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.

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.