January 15, 2010

Committee assignments are still being decided in the General Assembly and should be announced next week.

The Governor’s State of the State will be Wednesday, January 20th at 7pm and at that time the dismal budget picture will be announced by the Governor.

Hearings on legislation will begin in earnest next week and the real work of the 2010 session will begin.

News of interest this week includes:

Budget
A consensus budget estimate was delivered by the Governor’s office. During the first 6 months of the fiscal year revenue was 10.6 percent lower than during the same period as last year. Nixon plans to cut an additional $200 million on top of previous cuts this year to the state budget.

Health Care
The so called “tea-party” groups had a rally on Wednesday sponsored by billionaire activist Rex Singquefield.

The group was promoting HJR 57 (Tim Jones), HJR 18 (Diehl) and SJR 25 (Cunningham) that allow an “opt out” on the federal government health care plan. Although Missourians will still pay for the plan even if individuals “opt out”.

Fair Tax
More than 100 people packed a Senate Hearing room and overflow room on Tuesday to listen to presentations by a diverse group of economists and tax stakeholders during the Senate Seminar on tax policy. Dr. Joseph Haslag, executive vice president of the Show-Me Institute, gave a presentation in support of legislation to implement the "Fair Tax" in Missouri, which would eliminate the income tax and shift tax burden on broad-based sales tax collections. Nationally recognized economist Art Laffer followed his presentation with a discussion about the merits of Missouri eliminating its income tax, pointing to several states that have improved their economic standing by doing so. Laffer was followed by another well-know Missouri budget analyst, Jim Moody, who pointed out the potential pitfalls to such a broad-sweeping tax policy change. Amy Blouin, executive director of the Missouri Budget Project also outlined dangers of this change. Brian Schmidt, Executive Director of the Joint Committee on Tax Policy also gave an overview of Missouri's tax base and sourcing.

The hearing also gave a peek into the plans of Senate wildcard Jason Crowell, a Cape Girardeau Republican known for tying the Senate in knots to slow legislation he opposes or force action on his priorities.

Crowell, an outspoken critic of tax credits, intimated he was likely to stymie progress of the Missouri Science and Research Investment Act, or MOSIRA.

The program, a top priority for both House Republicans and Democratic Gov. Jay Nixon, would capture tax revenue from high-tech businesses and redirect it to attracting new high-tech business, conducting research and sponsoring job training.

"We need to have some understanding of the inequities that are dominant in Missouri's tax structure through tax diversions and tax credits," Crowell said.

To facilitate that understanding, he added, "I figure I’m going to hold the floor starting at about spring break."
Hearing notes from speakers include:

Tuesday, January 12, 2010, 8:30 a.m., SCR 2 & 1 Senate Seminar: Presentation on Federal Healthcare Legislation.

Speaker: Joy Johnson Wilson, Health Policy Director, NCSL

Senators in attendance: Shields, Champion, Stouffer, Lembke, Purgason, Mayer, Scott, Pearce, Schmitt, Engler, Goodman, Lager, Shoemeyer,

• Discussion on how the # of Republicans & Democrats affected the bill as it is today: filibuster needed votes to end & trades were made to get the votes to end the filibuster (Nebraska & Louisiana).
• Two bills on table today; house version and senate version.  Instead of going to conference committee, they are “ping-ponging” between the two houses informally to compromise to a “Managers Amendment” that will attach to either the house or the senate version.
• Medicaid expansion eligibility level raised to either 150% or 130% of fed. Poverty level.
• Mandatory coverage for single childless adults; preventative services (no cost sharing), coverage of podiatrist, optometrist, dental services; codifies requirement to provide non emergency transportation.
• Requires background checks for direct patient care employees at long term care facilities.
• Requires state use of NCCI.
• Individual & employer responsibilities, requirements & penalties were reviewed, noting the differences between the house and senate versions.
• “Exchange”: like a one-stop-shop for insurance and will replace small group an individual market.  The exchange will be in effect either 2013 or 2014 depending on house or senate version.
• Health insurance reforms taking effect after the exchange (in 2013 or 2014) will prohibit discrimination based on health status and there will be no discrimination in benefits.
• CLASS will be funded by automatic payroll deduction.  At time of hire you can opt out.  The money goes to disabled adults to remain independent.
• Go to NCSL web site for updates and current information.
• Tuesday, January 12, 2010, 10:30 a.m., SCR 2 & 1 Senate Seminar: Presentation on Tax Policy (HJR 56, Emery)

Speaker: Dr. Haslag, Show Me Institute

• HJR 56 shifts state revenue from income tax to sales tax as tax base. 
• Spending is 2/3 as volatile as income, so the logic is that the revenue stream for sales taxation would be steadier year after year than taxing income which fluctuates more with the economic ups and downs. 
• Services would be taxed; all doctors, lawyers, accountants, lobbyists, child care, bankers, etc. would pay tax on services.
• Rents would be taxed

Speaker: Dr. Laffer, Laffer & Associates

• “All tax is bad”; it is akin to negative reinforcement. 
• The optimal tax system keeps taxes as level as possible on the broadest base possible.
• Had loads of statistics on states with income tax vs. states without income tax.
• It’s all about economics, not re-distribution
• CA has high income tax; highest teacher salaries and 2nd lowest test scores.
  
  Senator Bray: Tax is not bad, but essential for the collective good.  Taxes are necessary for building libraries, roads, and caring for the elderly and indigent.

Speaker: Jim Moody, Jim Moody & Associates

• This is a “gross receipts” tax.
• Winners = people with W-2’s
• Losers = health care industry
  
  Senator Cunningham: I would rather pay tax on my spending because I have more control than paying tax on my income.

Speaker: Amy Bloom, Mo Budget Project

• HJR 56 eliminates corporate income tax, individual income tax, state sales tax (including conservation & road tax).
• No other state has a tax on sales AND services
• College tuition is exempt from taxation
• What is the impact on tax credits?

Speaker: Brian Schmidt, Joint Committee on Tax Policy

• Explained the current tax policy for Missouri
• Gave several different options for tax structures
• Explained the tax structure, base, timing & expenditures.
  
  Sen. Crowell: When did all the tax credits & exemptions & diversions occur?
  Life Sciences want an exemption.  The current tax policy is not equitable, so hire a lobbyist and get an exemption.  This carves special interests out of paying for the collective good.

Appropriations
Monday, January 25th the Senate Appropriations Chair Mayer will receive the FY 2011Governor recommendations. This will promise to be an “eye opening” dismal experience.

State Court Hears Medical Malpractice Damage Cap Challenge
The Missouri Supreme Court heard oral arguments today in a case challenging the statutory $350,000 per case cap on noneconomic damages awarded in medical malpractice cases. The statute was enacted in 2005 by the Missouri General Assembly as part of its comprehensive tort reform package. Numerous organizations filed amicus curiae briefs for the case of Klotz v. Shapiro. It is uncertain when the court will issue its opinion. Opinions are typically issued within a 45- to 60-day window from the date of oral argument, but a longer time frame would not be surprising.

Next Week
The third week of session begins. Committee hearings will start up and we will be anxiously awaiting the Governor’s budget message this week.

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