March 11, 2008

CAWV CONCLUDES LEGISLATIVE SESSION

The 2008 Legislature started out slow but gained pace in the final weeks of the 60-day session, which concluded at midnight, Saturday, March 8. Much of the debate centered on tax reform, pay raises for state employees and teachers, and a bail-out of the teachers' ailing 401(K)-style retirement account. Legislators also debated a number of bills that were objectionable to the state's business community. Infrastructure funding was addressed with passage of bills that will provide millions for K-12 schools and facilities at West Virginia's community and technical colleges. Marginal dollars will be made available for water and sewer projects and, after nine years of debate, the state can proceed with a public-private partnership (PPP) project for highways or other projects under the WV Department of Transportation, such as air, rail or port authorities.

The legislature approved Governor Manchin's tax proposals to eliminate the Business Franchise Tax by 2015 and passed a reduction of the Corporate Net Income Tax rate (down to 6.5 percent by 2014). The reduction in tax revenue is offset by the combined tax reporting bill which is expected to yield about $40 million annually. Republican legislators attempted to cut business taxes more immediately, saying the bills do nothing but "pay lip service to tax cuts in West Virginia." Democrats countered by stating that any potential recession requires reduction be passed "in a responsible manner."

A number of bills impacting a business' operations surfaced in the House, including the much-debated "Captive Audience" bill, prohibiting mandatory overtime, providing mandatory sick leave benefits, mandating contractors working on public works projects to provide health care for employees and employee access to personnel records. Much time and effort was expended to defeat these bills which many believe would have added to the perception that West Virginia has a negative business climate.

Both houses passed a budget in the $3.9 billion range. Lawmakers will meet this week to determine the final budget number. Governor Manchin is also expected to call a Special Session of the legislature to determine a solution to the teachers' retirement program. Enrollees in the 401(K)-style pension program have complained for years about poor investing advice and inadequate returns in these self-managed accounts. A House-Senate conference committee attempted to reconcile proposals allowing transfers into a state-run traditional pension fund. Governor Manchin's proposal cost zero, the Senate plan could be as high as $20 million, and the House version had a potential price tag of $78 million. The Governor ceased discussion Saturday until actual numbers could be developed for each proposal.

BILLS OF INTEREST TO CAWV

The CAWV Legislative Committee thanks all members who contacted their legislators during the session to discuss the industry's position on key legislation affecting contractors. For a listing of all bills passed this session, visit http://www.legis.state.wv.us/ or click here.

The following is a list of bills the CAWV tracked during the 60-day session. For more information on a particular piece of legislation, contact Mike Clowser at (304) 342-1166 or email mclowser@cawv.org.

SCHOOL CONSTRUCTION BONDS

S.B. 297, Gov. Joe Manchin's bill to authorize the School Building Authority to issue revenue bonds from the State Excess Lottery Fund, passed overwhelmingly in both the House and Senate. The bill takes the $19 million the SBA gets annually on a pay-as-you-go basis for school construction projects and uses it for debt service on bonds. The SBA will sell about $200 million in bonds over the next two years and would issue another $200 million when the current bonds are retired in 2014. This would provide between $60 million and $75 million through 2025. The benefit of the SBA plan is that it will eliminate the boom/bust cycle of school construction. In the past, the state or local boards of education issue bonds and projects are completed within three years, with little or no projects for the next five to seven years. S.B. 297 provides a consistent funding level so contractors will know exactly how much school construction will be performed, allowing contractors to better plan their workload, personnel and equipment. The CAWV and SBA had a study performed showing the economic impact of school building construction. An excerpt of a March 3 press release follows:

School construction has contributed over $1 billion to West Virginia's economy over the past five years, according to a study released by the School Building Authority of West Virginia and the Contractors Association of West Virginia. The report, "Economic Impact of the School Building Authority of West Virginia FY2003 - FY2007," also shows that nearly 10,000 jobs were created, representing wages of over $281 million. The study was written by Randall A. Childs, Bureau of Business and Economic Research, College of Business and Economics, West Virginia University.

From July 1, 2002 (FY 2003) through June 30, 2007 (FY 2007), adjusted for inflation, $546.5 million has been spent on school construction projects. The study shows that SBA's expenditures resulted in another $540.6 million in indirect and induced business volume. These expenditures recirculate through the local and regional economies as construction companies buy goods and services from businesses in the state and pay employees that spend money in the state.

A Comprehensive Education Facilities Plan (CEFP) in 2000 identified $1.7 billion in school facilities needs. This year, Governor Joe Manchin is proposing legislation (S.B. 297) that would take the $19 million the SBA gets annually from the State Excess Lottery Fund for pay-as-you-go school construction projects and use it for debt service on bonds. "The SBA would issue about $200 million in bonds which would provide between $65 million and $75 million annually for school construction and maintenance," said Dr. Manchin.

"The benefit of the governor's proposal is that it eliminates the boom-bust cycle that is associated with school construction," said CAWV Executive Director Mike Clowser. "In the past, bonds were issued and there was a lot of work for two or three years followed by seven to ten years of very little work. S.B. 297 will provide a consistent funding level so contractors will know exactly how much school construction will be performed. This will allow contractors to better plan their workload, personnel and equipment."

(A copy of the study and press release is on the CAWV website at www.cawv.org)

BONDING AVAILABLE FOR COMMUNITY AND TECHNICAL COLLEGE PROJECTS

S.B. 682 will provide $78 million for a number of projects at community and technical colleges throughout the state. The bill creates a special fund known as the Community and Technical College Capital Improvement Fund and authorizes the Higher Education Policy Commission to allocate $5 million annually in state lottery funds for debt service on bonds for community and technical college capital improvement projects. The list of potential projects is as follows:

Marshall Community and Technical College
Instruction Facility
$13.5 million
Blue Ridge Community and Technical College
Instruction Facility
$13.5 million
WV State Community and Technical College
Instruction Facility
$13.5 million
New River Community and Technical College
Instruction Facility (Beckley Campus)
$13.5 million
New River Community and Technical College
Renovation of Classroom Facility (Greenbrier Campus)
$3 million
WVU at Parkersburg
Classroom and Lab Facility and Child Development Center
$6 million
WV Northern Community College
Purchase and Renovation for Classroom and Lab Facility
$6 million
Southern WV Community and Technical College
Purchase and Renovation for Classroom and Lab Facility (Williamson Campus) $6 million
Community and Technical College at WVU Tech
Renovation of Davis Hall
$3 million

POTENTIAL BOND PROJECTS TOTAL
$78 million

PUBLIC-PRIVATE PARTNERSHIPS FOR HIGHWAY PROJECTS FINALLY PASSES

After nearly nine years of debate, West Virginia has the ability to utilize public-private partnerships to build highway projects. H.B. 4476, the Public-Private Transportation Facilities Act, passed in the final minutes of the 60-day session. The CAWV opposed the previous public private bills that allowed State Road Funds to be transferred to a PPP project, thus reducing the amount of available dollars for the state's core construction and maintenance programs. This bill, as passed, specifically states that no State Road Funds can be used in a PPP venture. Any public assistance would have come from a transfer from the state's General Fund or from federal funds specifically earmarked in a federal authorization and/or appropriation bill for a transportation facility to be acquired as a PPP project. A House Roads and Transportation subcommittee working on the bill made changes to the original bill. These include: The legislation would sunset after five years to give the administration, legislature, WVDOH and industry an opportunity to see if public-private ventures are benefiting the state's highway systems; the WVDOH would set the initial fees for tolls and approve any increases; and the WV Legislature would have to adopt a concurrent resolution in support of any PPP project. While no state road funds could be used in a PPP project, the WVDOH had proposed to provide the state match to any federal appropriation or earmark. An amendment caps the state match at 4 percent of the annual WVDOH's construction projects averaged over the three immediately preceding fiscal years (about $20 million using the past three year construction programs); and, where possible, breaking the construction contracts into $10 million to $30 million projects.

Passage of the bill was jeopardized when amendments to the bill were offered in the Senate Transportation and Infrastructure Committee and again in the Senate Finance Committee. The Transportation and Infrastructure Committee inserted an amendment Wednesday to exempt from state gasoline taxes truckers who are part of the Interstate reporting compact. The trucking industry felt they were being double-taxed by having to pay a toll to the new PPP highways and again when paying West Virginia gasoline tax based on their miles traveled in West Virginia. The CAWV objected to this provision on the grounds it could open the door for further diversions to the State Road Fund. The Senate Finance Committee removed this exemption when it passed out the bill Friday evening. The Finance Committee also removed House language requiring the legislature approve by concurrent resolution any PPP project and replaced it with language that only required the WVDOH to provide a report to the Joint Committee on Government Finance.

Movement on the bill came to a halt late Saturday when it was discovered the fuel tax exemption was left in the bill. The CAWV was prepared to withdraw its support for this bill if this language stayed in the legislation. House leaders were prepared to reject the bill if the Senate did not restore legislative oversight and approval of any PPP projects.

After discussions with Governor Joe Manchin and House and Senate leadership, in a rare move, the bill was recalled from Third Reading and reconsidered. The bill was amended to address the concerns raised by CAWV and the House. The bill passed the Senate by a 30 to 3 vote. The House concurred with the Senate changes and the bill passed in the final minutes of the session.

DRUG/ALCOHOL PROGRAM FOR CONTRACTORS WORKING ON PUBLIC WORKS PROJECTS

S.B. 657, which becomes effective July 1, 2008, requires public improvement contractors to have and implement a drug and alcohol testing program. The CAWV worked with Senate leaders to make a number of changes to the original bill. These include:

- The bill now only refers to State of West Virginia projects, not city or county projects.

- The written drug policy will not have to be included in a bid. A contractor will provide some affidavit prior to award of the project that he or she has a drug policy.

- The Division of Labor will not be the agency to inspect the job site and enforce the provisions of the bill. The awarding agency will oversee the contractor's program.

- The contractor will not be responsible for treatment for employees who test positive for drugs or alcohol. Contractors will only have to direct the employee to a treatment program.

- The original bill carried a fine of $5,000 to $25,000 and a one-year debarment from bidding on public projects. The Committee Substitute has a first offense of up to $1,000, $1,000 to $5,000 for a second offense, and up to $25,000 and a one-year debarment for the third offense.

Most CAWV members have a drug and alcohol testing program, much of which is driven by their insurance companies. The CAWV will provide a program for those contractors who have not yet instituted a testing program.

SPRING PAVING PROGRAM GETS ADDITIONAL $25 MILLION

In the final days of the session, legislators passed a supplemental appropriations bill that will provide an additional $25 million for the WV Division of Highways. The appropriation will be added to the DOH's spring paving program, bringing it to $50 million. The new allocation will be divided among the state's 10 highway districts. The additional projects will be advertised in April with a June 15 completion date.

PURCHASING RULES REVISED

The Department of Administration introduced H.B. 4664 which makes changes to the state's purchasing laws. The bill, as introduced, changed language in the current statute which gives the Purchasing Division the ability to negotiate contracts when all bids exceeded available funds. The department wanted to allow negotiation on all contracts, regardless if the bids were over the maximum budgeted amount. The department also wanted to negotiate with all bidders rather than the current law, which requires the division to work with the low bidder first and then go to subsequent bidders, prohibiting the division from negotiating with any bidder after closing negotiations with that bidder and entering into negotiations with the next bidder. The bill also amended the state's preference law by adding a 2.5 percent preference for veterans and a 2.5 percent preference for small and minority business enterprises. The CAWV met with administration officials and the bill was amended to restore current language to allow negotiation only when bids exceed the maximum budgeted amount and only in the manner provided in current law. The vendors preference language will not change either. The bill will give state agencies the ability to sell surplus property at a posted price in addition to the current auction procedure.

HOUSE/SENATE PASS ELEVATOR SAFETY ACT

H.B. 4038, passed on the 60th day, sets up a new section of WV State Code relating to the Elevator Safety Act. The bill requires, starting January 1, 2010, that no person may engage in the business of erecting, constructing, installing, altering, servicing, repairing or maintaining elevators or related conveyances unless he or she has a license issued by the Commissioner of Labor. Also, no person may serve as an inspector unless he or she completes the Qualified Elevator Inspector (QEI) examination through a program approved by the commissioner. The Division of Labor will develop rules for legislative approval for the implementation and enforcement of the bill.

WDA TO ASSIST STORMWATER SYSTEMS AND DEFICIENT DAMS

S.B. 466 authorizes that the Water Development Authority may provide assistance for the development of stormwater systems and authorizes WDA to administer on behalf of the Department of Environmental Protection a loan program designed to bring deficient dams in West Virginia into compliance. Many cities in West Virginia need millions of dollars to address their deficient stormwater systems.

MANDATORY HEALTH INSURANCE BILL DEAD THIS SESSION

The House did not pass H.B. 4520, a bill that would have required contractors bidding on public works projects to provide mandatory health insurance for its employees. The CAWV has opposed this bill for a number of reasons, including the fact that every state that has attempted to dictate benefit programs have had their laws overturned by federal courts. States cannot preempt ERISA, the Employment Retirement Income Security Act. More importantly, the bill would have hurt small contractors who would have not been able to bid as prime or subcontractors on local, county or municipal government construction contracts. It is anticipated this bill will be on the agenda for next year's legislative session.

CAPTIVE AUDIENCE BILL (H.B. 4132) DIES IN SENATE

West Virginia's business community was galvanized in opposition to H.B. 4132, the "captive audience" bill. H.B. 4132 would have placed restrictions, prohibitions and penalties on an employer's right to organize and hold mandatory employee meetings and to express views on business matters. If passed, West Virginia would have been the first and only state to censor an employer's right to communicate with employees about labor and union organizing and politics. The bill, which affected employers of 12 or more workers, would have imposed new costs and administrative hardships on business. Worse, it would place employers at risk of new lawsuits by employees for almost any action (alleged or otherwise) the employer may take at any time. Businesses from around the state contacted their legislators to note what a chilling effect passage of the bill would have on future economic development in West Virginia. The House of Delegates passed the bill and the bill died in Senate Judiciary Committee. Chairman Jeff Kessler, D-Marshall, said a pending U.S. Supreme Court case on the subject should be resolved before West Virginia considers such a bill.

BLASTING BILL WOULD HAVE ALLOWED COUNTIES TO HIRE BLASTING ENFORCEMENT OFFICER

H.B. 3204, introduced by Del. John Doyle (D-Jefferson), provided that a county commission that has enacted a county wide zoning ordinance and is a growth county (pursuant to the provisions article twenty, chapter seven of state code), may adopt an ordinance to enter into an agreement with the state fire marshal to hire, with the approval of the state fire marshal, a blasting enforcement officer to assist the state fire marshal in investigating and enforcing the state fire commission's rules on explosives and blasting in that particular county. The reported purpose of the bill is to address concerns of blasting associated with home building. However, it appeared any blasting, including the blasting associated with road construction and commercial construction, would fall under the provisions of H.B. 3204. The bill passed the House but did not make it to the agenda of the Senate Government Organization Committee.

H.B. 2447 WOULD HAVE SPED UP WATER PROJECTS APPROVAL

H.B. 2447 would have required every house, business or dwelling to take a tap and the minimum bill when water lines are constructed. Grant monies and low interest loans for water projects are based on how many are signed up to take water when the grant is requested. Right now, water projects are at the mercy of those who agree to take water when the project is being designed, unlike sewer projects where businesses and residents are required to tap into the new system. In a letter to members of the House Judiciary Committee, the CAWV urged passage of the bill in order to advance water projects statewide. The House Judiciary Committee defeated the bill in a very close voice vote.

H.B. 4385 - LEGISLATIVE AUDITOR'S AUTHORITY

A bill that generated a lot of discussion in the final week was H.B. 4385, a bill to revise certain powers and duties of the Legislative Auditor. It authorized audits of state funds, including funds derived from a state controlled function, provided legislative intent as to proposals for regulating professions and occupations, and allowed reports to be conducted by the Legislative Auditor by request.

The bill's intended purpose was to give the Legislative Auditor authority to audit organizations that receive state funding to make sure they are meeting their stated purpose. However, concern was raised as to whether companies that have contracts with the state - vendors who supply goods and services or contractors who bid with the WV Division of Highways and other state contracting agencies - would fall under the purview of this legislation. H.B. 4385 could have given the auditor authority to review the records, books and accounts of a local or private entity or agency to make sure the entity fairly and accurately reflects its financial and fiscal operations relating to the obligation, receipt, expenditure and use of state funds. The CAWV and other business groups met with the legislative auditors and legislators to include language in the bill that excludes entities that competitively bid on state contracts from a legislative audit. An agreement could not be reached and the bill was removed from further discussion.

BUSINESSES WOULD HAVE BEEN AFFECTED BY MANDATORY SICK LEAVE BILL

H.B. 4447, introduced in the House of Delegates, would have required employers to provide paid sick leave days. For employers who have more than 15 workers, the bill mandated that they provide up to seven sick days a year, depending on whether the worker is part-time, seasonal or full-time. The state Commissioner of Labor would have had inspection and enforcement powers. The bill did not make it out of the House.

DELIBERATE INTENT STATUTE DIES

S.B. 587 was introduced to stem the growing number of deliberate intent lawsuits, which not only are exposing businesses to significant legal costs and risks but also are threatening to undermine the state's "no-fault" Workers' Compensation program. Increases in these lawsuits have taken place because of a West Virginia Supreme Court interpretation that says "deliberate intent" may be considered as an "alleged" factor in workplace injuries. This theory, which exposes employers to massive liability claims, means that workplace injury claims will move out of the Workers' Comp system and back into the courts for litigation. The West Virginia Legislature needs to correct this matter by limiting deliberate intent civil actions to traumatic injuries only, eliminating the five-part test and excluding exposures to hazardous substances for deliberate intent civil actions. The bill did not pass this year but the business community will be introducing the bill again next year.