 250,000 low-income Arkansans.  The likelihood of expanding Medicaid never found much support within the Republican majority of the House or Senate.  However, leadership in both parties negotiated an innovative compromise that uses federal Medicaid dollars to pay private insurance premiums for low-income Arkansans.  This plan is projected to save Arkansas millions in Medicaid matching funds while reducing uncompensated care losses at Arkansas hospitals and providing insurance coverage to many of the neediest Arkansans.  The Private Option plan originally conceived by Republicans John Burris, David Sanders and Jonathan Dismang truly proved to be the best solution to a difficult, complex issue.  The Chamber thanks all those legislators that supported this compromise legislation.

Referred Constitutional Amendments:

The General Assembly has the authority to refer up to three Constitutional amendments that will be placed before voters on the 2014 General Election ballot.  The year, the legislature picked these three out of a possible 38.

• Issue 1 - Seeks voter approval to authorize the General Assembly to oversee state agency rulemaking.  This empowers the legislature at the expense of the executive branch.

• Issue 2 - Seeks voter approval of an ethics, term limit, legislative pay and campaign finance laws.  This bill contains a little bit of everything.  It would allow state legislators to serve for up to sixteen years in any combination of terms in the House and Senate; eliminates most gifts and free meals for state legislators with a few exceptions; establishes an independent commission to set salaries for elected state officials and legislators; and eliminates corporate contributions to elected officials. 

• Issue 3 - Requires citizen petition drives seeking to place questions on statewide ballots have at least 75% valid signatures when they are submitted for the first time.  In 2012, many proposed citizen initiatives had 60% or more of their signatures thrown out because they were not from registered voters or in at least one instance were fraudulent.  Despite this, these petition efforts still received 30 additional days to collect signatures simply because they turned in petitions.  If the proposed amendment is approved by voters any rejection of more than 25% of signatures would immediately eliminate the ballot question from consideration.  This would make it more difficult for citizen petition drives to receive enough signatures to be placed on the ballot.  A lawsuit has been filed to stop consideration of this issue.

Other Issues Approved by General Assembly:

• Tax Cuts - in addition to the two manufacturing tax cuts, the legislature approved 1) a reduction in the capital gains tax on Arkansas investments and property, 2) a sales tax reduction on utilities for grain dryers and poultry houses, 3) a 0.1% income tax reduction, 4) future reduction in the sales tax on groceries, 5) income tax exemption for active duty military personnel and 6) sales tax reduction on sale of dental appliances and timber harvesting equipment.
• Lottery Scholarships - early in the session, the General Assembly modified the state's lottery scholarship awards so that no matter the institution, qualifying students will receive $2,000 for their freshman year, $3,000 for their sophomore year, $4,000 for their junior year and $5,000 for their senior year.  This change places two-year and four-year institutions on the same level and rewards students who complete their degree.

 While these are just a handful of the 1,500 bills approved by the General Assembly, they are the ones that the Chamber focused on during the session. Thank you for subscribing to this email.  Your engagement in the political process is very important factor in ensuring the business community has a voice in determining bills approved by the General Assembly.

Please continue to check-in with our Chamber's advocacy website:  www.rogerslowellvotes.com  to stay up to date on federal issues and join with other Chamber members to participate in important advocacy efforts.

Arkansas General Assembly - Winding Down?

The legislative session is rapidly winding down. Maybe quicker than anyone imagined. More than a few people suggested that the General Assembly would adjourn on April 5, which leaves just two weeks to either consider the nearly 2,000 bills that remain on the table or disappoint a lot of legislators who didn't have a chance to have their bill heard. Of course the General Assembly won't consider them all, but they do typically pass around fifty or sixty percent of introduced bills so that would mean they would need to consider and approve more than 900 bills before adjourning. No way that happens by April 5.

One of the big stories for the past week was HB1418, which would have phased-in a transfer of sales taxes from vehicle-related sources (batteries, tires, car sales) from the state's general revenue to the Highway Department. As originally conceived the bill would have phased-in a gradual transfer of this revenue so that in ten years the Highway Department would have had nearly $400 million per year in additional funding to pay for maintenance and construction. The Highway Department's main funding source - the federal trust fund and state gas taxes - have been flat while the cost of maintaining and building new highways has skyrocketed. This disparity prompted the proposal to shift sales taxes to the Highway Department

Governor Mike Beebe and the state's institutions of higher education led a very spirited opposition to HB1418 because of their fears that any transfer of general revenue to the highway department would result in cuts to universities and community colleges. A number of other advocacy groups joined in the opposition and were able to strip away co-sponsors from the bill. The bill's sponsor amended the legislation a number of times to reduce the potential impact to higher education, but an acceptable compromise could not be reached. The Transportation Committee heard the legislation on Thursday and the normally quiet committee was transformed into standing room only as supporters and opponents took over an hour to argue the merits and drawbacks of the bill.

The bill required 11 votes to pass out of committee and on to full consideration by the House. After a roll call, the bill garnered ten yes votes - one short and HB1418 failed to advance.

Also this week, the legislature received a consultant's report on the viability of the proposed Big River Steel project. The House and Senate Agri/Economic Development committees meet on Monday to discuss the report and make recommendations on incentives. The state is being asked to issue $125 million in bonds to fund a $50 million loan to Big River Steel and use the remaining $75 million for site preparation and issuance costs. The state is also offering various sales tax exemptions and income tax credits estimated at more than $200 million.

In return, Big River Steel will build a $1.1 billion steel facility in Osceola that will employ 525 people at an average wage of $75,000. The success of the facility depends in large part upon the global demand for steel. The report projects steel demand will increase by 8.7 million short tons a year and the new plant has a capacity for more than 3 million short tons or approximately 1/3 of projected increase in demand.

So how does the state benefit from this investment? The state will collect additional income taxes from the 525 jobs created, collect sales tax from purchases made by the plant both during construction and operation and corporate income taxes from the company itself. The report projects that by investing $125 million in bonds the state will likely recover their investment plus earn a return of more than $50 million in sales, corporate and income taxes.

If this "modest level of economic benefits," as the report describes it, is enough to prompt the state to issue the bonds we shall likely see next week.

This week could also see an announced agreement on tax cuts. Media reports say that legislative leadership and the Governor's office are hinting that an agreement is close on up to $100 million in total tax cuts. With so many tax cut proposals introduced (in the billions if all were approved) there appear to be a few that have the most support. The leaders seem to be cuts to grocery, income and manufacturing-related taxes.

There is so much to be decided between now and the end of the session. They have to make a decision on Medicaid/insurance expansion for Arkansans earning 138% or less of federal poverty limits, cobble together a budget and consider up to three potential constitutional amendments. I can't imagine a more frenzied finish to a legislative session than what the 89th is going to experience.

If you want to see a list of committees, their members and pending legislation you can find that information HERE.

89th General Assembly - Week 7

The past week was full of new developments that possibly signals the start of a new emphasis on the major pre-session issues of Medicaid and tax reform. Those are the two key questions that everyone expected to consume the General Assembly in 2013, but which have not been the topic of much official debate. Although, apparently, legislators have been hard at work behind the scenes on both issues.

On the Medicaid front, Governor Mike Beebe met with federal Health and Human Services officials to discuss the possibility of using federal Medicaid funding to help subsidize private insurance premiums for Arkansans with incomes below 138% of the federal poverty limit. This option is finding quite a bit of positive feedback from Republicans who hold the majority in the House and Senate. Any decision to appropriate state funds for either adding Arkansans to the Medicaid program or subsidizing private insurance will require 75% of the House and Senate to agree.

By helping these neediest of Arkansans obtain insurance coverage with federally subsidized private insurance 250,000 Arkansans could receive insurance coverage while the state would not grow its Medicaid rolls and hospitals will be able to reduce losses from charity care.

Our state's hospitals are facing reduced reimbursement rates from Medicare patients and when this is coupled with continued massive losses from charity care, many of our healthcare systems are struggling to survive much less expand and improve care. Therefore, any efforts to reduce charity care by moving uninsured Arkansans into an insurance plan will be a tremendous benefit to hospitals. In Northwest Arkansas, our hospitals employ thousands and are a major quality of life component and driver of the local economy. The Chamber strongly supports efforts to reduce charity care losses for our hospitals, whether it is through an expansion of Medicaid or supporting private insurance coverage for low-income Arkansans.

Also this week, Speaker of the House Davy Carter told the Revenue and Tax Committee that he felt the General Assembly could pass up to $150 million in tax cuts during the session without cutting the state's budget.

This is the first person in legislative leadership to offer a value for total tax reductions. Governor Beebe has proposed cutting the grocery tax, but only as selected state funding commitments expire (like desegregation funding for Pulaski County public schools).

Proposed changes to state income taxes were also addressed this week when Representative Charlie Collins (R, Washington County) filed bills detailing his recommendations. Collins has long argued that reducing the state's income tax would make Arkansas more attractive for new businesses. He has offered two options for the legislature to consider. HB1586 would gradually lower all tax rates, including the highest bracket which kicks in at $34,000. For residents earning more than $34,000 their income tax would fall to 6% from the current 7% level. HB1585 proposes identical tax brackets as HB1586, but HB1585 would phase in the reductions more quickly. So what would this mean for someone with $50,000 adjusted annual income? Using a very simplistic analysis this may equate to around $20 more per paycheck.

 
There are a number of other tax cut options on the table as well. The Chamber endorses two tax cuts that support manufacturing in Arkansas and we encourage you to join us in advocating for their passage.

HB1218 - Eliminates the state sales tax on utilities used by manufacturers. Only one of our surrounding states tax manufacturer's utilities, which places Arkansas at a competitive disadvantage in both recruitment and retention of manufacturers. In order to have a diverse economy, Northwest Arkansas must continue to support and protect its manufacturers by creating an operating environment that allows them to be the most competitive in the world. This bill continues a steady reduction in this tax and improves our ability to recruit and retain jobs.

SB334 - Eliminates the sales tax on parts used to repair or replace equipment used by manufacturers. This reduction is important to retain industry in Northwest Arkansas since many of our local manufacturers not only have competitors from around the world, they also have other facilities in the United States When a company is looking to expand production or make their facilities more efficient we want them to choose their Northwest Arkansas location to improve and expand instead of moving production to somewhere less costly. Reducing the sales tax on repair and replacement parts and equipment gives the state an advantage that might save hundreds if not thousands of existing jobs.

CALL TO ACTION - I ENCOURAGE YOU TO JOIN WITH US AND CONTACT YOUR LEGISLATORS IN SUPPORT OF HB1218 AND SB334. WE MAKE IT EASY TO SUBMIT AN EMAIL TO THE REVENUE AND TAX COMMITTEE.

CLICK HERE TO TAKE ACTION

If you want to see a list of committees, their members and pending legislation you can find that information HERE.

 

89th General Assembly - Week 6

The legislative session is nearing the halfway point and 932 bills and joint resolutions have been filed so far. While that sounds like a lot of legislation this is a significantly slower pace than in the previous session and assuming it continues the 89th General Assembly will wind up filing nearly 20% fewer bills this time.

There have been 143 of the 932 bills enacted into law so far. Eighty-nine are Joint Budget Committee bills and represent the 2013-2015 budgets for state agencies and departments. None of the remaining 54 bills represent major business-related legislation and only a few of the Acts have received much in the way of press coverage. By far, the leading headline-grabber was the bill that allowed concealed handguns to be carried inside churches, which is now Act 67.

All the signs are there that the session will begin to consider some of the major business issues of the session soon. The Arkansas Economic Development Commission delivered the official report requesting legislative approval of the $125 million in state support for the Big River Steel project last week. This starts the twenty-day clock for either approval or denial of state support for the $1 billion superproject.

The most anticipated pre-session issue - Medicaid expansion - has seen some movement this week as well. Governor Beebe met with federal officials to discuss a partial expansion of the Medicaid program in Arkansas and Republicans announced the hiring of a consultant to provide information on cost and benefits of expansion.

Finally, the past week saw the final anticipated piece of tax reform legislation filed when Representative Charlie Collins submitted a bill, currently without any details, that will likely propose a reduction in the state's income tax rates. This bill filing might signal a willingness of the General Assembly to begin considering which tax cuts might be feasible and, if so, how much the state can afford to cut.

There are four main tax cut types that seem realistic options for consideration.

Grocery Tax - one of Governor Beebe's goals is to eliminate the state tax on groceries. Since 2006, the state's grocery tax has been reduced from 6% to 1.5%. SB135 would elminate the remaining 1.5% if certain revenue conditions are met and when select state spending on bond payments and other extraordinary items are phased out.

Income Tax - Representative Charlie Collins (R, Washington County) has long advocated for reducing the state's income tax, which kicks in the highest bracket at just $33,200 in income. While the bill, HB1442, is only in shell form at this time, in the past Collins has recommended that the income tax reductions be phased-in based on revenue increases to reduce the impact to the state's current budget. This would require the state to maintain the flat budgets until the entire reduction is enacted, which might be several years depending upon revenue growth.

Agriculture & Manufacturing Taxes - There are nearly ten separate bills seeking to exempt equipment, supplies or utilities from state sales tax. These items range from utilities used in agricultural structures like chicken houses, baling wrap for cotton and timber equipment to utilities and replacement parts for manufacturers. The Chamber endorses eliminating the sales tax on utilities and repair/replacement parts and equipment for manufacturers. More on that below.

Business Taxes - There are two major business tax cuts to be considered this session. The first is a reduction in the capital gains tax assessed on the sale of Arkansas investments and property. A similar bill passed the House in 2011, but did not pass in the Senate. The bill has been refiled and will likely be discussed in detail, although it doesn't have the champion in the current legislature that it has had in the past. The other major business tax cut would double to ten years how long businesses can carryforward prior year losses to offset current profits. Many states have even longer carry-forward policies so Arkansas' current five-year restriction is much too short.

As mentioned above, the Chamber strongly supports two of the tax reductions under consideration and we encourage you to join us in advocating for their passage in the coming weeks.

HB1218 - Eliminates the state sales tax on utilities used by manufacturers. Only one of our surrounding states tax manufacturer's utilities, which places Arkansas at a competitive disadvantage in both recruitment and retention of manufacturers. In order to have a diverse economy, Northwest Arkansas must continue to support and protect its manufacturers by creating an operating environment that allows them to be the most competitive in the world. This bill continues a steady reduction in this tax and improves our ability to recruit and retain jobs.

SB334 - Eliminates the sales tax on parts used to repair or replace equipment used by manufacturers. This reduction is important to retain industry in Northwest Arkansas since many of our local manufacturers not only have competitors from around the world, they also have other facilities in the United States When a company is looking to expand production or make their facilities more efficient we want them to choose their Northwest Arkansas location to improve and expand instead of moving production to somewhere less costly. Reducing the sales tax on repair and replacement parts and equipment gives the state an advantage that might save hundreds if not thousands of existing jobs.

If you want more information on how HB1218 or SB334 might benefit your business please contact Michael@RogersLowell.com. Also, we need your assistance to make sure legislators understand the potential benefits of these bills. Please reply to this email if your business would be positively impacted by a reduction in the tax on utilities and repair/replacement parts.

89th General Assembly - 4th Week

We are essentially a month into the legislative session and much of the major business-related issues remains sidelined. The Revenue and Tax committees in the House and Senate are not even holding meetings because they don't have anything to consider despite the fact that they are four weeks into the session. That is a telling sign that the 89th General Assembly is taking things very methodically.

My assumption is that leadership in the House and Senate have agreed to focus on social issues in the first month before turning their attention to taxes, Medicaid and other business-related legislation. The past two weeks have seen a lot of committee time spent debating abortion and guns. Next week should see the final resolution to many of these issues.

On Tuesday (February 12), the House Education committee will consider Representative Charlie Collins' (R, Washington County) bill to authorize college staff and faculty to carry concealed weapons on campus. Many universities oppose this measure and the Education committee will no doubt hear from them that allowing concealed weapons on their campuses will not make them safer and will result in higher liability insurance for academic institutions.

There are also two abortion bills that are moving through the House and Senate and their final form should be decided in the next week as well. Once those are done it seems more likely that the General Assembly's energy will focus on taxes, Medicaid, funding the Big River Steel plant and a host of other issues.

Leadership has hinted that all tax cut related legislation will be considered at the same time and after spending levels are more certain. So, instead of passing individual tax cuts they will weigh the merits of each and then decide which they can afford. In 2011, the House passed four tax cuts fairly early in the session that then got held up in the Senate and used as a negotiating piece for other legislation. One might guess that House members may want to hang on to some leverage by working jointly with the Senate to ensure their main priorities are enacted. If so, it will be March before Revenue and Tax has anything to vote on.

If the General Assembly is focused on social issues, it raises the question what types of bills are being filed and is there a backlog waiting to be heard. While clearly not a scientific analysis, keyword searches of filed legislation produces the following insight:

219 bills are related to revenue (out of approximately 580 total bills filed)

72 bills are related to tax
24 bills are related to Medicaid
20 bills are related to economic development
8 bills are related to concealed weapons
6 bills are related to abortion

So the issues with the fewest number of bills are generating the most debate!

89th General Assembly - Week 3

This is the first full week of the legislative session even though it was the third overall and it turned out to be quite busy in the Capitol as Governor Beebe announced the largest economic development project in the state's history - a proposed $1.1 billion steel plant in Northeast Arkansas.

The proposed plant is projected to create 2,000 construction jobs for 20-months and 525 permanent, high-wage jobs at the plant, which will be located in Osceola. Recruiting these types of major projects requires a substantial commitment from the state and local entities through incentives. The state will be considering whether to offer $125 million in Amendment 82 bonds to support the project. Amendment 82 refers to the voter-approved addition in 2004 to the state's Constitution that authorizes the state to sell bonds in an amount up to 5% of general revenues to attract a designated "super-project."

The $125 million bond issue will be used to provide a low-interest $50 million loan to the steel plant and pay for $75 million in site preparation and issuance costs. Over the next three weeks, the General Assembly will be reviewing the proposal and will have to determine if the commitment of general revenue to repay the bonds is a good investment of scarce state resources. In approximate terms, if the state issues a 20-year bond issue at current tax exempt rates of 3.5% this equates to a payment of $9 million per year. The private developer will be repaying $50 million so that would like reduce the commitment of general revenues to around $5.2 million per year. This is compared to almost $40 million in annual payroll produced by the plant.

It seems likely that the General Assembly will agree to the bond issue as a means of bringing high-wage jobs to a part of the state that has been struggling with double-digit unemployment over the past few years.

With three weeks in the books, the General Assembly has slowly been filing bills. A typical session sees around 2,500 bills filed with a little more than half actually enacted into law.

Sometimes you can see what is important in a legislative session by comparing how many bills are filed with each committee. The way the state legislature works is that non-budget bills are routed through one of about ten A or B committees. The committees review the bills and recommend passage or issue a do not pass recommendation. Often, making it of committee with a "do pass" recommendation is enough to ensure its passage on the floor.

So what are the committees with the most bills after three weeks?

Public Health - 34 bills

State Agencies - 31 bills
Judiciary - 21 bills
Education - 17 bills
Insurance & Commerce - 7 bills
Transportation - 5 bills
City, County, Local - 5 bills
Agri & Econ Development - 4 bills
Revenue & Tax - 4 bills
Aging, Children & Youth - 3 bills

Public Health is an obvious choice with healthcare representing such an important if not THE important issue of the 89th General Assembly. The committee also reviews topics as diverse as abortion, unemployment insurance and wage law.

State Agencies has a number of bills pending that will change how a state agency like Natural Resources or Alcohol Beverage Control might operate as well as a few voting laws. It is also the committee that can refer up to three constitutional amendments for inclusion on the 2014 general election ballot.

Judiciary often focuses on crime and punishment in the state. There are a number of proposed laws pending that deal with criminal penalties and capital punishment.

Education deals with public and higher education issues and currently has a number of school choice and charter school related bills pending. The choice bills would address the ability of public school students to transfer to a school outside of their home district while the charter school legislation most often seeks methods to increase the number and viability of charter schools as an alternative to traditional public schools.

89th General Assembly Recap - Week 2

This is likely the last really placid week at the Arkansas General Assembly. They did not meet on Monday in honor of Martin Luther King Day and are not meeting today due to a lack of pressing issues. So they really were in session for about two and a half days this week.

They are approaching 300 bills filed so far, but most are standard appropriation bills that will be considered in context of an overall budget. The only political heat generated this week came from gun-related legislation as the national debate over gun-control spilled into the General Assembly. 

The House State Agencies Committee recommended passage of HR1003, which would encourage preservation of Arkansans' right to bear arms. This is what I call a "soap box" bill since it cannot directly impact policy and is simply an opportunity to publicly take a position on an issue. With one out of every two southerners being a gun owner and more than 127,000 concealed carry permits in Arkansas, being pro-gun is usually safe political ground in this state.
 

The General Assembly also saw legislation (SB71) filed to allow concealed carry permit holders to take their handguns into churches if that church allows it. While, HB1035 would authorize staff or faculty at higher education institutions to carry a concealed weapon on campus.

 

The Senate also dipped its toe into the Medicaid expansion debate this week as the Public Health Committee heard testimony from Arkansas Surgeon General Joe Thompson and University of Arkansas Medical System Chancellor Dan Rahn. Both Drs. Thompson and Rahn support expansion of Medicaid to Arkansans earning up to 138% of the federal poverty level. Both were questioned about the possibility of partially expanding the program to Arkansans earning up to 100% of the federal poverty level. The federal government has not indicated a partial expansion is possible at this time. Roby Brock with Talk Business reported on this story, which can be found HERE.
 

Without some sort of partial expansion solution allowed by the federal government, Medicaid expansion could hinge on developing a plan to fund the future state share that Arkansas must assume beginning in 2017 and what happens if the federal government reduces their current funding commitment. Leadership in the House have stated that once the new Medicaid recepients are added to the system the possibility that the state would throw them off if federal funding is reduced seems very unlikely. So mitigating future budget risks will be an important component of the expansion negotiation.