Legislative Update 4.5.17
2017 Session Shows Shift to The Right
The 2016 election was a seismic event in Kentucky politics. Republicans achieved a super-majority of 64 members in the House—the party’s first majority there in 91 years. Many of the freshmen legislators have ties to small business and are strong in their belief in the free enterprise system.
New Speaker Jeff Hoover brought a new management style to the often-chaotic House. The chamber, notorious for starting late and droning on for hours with: introductions of gallery guests; provision of floor privileges to high school athletes, beauty queens and other local dignitaries; acknowledgment of the pages for the day; and even musical acts, has become more punctual and workmanlike.
Legislative leaders and Gov. Matt Bevin had agreed that the session would be focused on efforts to make Kentucky more Business Friendly and spur economic and job growth.
Typically, the first week of the short session is reserved for the election of House and Senate leaders, appointment of committee chairs and members and a variety of legislator training. This year, that came to a halt as some of the major priority bills for the General Assembly and Governor Bevin passed in the first five days.
As the Session begins on the first Tuesday after January 1st, an extraordinary Saturday session was called to complete the work. Hundreds of protesters filled the Capitol that day to oppose pending legislation related to employment.
Those historic first days saw:
• The passage of legislation making Kentucky a right-to-work state.
• The repeal of prevailing wage statues, which set minimum pay scales on public works projects.
• The approval of paycheck protection legislation requiring workers to “opt in” to payroll deductions for union dues, rather than “opt out.”
As the session continued, legislation creating Medical Review Panels was passed. These panels are designed to alleviate some malpractice legislation to drive down health-care costs and encourage physicians to practice in Kentucky. They are viewed as a first step toward comprehensive tort reform.
Final Days of Session Bring Flurry of Legislation
The Session of 2017 went out with the same energy that it opened with. In the final days, legislation that had been idling for weeks suddenly rose and moved toward final passage. One of the most intriguing items was a mysterious request from the Governor’s Office to allocate $15Million in economic development funds for a company considering building a facility in eastern Kentucky. The undisclosed project is said to include a $1Billion investment by the company, creation of 1,000 construction jobs and the creation of 500 permanent jobs with an average wage of $75,000 when the business is fully operational. Lawmakers stewed on the item, but ultimately trusted the Governor enough to provide the funding. Watch for potential announcements in the near future.
Looking Ahead: Bevin Promises Tax Reform This Year
Gov. Matt Bevin has said his next goal is overhauling Kentucky's tax code.
The governor hasn’t released a specific proposal but says he thinks Kentucky’s tax system code should be like Tennessee’s.
That state doesn’t have a state income tax on salaries and wages; revenue is generated primarily through various consumption taxes.
Tennessee’s business tax structure is a bit more complicated. Corporations, S-Corps and LLCs are subject to excise and franchise taxes.
In his State of the Commonwealth address, the Governor told the General Assembly that overhauling Kentucky’s tax system will require boldness and would not be revenue-neutral. He promised to review “sacred cow” tax exemptions, including the current exemption of sales tax on services.
Other potential changes could be revisions to: the limits on property tax increases; implementation of local sales taxes; elimination of corporate and inventory taxes; and review of exemptions for items currently tax exempt.
The debate over tax reform has taken on a greater sense of urgency in recent years as revenues lag further and further behind expenditures.
Each year of the current two-year budget cycle, the Commonwealth will have revenues of about $11.5 billion. Recent announcements by the governor say that the Pension Fund shortfall may be as much as $82 billion.
Leaders of the General Assembly have said they are relying on the governor to make the case to the people of Kentucky that substantial new revenues are needed. Senate President Robert Stivers has told the news media that the Governor’s package must have the ability to be passed in five days through both Chambers with little or no revision in order to be heard in the upper chamber.
Legislative Update 3.10.17
As the General Assembly days are dwindling, tempers are flaring and large issues remain unresolved. SB 18, another step in medical malpractice reform continues to languish in the House. Attorney opponents have attached floor amendments that make the bill unpalatable. HB 151 would allow students to attend the neighborhood school closest to their home. Targeted primarily at Jefferson County, discussions are grinding forward in attempt a compromise as the bill sits in the Senate Education Committee.
HB 296 is the bill that will be of most interest to the business community. HB 296 was originally a comprehensive reform of the workers’ compensation insurance system. The bill would: allow for cut off of benefits at age 70; reform third party subrogation; lowering of interest rates on workers’ compensation judgements that are in dispute; adopt practice guidelines for medical treatment and formularies for prescriptions among other items. The bill also included a 50% increase in the cap on attorney’s fees. Currently the bill is resting in a Senate Committee as furious activity is going on behind the scenes. The bill will likely pass but we have no idea what its final form will look like.
The bill has the potential to become Pandora's Box. There are a number of factors in play. The Coal Worker's Pneumoconiosis Fund (which is parallel to the Special Fund for non-coal employers) is essentially insolvent partly because of the closing and bankruptcy of mining companies. It has assets of around $14million with liabilities estimated at anywhere from $80-100 Million. The Special Fund assesses non-coal companies at around 6.2%. If nothing is done, the few remaining coal companies will get a 49% assessment. Several have said they will either leave or bankrupt. The trial attorneys increased worker benefits in the house floor amendment and now another group is trying to raise them yet again, increasing costs for employers. The bottom line is that at the end of the day, HB 296 may become something that the business community will oppose. We will not know until the last moment.
The General Assembly will return March 14th and 15th and then recess for 10 days. During that period, Governor Bevin will consider which bills to sign or veto. The legislature will return for two final days on March 29th and 30th to consider override of any vetoes and mop up final details before final adjournment.
Legislative Update 3.3.17
Friday, March 3rd marked the 23rd legislative day and the end of the last full week of legislative action. The week began with a marathon session of the House lasting until 11:30PM. The extended day included multiple partisan battles and rancor. The week resumed its usual format and several very divisive pieces of legislation.
SB 4 was the first attempt at tort reform. This bill creates Medical Review Panels. An appointed group of physicians would literally review the evidence in a medical malpractice case to see if it is a frivolous suit. A titanic struggle between the health care community and the trial attorneys end with the bill squeaking out of the House with only 51 of 100 votes.
Bills that have not left their chamber of origin would require heroic efforts to pass through the process at this point. As the opportunities for passage narrow, we enter the most dangerous part of the session. “Committee Substitutes” are last minute changes added in committee meetings that can be called with only a few minutes notice and held in rooms too small for the public to attend. These “subs” can change a bill completely and rush it to the floor for a quick vote.
The week has ended with fiery speeches on both sides on HB 520 which would create Charter Schools as an option under public school districts. The bill cleared committee on a partisan vote only minutes before the House gaveled into Session. At this writing debates were continuing on the House floor, slowed by numerous parliamentary attempts to slow the process.
With only 7 days left, the General Assembly will return from the weekend with only three days of floor action. March 9th , 10th and 13th will be used as committee work days with no floor action. Members should be vigilant for any legislative alerts for fast action.
Legislative Update 2.17.17
The General Assembly reached a milestone of the short session on Friday. That was the last day for new bill introductions. The 2017 bill production has set a new record for a “short” session with over 800 pieces of legislation filed (not including resolutions). New House committee chairs are overwhelmed with both learning how to manage their committee and being inundated with legislation. Of interest is HB 296, An Act relating to Workers Compensation. As passed out of the House Licensing & Occupations Committee, the bill would: limit length of benefits to retirement age, liberalize subrogation recovery of workers comp health and indemnity benefits in third party cases; lower interest rates on judgement; allow insurers to elect not to have a utilization review when treatment necessity is obvious; requires adopting of pharmacy formularies and treatment guidelines by the Commissioner; codifies credit for wages against lost work benefits in temporary total disability when a work returns to “light” duty. The bill also increases the maximum attorney’s fees from $12,000 to $18,000. Floor Amendment 1, filed by the sponsor Rep. Adam Koenig, will also require employers to pay a proportional share of attorney’s fees and costs under a subrogation claim. More Amendments are likely as Labor and the Trial Attorneys continue to battle against the bill. KHLA members are urged to contact their State House Representative and ask them to support HB 296 and House Floor Amendment 1 only.
A bill has been stopped before it could be filed that would have been adverse to properties with older telephone systems. The proposal would have required that the systems be upgraded to provide direct “911” dialing without pressing “9” for an outside line. The systems would have also been required to display the location on the screen of the 911 operator. KHLA representatives met with the potential sponsor and explained that many properties have older PBX and other systems that are not able to be upgraded in such a manner. The proposed law would have necessitated complete system replacements and caused financial hardships for many hoteliers. KHLA energized other groups that would have been affected as well and had them take their concerns to the sponsor. After this education process, the sponsor said he would not be introducing the bill in 2017.
Legislative Update 2.10.17
The Kentucky General Assembly returned to Frankfort on Tuesday after a raucous first week at the beginning of January. The pace has slowed dramatically as the primary objectives of the session have already been passed and signed by the Governor.
Governor Bevin gave his State of the Commonwealth address on Wednesday evening. While he has called for tax reform since being elected, he stunned the audience by announcing that the proposal he is developing will not attempt to be revenue neutral and is designed to bring a large infusion of cash into the General Fund. From the context of his speech, it appears that he plans for the bulk of the new money will go directly into the faltering state employee pension system. It is expected that a special session will be called in the Fall to address reform. Whispers in the hallways hint that the proposed transition toward a consumption based system would generate between $750 Million and $1 Billion in new revenues. Lawmakers have become circumspect on taxation after the unexpected announcement on Wednesday.
Legislation is being drafted that would directly impact Hotel communication systems. Proponents of 911 systems are calling for all lodging telephone systems include direct dialing outside to 911 and caller id’s that show the location from which the call was made on the operator’s screen. This is coming out of Texas where a young mother brought her children for a visitation with her estranged husband in a hotel room. The husband stabbed her multiple times in front of the children and fled. One child attempted to dial 911 multiple times, but wasn’t aware of the need to dial 9 for an outside line. Emergency personnel arrived after complaints from guests in adjacent rooms, but the victim had died before they could reach her. Texas passed legislation that required an upgrade of all hotel systems and gave one year for compliance. In meetings with the Kentucky sponsor, he has been made to understand the hardships that this would likely cause on lodging properties that have older telephone systems. He has stated that it is not his intention to cause harm and is willing to work with KHLA to find an accommodation that will suit all. Other organizations with interest in the legislation have been contacted and brought into the discussion by the KHLA legislative team. The bill has not yet been introduced. KHLA members should review their telecommunications systems’ compatibility for such a change with their supplier. All members will be notified as soon as the bill is filed with the bill number and a link to the language.
The pledge by legislative leadership that no “bathroom bill” would come into play continues to hold. We will continue to watch for any movement on this issue. Focus now is on a bill to allow religious expression in public schools by students. This bill will likely be challenged if it becomes law, but should not cause any harm to Tourism for Kentucky.
HB 296 was introduced today by sponsor Rep. Adam Koenig. The bill contains employer friendly revisions to the Workers Compensation statutes and has good prospects in both Chambers. Features include: Subrogation Reform; Reduction in penalty interest rates; Cut off of benefits after a certain number of years, and more. See the link in the bill tracker for more information. (May be late Friday evening before all bills introduced today are available through the link.)
Legislative Update 1.9.17
The 2017 Short Session has begun and is making history in a number of ways. For the first time in 95 years, the House of Representatives is controlled by the Republican Party. With the Republican Party having a Super Majority in both Chambers, the Governor’s agenda has moved quickly.
In an unprecedented plan, some of the most contentious bills were passed in just 5 days. Bills enacting Right to Work, repeal of Prevailing Wage statutes for government projects, and removing requirements for Payroll Deduction of Union Dues drew literally thousands of rowdy protesters to the Capitol.
Right to Work prohibits the requirement that an employee join and pay dues to a labor union as a condition of employment. Kentucky is the last state in the South that had not adopted Right to Work. It is now the 27th state to adopt Right to Work legislation.
The repeal of Prevailing Wage statutes removes the government required pay scales for publicly funded projects. School Boards and other local government officials clamored for change to lower the cost of construction. Kentucky joins 29 other states with no Prevailing Wage laws. Federally funded projects are still covered under the Davis-Bacon Act.
The General Assembly took action in response to the University of Louisville being placed on probation by the agency that does academic accreditation. The legislation dissolved the current 17 member Board of Trustees. Under its provisions, the Council on Post Secondary Education will submit a list of 30 names, from which the Governor will select 10 new Trustees.
Bills prohibiting abortions after 20 weeks and requiring an ultrasound report be shown prior to an abortion also were passed. Legislators’ pension amounts and details will now be open public records, a bill that has been stymied for years.
Governor Bevin signed all of the bills on Saturday evening. All of these proposals include Emergency clauses, meaning they take effect on Monday, January 9, 2017.
With the major priorities of the Governor and Leadership from both Chambers being complete, the balance of the Session should be much calmer. Twenty-Five days now remain in the short session. Legislators will return on February 7th for the final segment.