TO:American Council of Professional Engineers

M E M O R A N D U M

TO:American Council of Professional Engineers

Bruce Wylie

FROM:Mark J. Rhoads

RE:Missouri Legislative Report – Week 7

DATE: January 23, 2013

In the news:

Lieutenant Governor Peter Kinder (R) made public his comments on how he has been treated by Governor Jay Nixon (D) in an interview with St. Louis Public Radio on Wednesday of this week. Kinder told interviewers that in the five years that the two have served in office, they have had only one substantive conversation about state policy and that discussion related to the now defunct Tour of Missouri bicycle race which Kinder says brought in hundreds of thousands dollars into the state of Missouri. The event has since moved to the State of Colorado. Most recently, Kinder has joined with Democrat State Senator Jamilah Nasheed in criticizing Nixon for delaying tax credits for low-income housing projects pending before the Missouri Housing Development Commission. Don’t expect a thawing of the relationship anytime soon.
Senate Budget Chairman Kurt Schaefer (R-Columbia) called the Governor’s budget submission “absolute political fiction” as the Governor’s Budget Director presented his FY 2015 budget to the Senate Appropriations Committee this week. Points of contention include $490 million in increased spending for K-12 and higher education spending, $200 million in bonds to build a new state mental health facility in Fulton, MO, and $37 million for pay raises for state employees. Nixon’s administration is counting on a 5.2% increase in state revenues, while the House and Senate have agreed to a 4.2% increase, a difference of $214.5 million.
One of the most watched actions this week were the bills heard by the Senate Education Committee relating to the student transfer problems created by unaccredited schools in St. Louis and Kansas City. The Committee heard six bills in a three hour hearing attempting to address the problems associated with student transfers in the urban areas. Five of the six bills were identical and there is bi-partisan support to solve the problem of students transferring from unaccredited to accredited districts. The bills heard Wednesday allow districts receiving transfers to establish class size policies and teacher-student ratios that would allow them to decline to accept transfer students due to space considerations.
State Senator Scott Rupp (R-St. Charles) announced this week that he will accept a Nixon appointed position to the Missouri Public Service Commission. The AP reports that the Rupp appointment could clear the way for the appointment of Nixon aide Daniel Hall to receive the necessary advice and consent from the Senate Gubernatorial Committee to serve on the Commission. Hall’s appointment was on the agenda this week, but was set aside by the Committee this week, but is expected to be revived in the future.
At an annual conference on transportation, MoDOT Director Dave Nichols warned that MoDOT will not be able to continue to maintain Missouri’s vast network of roads and bridges with declining funding. He told attendees that MoDOT’s budget would fall from $685 million this year to $585 next year and could drop as low as $325 million in 2017 and beyond. Nichols said “we have started to fall off the cliff”.

STATE-OF-THE-STATE AND BUDGET ADDRESS: Governor Jay Nixon addressed the Missouri General Assembly on Tuesday evening presenting his annual State-of-the-State address. He said that Missouri’s economy is strong and growing stronger. Nixon stated that unemployment has been below the national average for 51 straight months and Missouri has added 44,000 jobs in the last year. Nixon emphasized the usual themes of economic development growth and more state efficiencies in spending. A few of the highlights of the address and budget include:

$42.1 million for performance-based funding for colleges and universities.
$67.2 million for the Access Missouri Scholarship Program, an increase of $8.6 million to assist an estimated 49,000 students.
$33.1 million for the A+ Scholarship Program, an increase of $2.7 million, assisting an estimated 14,000 students.
$31.7 million for the Academic Scholarship Program (Bright Flight), an increase of $17 million, including $15 million general revenue, to offer Bright Flight scholars the option of receiving an additional $5,000 per year on the condition that they pursue employment in Missouri after they graduate.
$22 million new funding to four-year universities to focus on preparing students for high-demand careers in science, technology, engineering, and math (STEM).
$24.1 million for the Division of Tourism to enhance efforts to showcase Missouri and expand the state’s tourism opportunities, an increase of $10 million.
$18.5 million for the Missouri Works Job Training Program to provide training assistance for eligible businesses to retrain workers in existing jobs or train workers in newly created jobs, an increase of $4.5 million.
The Governor also proposed to expand and reform Medicaid in a fiscally responsible way.
$37.1 million for a three percent salary increase for state employees, effective January 1, 2015, including $17.1 million general revenue.
Reforms to the state’s largest tax credit programs are long overdue and will yield significant future savings for taxpayers.
$10 million to upgrade the state’s cyber security systems, modernize legacy systems, and address the demand for mobile applications.

You can see Governor Nixon’s entire budget proposal at the following link:

RESPONSE TO THE STATE-OF-THE-STATE ADDRESS: The State-of-the-State response was delivered by Republican House Speaker Tim Jones (R-St. Louis). Speaker Jones reiterated the same agenda he rolled out in his opening day speech: tax cuts, medical malpractice caps and right-to-work. The speech was ripe with criticism of Nixon and his administration as Jones said that the Governor rarely engaged in the business of governing. He leveled charges that Nixon was another tax and spend career politician who supported expanding government.

"The people of this state deserve a government that works to level the playing field and remove barriers so workers and businesses can do what they do best - create growth and opportunity for all," said Tim Jones, Missouri House Speaker.Jones says Missouri needs to become the 25th right-to-work state.

A full text of Speaker Jones’ speech can be found at the following link:

Committee Action:

QUALITY STANDARDS FOR MOTOR FUELS: This week the committee on Rules, Joint Rules, Resolutions and Ethics held a hearing on SCR 18 sponsored by Sen. Schmitt (R-St. Louis). This resolution permanently disapproves and suspends the final order of rulemaking for a proposed amendment to the Quality Standards of Motor Fuels section in the Code of State Regulations. Testifying in support was the Petroleum Marketers and Convenient Store Owners Assn, MO Petroleum Council, Associated Industries of Missouri, Alliance of Automobile Manufacturers, MO Power Sports Association, MO Retailers Assn, Freedom of the Road Riders and the American Motorcycle Association. All of whom testified that this sort of issue needs to be handled through the legislative process and not by department rule making.

Testifying in opposition was the Missouri Department of Agriculture, POET LLC, Renewable Fuels Association and the MO Corn Growers Association all of whom testified that the department has the authority to promulgate these rules and did so in a responsible manner. The committee took no further action.

GUBERNATORIAL APPOINTMENTS AND FILLING OF EXECUTIVE BRANCH VACANCIES: This week the Senate Rules Committee held an executive session on two measures relating to the appointment of executive department heads and appointments by the Governor to fill vacancies on boards and commissions with the advice and consent of the Senate.

SJR 30, sponsored by Senator Bob Dixon (R-Springfield), provides that whenever a vacancy occurs in any office of department head, the Governor may appoint an acting or temporary department head in such manner and for such time as provided by law. Currently, the Governor is required to appoint all members of boards and commissions with the advice and consent of the Senate. This amendment provides that if the Governor fails to select a person for such a board or commission within ninety days of a vacancy, then the Lieutenant Governor shall make the appointment with the advice and consent of the Senate. The amendment modifies the senatorial duties of the Lieutenant Governor by removing his or her ability to cast a deciding vote in the Senate on matters related to appointments of members of boards and commissions submitted to the Senate.

SB 507, also sponsored by Senator Bob Dixon, modifies the processes for vacancies in certain public offices. The bill makes numerous changes to the process of filling vacancies of public elected offices and appointments to boards and commissions.

Both of these bills were voted Do Pass by a vote of 7 yeas and 0 nay.

CORPORATE BUSINESS TAX REDUCTION: On Tuesday, the House Ways and Means Committee met for a public hearing on HB 1253, sponsored by Rep. TJ Berry (R-Kearney). This legislation establishes the Broad-Based Tax Relief Act of 2014 thatreduces the tax on corporate business income and business incomefor sole proprietors, partners, and shareholders in S- corporations. The bill’s main provisions include:

For all tax years beginning on or after January 1, 2014, the amount of business income to tax will be determined by the Office of Administration comparing the Missouri net individual and corporation income tax revenue received in the fiscal year ending on June 30, 2012, to the Missouri net individual and corporation income tax revenues received in the fiscal year ending. Once the comparison shows the revenues to be equal to or increased, business income will be taxed at 90% for the year following the determination, then each year the comparison shows the revenues to be equal to or increased from 2012, business income will be taxed at 80%, then 70%, then 60%, and then 50% for each subsequent tax year;
For all tax years beginning on or after January 1, 2014, the corporate tax rate will be determined by the Office of Administration comparing the Missouri net individual and corporation income tax revenue received in the fiscal year ending on June 30, 2012, to the Missouri net individual and corporation income tax revenues received in the fiscal year ending on June 30 of the tax year before the tax year of determination. Once the comparison shows the revenues to be equal to or increased, the tax rate will be decreased from 6.25% to 5.625% for the year following the determination, then each year the comparison shows the revenues to be equal to or increased from 2012, the tax rate will decrease to 5%; then 4.375%, then 3.75% and finally to 3.125% for each subsequent tax year.

The sponsor stated this legislation was in response to the 2013 Governor’s veto of HB 253. He noted that the tax on prescription drugs and textbooks have been removed as well as the retroactivity provision that was in last year’s proposal. It is the sponsor’s hope this legislation would promote growth in Missouri for existing businesses. Democratic committee members expressed strong opposition to any tax cuts that could potentially restrict revenues for school districts.

Testifying in support was Associated Industries of Missouri, Taxpayers Research Institute, Gate Way Group, Americans for Prosperity for Missouri, Missouri Chamber of Commerce and Industry, United for Missouri, NFIB, and Missouri Society of CPAs. Supporters testified the current tax rate is detrimental to growth for current business and that the Kansas tax cuts businesses are causing businesses to leave the state for more favorable tax rates.

Testifying in opposition was Civic Council of Greater Kansas City, Coalition of Missouri Community Mental Health Centers, Missouri Budget Project, School Administrators Association, and Missouri NEA. Opponents stated this legislation could lead to potential cuts for mental health centers if revenue is low. Opponents also argued that, even tax cuts that have been implemented in Oklahoma and Kansas, those states are not experiencing the growth expected.

The committee took no action on this legislation.

CORPORATE INCOME TAX PHASE-OUT: On Tuesday, the House Ways and Means Committee met for a public hearing on HB 1297, sponsored by Rep. Andrew Koenig (R-Manchester). This legislation states beginning January 1, 2015, this bill phases-out the tax oncorporate income over a five-year period. The rate is reduced to5% for 2015, 3.75% for 2016, 2.5% for 2017, and 1.25% for 2018. By2019 when the rate reduction is fully phased-in, no tax will beimposed on corporate income.

The committee took no action on the measure.

TRANSPORTATION DEVELOPMENT DISTRICT AUDITS: On Thursday, the House Local Government Committee met for a public hearing on HB 1261, sponsored by Rep. Donna Pfautsch (R-Harrisonville). This bill requires the State Auditor to report to the Department of

Revenue any transportation development district (TDD) that fails totimely submit its annual financial statement to the State Auditor.The Department of Revenue is required to collect the authorizedfine and annually distribute the revenues, less a collection fee,to schools of the county where the TDD is located in the samemanner that penalties, forfeitures, and fines for penal codeviolations are distributed.Costs of astatutorily required or petition audit of a TDD performed by theauditor must be paid by the TDD and cannot exceed the greater of 3%of the TDD's gross revenues or 3% of its expenditures. The sponsor requested consent status.

Testifying in support was the Deputy State Auditor, Missouri Municipal League, and a private attorney.

There was no testimony in opposition. The committee moved into executive session and voted the bill “do pass” 14-1 with the bill failing to achieve consent status.

INCOME TAXATION: On Thursday, the Senate Ways and Means Committee met in executive session to vote on SB 509, sponsored by Sen. Will Kraus (R-Lee’s Summit). This legislation modifies the individual tax rate table and creates an individual income tax deduction for business income and phases it in over a period of five years.

A substitute was offered which makes the following changes:

Replaces the business income deduction provisions with the provisions from SB 496;
Removes the exemption for the first $25,000 in corporate income

The committee voted “do pass” 7-2 with Democrat Senators Scott Sifton and Paul LeVota voting no.

WATER QUALITY STANDARDS FOR SMALL WATERSHEDS: On Thursday, the House Tourism and Natural Resources Committee voted “do pass” HCS/HB 1074, sponsored by Rep. Rocky Miller. This substitute provides that the Clean Water Commission shall modify water quality standards for construction and operating permits only upon completion of a study performed and paid for by the MDNR finding that there is an environmental and economic viability for the modifications. Such study shall not be greater in scope than the twelve-digit hydrological unit code (HUC) watershed boundary. Rep. Miller explained that the HUC standard would force the Department to look at smaller watersheds or make a determination that the study is not necessary and modifications would not be made to the standards. He further told the committee that MDNR was advocating an eight-digit HUC which would only cover about 66 watersheds in the state…not enough in his opinion. Some committee members raised concerns about the fiscal note that would result from the bill, noting that MDNR would have to add staff and resources to conduct the studies. Rep. Miller countered that the intention of the bill is to cause MDNR to forgo the study, especially relating to small watersheds, as they consider environmental and economic considerations. The committee voted the bill out by a vote of 17 – 1.

BILLS OF INTEREST FILED SINCE YOUR LAST REPORT:

HB 1513Cox(R)Establishes the Missouri Electrical Industry Licensing Board to regulate and license electrical contractors.

HB 1532Spencer(R)Designates the third week of February as "Engineers Awareness Week" in Missouri.

HJR 68Hinson(R)Proposes a constitutional amendment imposing a 1% temporary increase in the state sales and use tax to be used for transportation projects.

SB 755Wallingford(R) Creates the Missouri Electrical Industry Licensing Board and licensure requirements for a statewide electrical contractor's license.