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Friday Fax – Legislative Update
Well, this is the 31 st edition of the 2005 Friday Fax covering the retail perspective of the North Carolina General Assembly. Imagine that some states meet for 30 days and we are now on 30+ weeks . I am left to wonder what the purveyor of that famous quote "No man's life, liberty or property are safe while the legislature is in session" would think about our elongated session. Then again, this could be deemed a short session in comparison to 2001 when we met for 12 straight months .
Opening Day on January 26 th seems so long ago and as you walk the halls on Jones Street it is apparent that patience is wearing thin and legislators, legislative staff and lobbyists alike are ready for our dear elected friends to put Raleigh in the rear-view mirror until the May 2006 Short Session. Yes, another Continuing Resolution has come and gone but there appears to be light at the end of the proverbial Budget tunnel meaning adjournment cannot be too far away.
August 5, 2005
1) Senate and House Strike a Deal on Budget - End in Sight? Part IV
2) Methamphetamine Bill Heads to Conference
3) Minimum Wage Hike Passes House Finance
4) Service Agreements and Warranties Likely to be Taxed
5) Agreement Reached on Board of Pharmacy Fees
6) Sales Tax Holiday Date Change Could be in the Works for future years
1) Budget Talks Continue - An End in Sight? Part IV -- Earlier in the week, the General Assembly was full of optimism that a Budget would be approved by Friday, meeting the deadline before the expiration of the August 5, 2005 Continuing Resolution. Unfortunately, that optimism quickly evaporated due to the Senate and House's inability to resolve a few key issues - tobacco tax increases, lottery provisions and autonomy for UNC-Chapel Hill and NC State from the UNC Board of Governors. On Thursday, the House and the Senate passed another Continuing Resolution that will allow State Government to continue to operate under the current Budget scheme through August 11, 2005. Late last night, deals were reached on each of these matters and provisions were sent to the print shop to begin readying the Budget for a floor vote next Tuesday or Wednesday.
The Senate was pushing for a $0.35 cent per pack increase in the cigarette tax while the House Speaker continually maintained that he could not muster the necessary 61 votes for anything over $0.25 per pack. The House and Senate have agreed to a $0.25 per pack increase in the cigarette tax effective September 1, 2005 making the tax $0.30 per pack. The tax would then increase an additional $0.05 per pack effective July 1, 2006 taking the tax to $0.35 per pack. Taxes on other tobacco products would also increase from 2% to 3%.
It also appears likely that the Budget will include provisions allowing for the advertising of the lottery as well as spending part of the proceeds of the lottery on childhood education. These lottery changes included in the Budget would be contingent upon the Senate approving the House Lottery Bill as a stand-alone bill.
Speaker Black and Senator Basnight have headed home for the weekend presumably with all the Budget details in order. In response to criticism from the media and Republican legislators, Speaker Black has stated that he will allow the House one day to review the Budget prior to voting on the Budget on Tuesday and Wednesday.
As we have repeatedly reported, the Senate has shut down all Senate committees until the Budget was resolved. With the Budget apparently behind us, there will be a race to get bills heard in the Senate as we head towards adjournment. It usually takes two to three weeks to shut down Jones Street once the Budget has passed so look for adjournment from anywhere between August 18 and Labor Day. There does not appear to be many issues that the General Assembly would hang around past these dates to address. There is some talk that the Honorables may swing into high gear and try to finish up in the neighborhood of August 18 through 21. One thing that could stand in the way of a quick adjournment would be the National Conference of State Legislatures meeting in Seattle from August 16 to August 20. If legislators catch their breath we could be in Raleigh for quite a while.
2) Methamphetamine Bill Heads to Conference Committee -- This week, the Senate and House named Conferees to work out the differences between the Senate and House on their versions of Senate Bill 686 - Methamphetamine Lab Prevention Act of 2005. The Senate Conferees are Senators Walter Dalton (D-Rutherford), John Snow (D-Cherokee), Tony Rand (D-Cumberland) and Fletcher Hartsell (R-Cabarrus). The House Conferees are Representatives Bill Culpepper (D-Chowan), Lorene Coates (D-Rowan), Phil Haire (D-Haywood), Grier Martin (D-Wake), Jennifer Weiss (D-Wake), Earline Parmon (D-Forysth) and Karen Ray (R-Iredell). Senator Dalton and Representative Culpepper will serve as Chairs of their respective Conference Committees. Both of the Chairs have been major negotiators in the Budget process and have delayed negotiations until after a Budget agreement is finalized. The Conference Committee will work out a compromise that will go before both bodies for an "up or down" vote with no amendments. In other words, whatever comes out of the Conference Committee will pass.
We have been in close contact with members of the Conference Committee as well as with Senate and House Leadership to try and work out a reasonable compromise. From our conversations, it appears that the Conference Committee may be leaning towards the following: 1) Requiring products containing pseudoephedrine as the single active ingredient (i.e. Sudafed) to go behind the pharmacy counter; and 2) Gel caps, liquids and pediatric would remain on the shelves of all retailers. What remains up in the air is what will be done with products that contain pseudoephedrine in combination with other active ingredients (i.e. Tylenol Cold and Sinus and Theraflu). The Attorney General is still pushing hard for requiring these items be placed behind the pharmacy counter while we have argued that these items should be placed behind a counter or in a locked case of all retailers.
This issue will be resolved fairly quickly depending on how long legislators decide to stay in town after the Budget is passed.
At the bottom of this update is an AP article detailing what we have been telling legislators all along - meth addicts do not quit "cold turkey" and the restriction of products only serves to switch the meth population to other sources of this dangerous drug. Oklahoma 's law is held up as the beacon of how to reduce meth - including by North Carolina 's Attorney General. Now, we find out that maybe Oklahoma 's law has done little to solve their problems. Click here to read the article.
3) Minimum Wage Hike Passes House Finance -- As expected, the House Finance Committee approved an increase in the minimum wage on Thursday. The minimum wage increase appears to have nine lives as similar measures had already been defeated twice earlier this year. As you may remember, NCRMA was successful in defeating this legislation earlier this year in the House Commerce Committee only to see the bill revived in House Commerce Committee and sent to the House Floor where the bill was defeated by 14 votes.
The newest proposal would increase the minimum wage by $0.85 per hour effective January 1, 2006. Because the proposed increase is different than the two earlier proposals that have been defeated, the bill is eligible for consideration. In an attempt to pull some of the conservative Democrats that voted against the last proposed hike, the minimum wage increase has been attached to legislation providing for a $400 tax credit per employee to every employer employing less than 25 employees and who provides health insurance. The Winston-Salem Journal detailed the objection to the bill argued by Bill Daughtridge. Rep. Bill Daughtridge (R-Nash) said that businesses would have to give up a tax deduction that they can already claim for health insurance to claim the new tax credit. "It sounds a whole lot better than it is," Daughtridge said. Based on an average cost of $5,000 to insure a worker, he said, "It sounds like you're getting $400, but you're really only getting $55."
While most retailers pay above minimum wage, NCRMA testified in the House Finance Committee against the proposed bill due to the ratcheting effect the bill would have on retail employees making more than the minimum wage. Additionally, because workers' compensation, unemployment compensation and FICA are all tied to payroll an increase in minimum wage will likely cost employers in the neighborhood of $1.35 per hour per hourly employee. Based on the Congressional Budget Office's determination of the impact of the minimum wage, it is estimated that the proposed minimum wage increase would cost North Carolina 's businesses $81,000,000 in 2006.
From all indications the vote will be close on the House Floor. With the Democrats holding a 63-57 margin and one Republican likely to vote for the increase, it will be necessary for us to again have at least four Democrats vote against the bill. The Democrats voting against a minimum wage increase earlier in the year are listed below along with their legislator's phone numbers. Give them a call and tell them to vote "No" on the Minimum Wage Increase!
Nelson Cole (D-Rockingham) - 919.733.5779
Jim Crawford (D-Granville) - 919.733.5824
Pryor Gibson (D-Anson) - 919.715.3007
Jim Harrell (D-Surry) - 919.715.1883
Dewey Hill (D-Columbus) - 919.733.5830
Edd Nye (D-Bladen) - 919.733.5477
Ronnie Sutton (D-Robeson) - 919. 715.0875
Joe Tolson (D-Edgecombe) - 919.715.3024
Winkie Wilkins (D-Person) - 919.715.0580
4) Service Agreements and Warranties Likely to be Taxed -- The Senate appears set to push for warranties and service agreements to be subject to sales and use tax regardless of whether the service agreement or warranty is part of the purchase price of the product. Under current North Carolina law, a service agreement or warranty is subject to sales and use tax if the price of the service agreement or warranty is part of the service agreement. However, if the warranty of service agreement is purchased separately sales tax is not applied. Earlier this year, the Senate included language in the Senate version of the Budget applying sales tax to warranties and service agreements on goods regardless of how or when the warranty or service agreement is purchased. As recently as last week, it appeared that this provision was dead but like the minimum wage has resurfaced as an attempt to clarify North Carolina 's tax scheme.
NCRMA met with Senators and legislative staff for three hours yesterday trying to determine the impact on retailers for things such as warranties on software, lighting maintenance agreements, shopping cart repair agreements etc. Late Thursday, legislators were leaning towards exempting service agreements on software from sales tax but applying the sales tax to all other warranties and service agreements.
5) Agreement Reached on Board of Pharmacy Fees -- After months of arguing back and forth it appears that there has been some resolution reached on the Board of Pharmacy fees. The bill attached will raise the Board approximately $400,000 to hire three new inspectors and pay for their expenses. The original bill would have raised nearly $1.4 million and the Board's "compromise" would have raised nearly $900,000 the first year escalating to $1 million in the second year. Under this proposal, the fee for a pharmacy or a pharmacy to renew their pharmacy permit/pharmacist license would go up $25 and the fee for technicians would go up $5. Language was included in the bill that it is the goal of the General Assembly that this money be used to fund inspectors rather than to pad the Board's budget. The increased continuing education for pharmacists was pushed back to January 1, 2008.
A renewal fee for durable medical equipment dealers - does not apply if you already have a pharmacy permit - is also being implemented at $200 per year to keep this fee in line with the pharmacy renewal fee. The Board had originally proposed a $300 fee for Durable Medical Equipment dealers.
We have had several conversations with the Board and individual members about the need to trust one another and get out of our fox holes. In that light, we gained commitments from the Executive Director of the North Carolina Board of Pharmacy, Dr. David Work to the bill sponsor and the community pharmacy representatives of the following:
1) There will be quarterly meetings with a Board committee to discuss issues concerning community pharmacy;
2) The Board will inspect pharmacies in an equitable manner and will report to us on who is being inspected.
3) The Board will not attempt in any way to sabotage the Quality Assurance bill going forward.
Yesterday, the House Finance Committee approved the House Bill 1349 sending the bill to the House Floor.
6) Sales Tax Holiday Date Change Could be in the Works -- We hope as you read this update that you are enjoying a successful Sales Tax Holiday. As you know, NCRMA worked hard to get the Sales Tax Holiday enacted in 2001 and has continuously worked to ensure that the Sales Tax Holiday continues. Additionally, NCRMA continues to work closely with the North Carolina Department of Revenue to prepare handy materials, including a poster containing a list of taxed and non-taxed items to place at your registers to help employees and customers identify tax-free items. We heard from a couple of legislators this week that they may look at moving the Sales Tax Holiday out a couple of weeks to get closer to North Carolina's new start date for school of August 25 th of each year.
‘TIL NEXT WEEK
Fran Preston
Andy Ellen
Oklahoma : No drop overall in meth use
Law leads to drop in labs; Mexican-made version more prevalent
08:21 PM CDT on Thursday, July 28, 2005
Associated Press
TULSA , Okla. - A widely copied Oklahoma law that has led to a dramatic drop in small-time methamphetamine labs has done little to curtail meth abuse overall. Users are turning to Mexican-made versions of the highly addictive drug, according to drug agents and others dealing with the problem.
Mexican drug cartels that have traditionally focused on trafficking cocaine, heroin and marijuana are now adding methamphetamine to their supply, said Lonnie Wright, director of the Oklahoma Bureau of Narcotics and Dangerous Drugs.
Mr. Wright told members of the Oklahoma Sentencing Commission on Thursday that law enforcement is shifting its focus to these Mexican drug smugglers who are dealing in a smokeable meth known as "crystal ice" to fill a void left with the disappearance of Oklahoma meth labs.
"We're regrouping, and we're kind of at a crossroads," Mr. Wright said. "I think we're through with meth labs, at least for now."
Seizures of "crystal ice" have risen nearly fivefold since a state law began putting local meth makers out of business.
Oklahoma was the first of more than a dozen states to limit over-the-counter sales of cold medicine containing a key ingredient used to make meth.
"Our problem hasn't gone away," said Oklahoma City Police Lt. Tom Terhune, who investigates drug cases. "The problem that's gone away is the meth labs."
Oklahoma has seen a 90 percent drop in lab seizures since it put medicines containing pseudoephedrine behind pharmacy counters in April 2004. Congress is now considering similar legislation.
In the same 15 months, however, ice seizures rose to 1,875, compared with 384 seizures in the previous 15 months, Oklahoma State Bureau of Investigation statistics show.
"The violence with the drug is still there," Lt. Terhune said. "But the house next door isn't going to blow up because they're selling ice out of it."
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