February 11, 2011

The week after the great blizzard began slow as the committee routine resumed. Hearings were posted slowly occasionally they were timely.

The Senate focused on elimination of the sate corporate income tax.

In the House the appropriations committees have been instructed to begin marking up the various department budgets by the week after next.

News this week includes:

House Continuing Resolution Reduces Spending For Health Centers, Programs
The House continuing resolution to fund the federal government for the remainder of this fiscal year includes spending reductions of nearly $35 billion for at least 70 programs. Appropriations Committee Chair Harold Rogers, R-Ky., released a partial list of programs that will receive less funding under the continuing resolution, including community health care centers ($1.3 billion), the National Institutes of Health ($1 billion) and the Centers for Disease Control and Prevention ($755 million). The full resolution release is expected sometime today and will be considered on the House floor next week.

Total spending reductions will exceed $74 billion. House Majority Leader Eric Cantor, R-Va., has promised that a final bill approved by the House also would deny additional funding for implementation of the health reform law. The House measure will have to be reconciled with a continuing resolution passed by the Senate.

HHS Announces $750 Million For Disease Prevention
The Department of Health and Human Services yesterday announced it will make $750 million in federal funds available for hospitals, clinics and chronic disease programs for disease prevention. Building on $500 million in investments last year, this new funding will help prevent tobacco use, obesity, heart disease, stroke and cancer, and help to increase immunizations.

FLOOR ACTION:  Tuesday, February 8, 2011
HB 162 Rep. Barney Fisher (R-125) passed the House this week.  HB 162 addresses the precedent set by the Franklin v. CertainTeed Corp. court ruling which, in essence, moved occupational disease claims from the worker’s compensation system (where they have properly been for over 80 years) into the courts.  In response to the business community’s “Fix the Six” agenda, HB 162 reverses that court ruling, which, if left to stand, would be devastating on our economy and jobs.  This legislation will permit appropriate compensatory damages to once again be determined by the worker’s compensation system.  The result will be a reduction in the cost of liability insurance for small business and less of a burden on our court system.  The bill passed with over 100 votes in the House.

State of the Judiciary
A joint session of the House and Senate convened this week to receive the State of the Judiciary Address.  Chief Justice William Ray Price, Jr. addressed the legislature with concerns ranging from funding cuts to the undesirable effects of incarcerating non-violent offenders.  He cautioned against the release of inmates simply because of budget cuts and made it clear his issue with the over-incarceration of non-violent offenders is not a reaction to budget concerns, but rather, an honest assessment of the non-rehabilitative nature of imprisonment. 

Right To Work
Proposals that would establish Missouri as a right-to-work state started the legislative process on Tuesday in the Senate General Laws Committee. Due to the popularity of the topic, the committee met in Senate Committee Room 1 with crowds flooding into the surrounding rooms and hallways, as well.

• SB 1   Bars employers from requiring employees to engage in or cease engaging in certain labor practices. - Hearing Conducted
  
  
• SB 197   Bars employers from requiring employees to engage in or cease engaging in certain labor practices. - Hearing Conducted

The nearly three-hour discussion centered on two pieces of legislation, Senate Bills 1 and 197. Sen. Luann Ridgeway, R-Smithville, is the sponsor of both bills that seek to bar employers from requiring employees to engage in or cease engaging in certain labor practices- creating a right-to-work state. The difference between the two bills is that SB 197 includes a referendum clause.

In presenting the proposals, Sen. Ridgeway said that workers have the freedom to choose whether or not they want to participate in a union. Missouri is competing for jobs on a national and international level, she said, and the incentives the state has focused on in the past are not working. Sen. Ridgeway believes it is clear that right-to-work states are bringing in the most new jobs, and she said that Missouri is losing nearly 1/3 of jobs to Kansas, because it is a right-to-work state and we are not.

Questions by members of the committee to Sen. Ridgeway included what safety issues may result because of this legislation and the overall effect it would have on union membership in the state. Many individuals were present to testify for and against the proposals. Committee chairman Sen. Jane Cunningham, R-Chesterfield, allowed witnesses to come forward by alternating proponents and opponents. The first opponent of the legislation was Emily Martin, Aschinger Electric Co. in Fenton, Mo. She said approving right-to-work would limit her rights as a business owner to negotiate collective bargaining agreements. Martin believes the current law successfully allows business owners to make the decision.

The first proponent of SB 1 and SB 197 was Cindy O'Laughlin, O'Laughlin Inc. in Shelbina, Mo. According to O'Laughlin, every individual should be allowed to make the best decisions for them and their families. Establishing a right-to-work state would allow employees to have that right, she said.

Main points of the discussion included the comparative wages of union and non-union employees, the cost of living in Missouri as it relates to other states, specific provisions in the collective bargaining process and how these proposals could help grow business in the state. Sen. Chuck Purgason, R-Caulfield, and Ron Gladney, an attorney for Missouri State Labor Council testifying in opposition, debated on how right-to-work legislation would impact Missouri's competitiveness in attracting new companies. Sen. Purgason believes it is a top concern of those businesses and Gladney said it has little influence. Others testifying in opposition were: Jeff Aboussie, St. Louis Building and Construction Trades Council; Gary Elliott, Eastern Missouri Laborers' District Council; Keith Querry, Blue Cross-Blue Shield of Kansas City Board of Directors; Maurice Schulte, Carpenters` District Council of Greater St. Louis; Terry Briggs, Site Improvement Association; Herb Johnson, Missouri AFL-CIO; and Joe Privitera, Mark One Electric of Kansas City.

Others testifying in support were: Greg Mourad; National Right to Work Committee; Jim Kistler, Associated Builders and Contractors; Ray McCarty, Associated Industries of Missouri; Ron Keeven, Keeven Heating and Cooling; and Greg Johns, Missourians for Right to Work.

Speaking for informational purposes only was Mark Sweeney, a site selection consultant from South Carolina. Sweeney said that 100 percent of his clients have concern over the state's labor management climate and have expressed interest in operating in a non-union manner. He also said that 50 percent of his manufacturing clients will not even consider Missouri because it is not a right-to-work state.

The final person speaking during the hearing was Lawrence Rebman, director of the Missouri Department of Labor and Industrial Relations, who expressed the administration's opposition to the legislation.

House-Tax Reform
The Missouri House Tax Reform Committee met on Wednesday in House Hearing Room 5 to hear two major bills. They were:

HB 76   Limits the tax liability of a corporation for corporate franchise taxes to no more than $2 million annually. - Voted do Pass as Substituted

The first order of business before the committee was to hold an executive session on House Bill 76, sponsored by Rep. Jerry Nolte, R- Gladstone. HB 76 would cap corporate franchise taxes at $2 million, and during committee discussion, members added an amendment that would phase out the tax altogether over five years. The committee approved House Committee Substitute for HB 76 in a vote of 8 to 3.

HJR 8   Proposes a constitutional amendment replacing the individual and corporate income tax, corporation and bank franchise taxes, and sales and use tax with a fair sales tax on certain property and services. - Public Hearing Completed

Following the executive session, Rep. Andrew Koenig, R-Winchester, presented House Joint Resolution 8 before the committee. This resolution is commonly known as the Fair Tax proposal. It would propose a constitutional amendment to replace the individual and corporate income tax, corporation and bank franchise taxes, and sales and use tax with a fair sales tax on certain property and services.

Rep. Koenig believes HJR 8 would streamline Missouri's tax policy, and create a more attractive place for people and businesses to locate. He said under this legislation, every Missourian would have a higher take- home pay and the opportunity for tax fraud would decrease. Rep. Koenig cited a report that says the tax-fraud rate is 15 to 17 percent federally.

Other specifications of HJR 8, which Rep. Koenig described, were that the state sales tax level would be capped at 7 percent and families would receive a sales-tax rebate to help ease the burden on the increased rate. Proposed exemptions to the increased sales tax rate would be business-to-business transactions, insurance, education, gasoline and donations to charities.

Rep. Rory Ellinger, D-University City, asked Rep. Koenig what his true intent was with the legislation and his response was "to make this a more business friendly state."

Testifying in favor of the HJR 8 were: Fred Berry, resident from Columbia, Mo.; Ed Emery, former Missouri House Representative; Carl Bearden, United for Missouri; Rob Hillman, Republican Liberty Caucus - Missouri; and a former small-business owner.

Jim Moody, on behalf of Missourians for Fair Taxation, testified in opposition to HJR 8. Moody believes there are three main questions that should be asked about the proposal: What is taxed? What are the rates going to be? What will be exempted? According to Moody, analyzing those questions leads to the conclusion that the major burden is going to fall on the middle class under this legislation. Moody said the expanded sales tax rate would cover items such as rent, food, utilities, child care, attorney fees and health care. In theory, Moody said, this sounds like a good proposal, but research shows that implementation will be difficult.

Also testifying in opposition were: Sam Licklider, Missouri Association of Realtors; Amy Blouin, Missouri Budget Project; David Overfelt, Missouri Retailer's Association; Patrick Bonnot, Missouri Municipal League; Shannon Cooper, Greater Kansas City Chamber of Commerce; Jeremy LaFaver, Missouri Partnership for Children; Mike Hoey, Missouri Catholic Conference; Otto Fajen, Missouri National Education Association; and Chuck Pierce, Missouri Society of CPA's.

Fair Tax
On Wednesday, 2/9/11, the House Tax Reform Committee held a hearing on HJR 8, the “mega sales tax” proposal. Significant and diverse opposition presented testimony on the drastic impact of the proposal that would create a constitutional amendment to eliminate Missouri’s current tax structure and replace it with a greatly expanded sales tax. Jim Moody, former budget director under Governor Ashcroft, testified that the measure would require a more than 12 percent sales tax rate on everything from rent to child care. The Missouri Budget Project, the Kansas City Chamber of Commerce, the Missouri Realtors Association, the Missouri Retailers Association, Partnership for Children, the Missouri Catholic Conference, Catholic Charities, the Missouri Municipal League, the MNEA, and others testified against the measure.

Also this week on the same topic, Missouri State Auditor Tom Schweich released a statement indicating that the Auditor’s office is not able to fully ascertain the impact of the nine initiative petitions that have been filed on the issue. The Auditor indicated that the initiatives are unable to be fully quantified because critical factors are unknown, including what the tax rate would be, what items or services would be exempted by the legislature, and what economic consequences there might be, such as retailers and service providers relocating out of the state.  The inability of his office to estimate the impact underscores the fact that this proposal has no place in the state’s constitution. The uncertainty could prove devastating, and as a constitutional provision, it would be very difficult to reverse.

House Tax Reform Committee to Hold Hearing on the Streamlined Sales Tax
The House Tax Reform Committee, chaired by Representative Funderburk, will hold a hearing on Wednesday, 2/16, at 8 a.m. in House Hearing Room #5 to discuss the Streamlined Sales Tax proposal.  

The Missouri Budget Project supports this proposal, and urges lawmakers to ensure that Missouri joins the twenty-four states that have already enacted the mechanism, including most of the state’s neighbors.  The state sales tax hasn’t kept up with the changing economy.  In the last year, Missourians spent approximately $2.8 billion on e-commerce, but most of the state and local sales and use taxes on these purchases have gone uncollected or to other states.  This gives an unfair advantage to online retailers compared to Missouri’s brick and mortar stores and results in a significant loss of state and local revenue.  In fact, Missouri is estimated to lose $210 million in state and local sales tax revenue in 2012 if it fails to adopt the Streamlined Sales Tax, the mechanism necessary to address this inequity.   

Next Week
After the set back of the blizzard week last week the House and Senate will have a very heavy hearing schedule in an attempt to hear as much legislation as possible prior to the spring break a few weeks from now.

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