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Friday Fax – Legislative Update
It has certainly been a long, long session and this week was a long, long week with legislative work running from 7:30 a.m. to well after midnight Monday through Friday and a Saturday session to boot. The Senate, whose committees had been on a hiatus for a month, completed a month's worth of work in a week's time. Some committees considered 40 bills at one hearing and Friday the Senate calendar contained over 100 bills that were voted on before the day's end. NCRMA was there every step of the way - shepherding legislation through the process and trying to stop bad legislation.
Lobbyists refer to the closing weeks as "silly season" where bills are stripped and new language is dumped into a bill, bills that were once dead manage to be reincarnated and the pace runs a mile a minute. Notice we said closing weeks but we might should say closing days. After passing the Budget and working like crazy this week and session, the Senate and House will run skeleton crews this week meaning there will be no real sessions. The House will return on Monday, August 22 and the Senate on Tuesday, August 23 to hopefully complete the session and adjourn until May '06. We say "hopefully" because we do not want to be too optimistic but we do have our fingers crossed for a quick closing of the session.
Due to the lack of activity, there will be no Friday Fax this Friday. We will send you an update if there is breaking news. Otherwise, look for your Friday Fax again on August 27 th .
August 15, 2005
1) Senate and House Pass Budget/Governor Finally Signs It
2) Conference Committee Works on Methamphetamine
3) Minimum Wage Hike Passes House/Senate Bill Introduced
4) Service Agreements and Warranty Tax Removed
5) Pharmacy Bills Headed Towards Passage
6) Alcohol Legislation Update
7) Lottery Update
1) Senate and House Pass Budget/Governor Finally Signs It--The House and Senate finally passed a Budget this week - although late Tuesday evening it appeared we might be headed towards another stalemate. The final details on the Budget had been finalized on Sunday and sent to the print shop. Legislators picked up their copies on Monday for a review prior to the final votes. On Tuesday, the State Employees Association raised the amount of the State Employees raises forcing Speaker Jim Black to try and negotiate a separate bill to give every state employee an additional $150 raise (approximately $21 million). It appeared that this would garner Speaker Black the votes he needed to pass the $17.2 billion budget and this held true through the first vote of 60-59 late Tuesday afternoon. However, Governor Easley balked at the additional spending and said he would veto any such increase costing Speaker Black some potential votes and delaying the 3 rd reading of the bill at 12:01 a.m. Wednesday.
On Wednesday, Representative Paul Luebke (D-Durham) returned from France giving Speaker Black an additional vote. The return of Representative Luebke combined with the Governor's threat of a veto gave Speaker Black the leverage to get the State Employees and some Wake County Representatives to back off and pass the Budget on Wednesday afternoon. The Senate then followed suit on Wednesday evening and Thursday. Curiously, Governor Easley took his time in signing the Budget even though this resulted in State Government shutting down at 12:01 a.m. Friday. However, the prisons gates did not open, State Troopers continued to patrol the roads and the State hospitals continued to be staffed until Easley signed the Budget at 2:00 p.m. Saturday.
The Budget contains a $0.25 per pack increase in the cigarette tax effective September 1, 2005 making the tax $0.30 per pack. The tax then increases 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%. Effective October 1, 2005, candy will now be subject to state sales and use tax and will be taxed at 7% (7.5% in Mecklenburg ). Candy was previously treated like food and was only subject to 2.5% local sales and use tax.
The Budget contains all of the necessary changes to North Carolina 's tax laws to keep North Carolina in compliance with the Streamlined Sales Tax Project Agreement. The SSTP is an attempt by states to make tax laws consistent so that remote retailers will be subject to the state sales and use tax and level the playing field with brick and mortar retailers. North Carolina has been a leading state in this effort and NCRMA has played a large role in getting SSTP legislation enacted in each of the last five legislative sessions.
The Budget included 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 are contingent upon the Senate approving the House Lottery Bill as a stand-alone bill.
In a joint effort with the Association of Community Pharmacists, we were able to maintain the current Medicaid reimbursement for pharmacies. The Senate had initially proposed a reduction of $35 million this year and approximately $50 million in 2006-2007.
2) Conference Committee Works on Methamphetamines--The Senate and House Conferees began trying 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.
A draft proposed Conference Committee Report was printed but created so many operational burdens that many retailers initially stated they might get out of the business all together. This may have sent the Conferees back to the drawing board. We will be trying to work out a compromise proposal this week while the Senate and House are on hiatus.
3) Minimum Wage Hike Passes House Finance--By a vote of 62-59, the House approved House Bill 20 which would increase the minimum wage by $0.85 to $6.00 per hour. Quietly, many felt that the bill came to a vote in the House and was ultimately passed in an effort to secure the necessary votes from members of the Legislative Black Caucus to pass the Budget. Tied to the minimum wage increase in an $800 tax credit per employee for every employer with twenty-five or less employee you pays for in excess of a 50% of health insurance premiums.
It is uncertain what kind of reaction House Bill 20 will receive in the Senate - especially with the General Assembly heading towards the closing days. The Senate may have answered this question when they rolled out their own version of a minimum wage increase in Senate Bill 344 on Wednesday. Senate Bill 344 increases the minimum wage by $0.85 to $6.00 per hour but also makes the temporary half-cent sales tax permanent, increases the cigarette tax, reduces the corporate income tax rate and reduces the highest personal income tax rate. All of these are items that have been individually rejected by the House and would certainly be rejected again when combined together.
4) Service Agreements and Warranties Likely to be Taxed--Last week, we told you that some members of the Senate were pushing hard to make warranties and service agreements 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. The Senate backed off this proposal late last weekend and will instead charge the Revenue Laws Study Commission to revisit the issue. It is the intent of the General Assembly to apply the sales and use tax, in some manner, to maintenance agreements beginning July 1, 2006.
NCRMA met with Senators and legislative staff for three hours just before this decision was made to explain the number of service agreements and warranties that retailers maintain on things such as warranties on software, lighting maintenance agreements, shopping cart repair agreements etc. and the impact this new tax would have on the retail industry in North Carolina .
5) Pharmacy Bills Headed Towards Passage--On Friday, the Senate approved House Bill 1493 - Pharmacy Quality Assurance Protection Act - as introduced by Representative Nelson Cole
(D-Rockingham). This legislation was an NCRMA initiative and would require pharmacies to create a pharmacy quality assurance program to reduce medication errors in North Carolina while providing some protection from discovery in civil and criminal actions. The bill now heads back to the House for concurrence.
On Saturday, the Senate approved House Bill 1349 - Raise Ceiling on Board of Pharmacy Fees - by a vote of 49-0. This legislation was introduced by Representative Winkie Wilkins (D-Person) at the request of the Board of Pharmacy. After numerous months of discussions and negotiations, NCRMA was finally able to reach some resolution on how much the fee increase would be and the use of the additional revenues. The Senate will likely give final approval to the bill when the Senate returns to Raleigh on August 23 rd .
6) Alcohol Legislation Update--A number of alcohol related issues began moving this week towards passage. Two of the pieces of legislation were NCRMA initiatives: one addressing split case fees and the other addressing the stoppage of wine tastings in retail stores. Two other alcohol related bills of interest to retailers also saw some movement.
By a vote of 44-5, the Senate gave final approval to House Bill 1429 - Wine Shipper Fee - as introduced by Representatives Pryor Gibson (D-Anson) and Jim Harrell (D-Surry). This legislation included a provision at the request of NCRMA which overturns the North Carolina Alcoholic Beverage Control Commission's ruling that wine wholesalers were required to charge retailers a fee to split a case of wine. The Commission's ruling would have potentially cost retailers and restaurants in excess of $20 million in fees. The bill now goes back to the House for concurrence before on Monday, August 22, 2005.
On Thursday, the Senate approved the Conference Report for House Bill 1500 - Wine Tasting Changes - as introduced by Representatives Pryor Gibson (D-Anson) and Jim Harrell (D-Surry). The House approved the Conference Report on second reading on Thursday and will give final approval to the Conference Report on Monday, August 22, 2005. This legislation will allow retailers to again conduct wine tastings in their stores and was introduced in response to a ruling by the North Carolina Alcoholic Beverage Control Commission that retailers must perform every task of a wine tasting and that wine wholesalers and wineries could not participate in a wine tasting. NCRMA also had language inserted into House Bill 1500 that would allow retailers to rely on biometrics (fingerprints tied to an individual and their birth date) when carding purchasers of alcohol and tobacco.
On Friday, the Senate passed House Bill 1174 - ABC Permit Issuance and Compliance - by a vote of 45-3. As introduced by Representative Deborah Ross (D-Wake) this legislation is intended to address some bad actor "shot houses" in a distressed and blighted area of Representative Ross's district. The legislation requires the ABC Commission to revoke an ABC permit if the permittee or his employee has been convicted of two or more instances of gambling, disorderly conduct, gambling, prostitution or drug dealing on the premises within 12 months. NCRMA worked very long and hard with Representative Ross to craft this bill to help address the problems in her district and hopefully take the pressure off to implement local control of alcohol permitting. The bill must now go back to the House for concurrence next week.
On Saturday, Governor Easley signed House Bill 392 - Amend Definition of Malt Beverage in ABC Law. This legislation increases the cap on the amount of alcohol a malt beverage may contain from 6% to 15%. The beverage label must contain the amount of alcohol contained in the beverage. The legislation was a fine example of grass roots lobbying by self-proclaimed "beer nerds" and is intended to open up North Carolina's alcohol market to expensive and finely crafted beers with some costing upwards of $13 a piece. The bill became effective with the Governor's signature. No new permits are required to sell these newly allowed products.
7) Lottery Update--Being in the Senate Gallery watching the proceeding on Friday night was like watching the sixth game of the World Series. The Home team was preparing to clinch the World Championship with champagne on ice in the locker room and cameras set to capture the celebratory moment. Only thing was the Visiting team held tight and came through in the clutch in the 9th inning to force a seventh and deciding game.
The air was tense on Friday as many felt the Senate was set to make history with the passage of the Lottery. Many thought the vote would be close possibly even a tie which would have allowed future Gubernatorial candidate Lt. Governor Beverly Perdue to casting the deciding vote. Lobbyists for
G-Tech - the potential lottery administrator - left the take-out they were picking up for their families at the counter to return to the General Assembly at the request of Senate Leadership. North Carolina Association of Educators lobbyists grinned in the gallery in anticipation while Governor Mike Easley could smell victory on his major campaign platform in each of the last two elections. Members of the Senate flashed cameras during recesses and those cameras that did not flash merely lay on chamber desks in preparation. However, it was not meant to be as five Senate Democrats - Martin Nesbitt
(D-Buncombe), Dan Clodfelter (D-Mecklenburg), Ellie Kinnaird (D-Orange), Janet Cowell (D-Wake) and Charlie Albertson (D-Duplin) - held strong with 21 Republicans. The Senate adjourned just after midnight without taking a vote on the lottery.
Saturday's session came and went without a lottery vote as well. Senate President Pro Tem Marc Basnight stated afterwards to the press that they would probably have to convince a Senate Republican to vote with them to pass the lottery.
Lottery opponents forced the seventh game which could have a first pitch as early as August 23, 2005 when the Senate returns to town. When the Senate returns to town, most long-term observers of the General Assembly refuse to count out the passage of the lottery with Senate President Pro Tem Marc Basnight and Senate Majority Leader Tony Rand (D-Cumberland) taking the pitchers' mound for the deciding game.
‘TIL NEXT WEEK
Fran Preston
Andy Ellen
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