April 15, 2009
LEGISLATIVE SESSION EXTENDED UNTIL JUNE 6
The 2009 Regular Session of the WV Legislature ended Saturday, April 11, but legislators had already voted to extend the session until June 6 for consideration of the budget, supplemental appropriations or to take up any veto messages. This will also allow members to address potential legislation relating to the American Recovery and Reinvestment Act of 2009, the economic stimulus package.
Lawmakers did not take action on the Fiscal Year 2010 budget due to the current unstable economy and a forecast of budget shortfalls in the near future. Governor Joe Manchin presented a budget on the first day of the 60-day session but continued to project revenues downward as the session progressed. The revised budget is $200 million to $250 million below the governor’s original projection. Extending the session gives the state Tax Department and legislators the ability to see what April and May revenue figures will be. Lawmakers will come back in session May 26.
A number of bills that had financial measures connected with them did not pass this session, including a bill to freeze the wholesale gas tax at its current level and bills that would have provided bonding for higher education facilities. A bill to increase the taxable wage base to bolster the state’s unemployment compensation trust fund did pass.
A number of bills impacting business operations surfaced, including a bill to mandate lunch and other breaks, public employee collective bargaining, requiring employers to use the electronic E-Verify program to verify legal employment status of workers, 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.
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/ and click on Completed Legislation under the 2009 Session.
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 firstname.lastname@example.org.
GAS TAX FREEZE BILL DIES IN HOUSE
S.B. 680, freezing the wholesale gas tax in 2010 at current levels, reached a stumbling block in the House in last few days of the session. The WV Division of Highways released a report showing that the State Road Fund could lose as much as $70 million if the gas tax drops five cents. DOH stated this money will come out of the state-funded road program, or about 26,000 miles. “Basically, all we’re going to be able to do at that point is to patch potholes, do a little bit of ditching and a little bit of shoulder stone and cutting the brush and the grass,” Deputy Transportation Secretary Paul Turman said on MetroNews Talkline. House Speaker Richard Thompson responded by releasing a statement that noted the bill would amount to a tax increase on fuel should gas prices continue to remain low.
S.B. 680, passed by the Senate 34-0, froze the wholesale gas tax in 2010 at the current 11.7 cents a gallon. The WV Division of Highways and the CAWV worked on the assumption that the price of gasoline will not rise in 2009 to the level the current wholesale tax is based upon. If the wholesale price does not rise to $2.34 a gallon – the basis for the 11.7 cents tax – the wholesale tax will drop in 2010. The wholesale tax generates approximately $14 million per penny, so a three to five cent drop in the tax would cost the State Road Fund between $42 million and $70 million. If gas prices rise in 2009, the tax would stay the same in 2010 with passage of the bill. However, the administration and the legislature froze the tax twice from going up and the highway department is working on the presumption that the tax will be reduced, not increased.
The attached article shows the detrimental impact a reduction in gas tax revenues will have on the secondary road paving program and other highway construction and maintenance program. The Manchin Administration and the highway department are considering their options. One possibility is to put the bill on a special session call should one be called, or wait until later in the year. The wholesale gas tax is not adjusted until January 1, 2010 so the DOH will closely monitor gasoline prices in the coming months to determine what impact prices will have on the wholesale tax.
UNEMPLOYMENT COMPENSATION FUNDING FIX
S.B. 246, which becomes effective from passage, will provide about $120 million in added funds to the state’s unemployment compensation program. The unemployment comp trust fund has dropped from about $220 million to $170 million due to the enormous increase in claims over the past several months. March 2009 was the lowest level of employment in West Virginia in ten years.
The bill provides:
● Imposition of a temporary wage base increase to $12,000, which would equate to roughly a $70 million to $75 million increase on employers over a year’s time.
● This temporary wage base increase would remain in effect until the state’s UC fund balance reaches $220 million; and
● Once the state’s UC fund balance returns to $220 million, the unemployment compensation taxable wage base becomes $9,000 (the current unemployment compensation taxable wage base in West Virginia is $8,000). This would amount to an increase of approximately $17.5 million on an annual, ongoing basis.
The final version does not include any additional temporary assessments, which were originally contemplated to be imposed on employers and employees. The assessment on employers would have been 0.075 percent of total gross wages. The bill also contains several key reforms that have been advocated by the West Virginia Chamber and other business groups: establishing mandatory disqualification from unemployment comp benefits if a worker is terminated for failing a workplace drug or alcohol test, disallowing payment of unemployment compensation benefits to an individual who elects to take a voluntary retirement incentive package and allowing benefits to an employee who must leave work for health reasons and who provides a written certification from a physician. One provision, relating to strike benefits, will remain the same as current law.
This package will help to provide needed funding to cover the sudden increase in the state’s unemployment rate and to ensure that unemployment compensation funds will be available for legitimate claimants – current and future.
TOWER CRANES ADDED TO CRANE CERTIFICATIONS
H.B. 3076 adds tower cranes to the current crane operator certification requirements. Most all of the language in the introduced version of the bill was struck in House Judiciary Committee and the bill limits itself to adding tower crane to the list of cranes. The bill does change the certification categories language but it will not require anybody who is currently certified to make any changes in their operators licenses. The old and new language for certification categories is as follows:
that must include including lattice boom truck cranes; lattice boom crawler cranes; small telescoping boom cranes, with a lifting capacity of at least five tons but not more than seventeen and one-half tons fixed cab-telescoping boom cranes; swing cab-telescoping boom cranes; and tower cranes. Provided, That the holders of a certification for the large telescoping boom crane upon application for recertification will be provided with a one time election to either be certified as an operator of a fixed-cab or swing-cab telescoping boom crane, and that holders of a certification for the small telescoping boom crane, upon application for recertification, will be automatically certified as a fixed cab operator. ”
Crane operators who are presently certified in the small or large telescoping cranes can automatically have their certification transferred to correspond with the new definitions. Current operators will not have to do anything except select whether they will have a fixed-cab or swing-cab classification, or both if they currently hold more than one classification.
DRUG TESTING REQUIRED IN ALL PUBLIC WORKS CONTRACTS
H.B. 2771, a bill to amend the state’s drug and alcohol testing program for contractors working on public works construction projects, has passed. The bill expands the drug and alcohol testing program to projects performed by a political subdivision of the state – cities, counties, public service districts and other governmental entities. The bill addresses a number of issues sought by the CAWV, including requiring contractors to have two programs, one for CDL purposes and another for all other employees. It also allows contractors to accept an employee’s drug test if it has been performed in the previous twelve months and gives employers the ability to hire people on a temporary basis. Under current law, employers who have three violations could be barred from bidding work for one year, even though the third violation may be twenty years after the second violation. H.B. 2771 wipes an employer’s record clean if there are no violations within the preceding five years.
The bill also requires contractors to report to the awarding agency at the end of the project the following:
Indication employees have received training on how to detect drug and alcohol abuse, the name of the testing laboratory, average number of employees on the particular project, number of positive and negative tests, and random tests performed. Testing companies reviewed these reporting requirements and have stated they can provide them easily to their clients who can then forward them to the awarding agency.
WORKERS’ COMPENSATION REQUIREMENTS MODIFIED
S.B. 537 makes changes to the workers’ compensation program. Of interest to the contracting and business community is the section dealing with prime contractors and their subcontractors. The House Judiciary Committee modified language to make it clear that a receipt by the prime contractor of a certificate of workers’ compensation coverage from a subcontractor shall be deemed to relieve the prime contractor of responsibility regarding the subcontractor’s workers’ comp coverage. Original versions of the bill had the prime contractor responsible for their sub’s employees’ workers’ comp claims if the sub defaulted on their comp coverage, even though the prime may not know of the sub’s default status. The Judiciary Committee rewrite requires the subcontractor to provide notice to the prime within two business days of cancellation or expiration of coverage. The bill also had a provision that if a sub’s employee’s claim was accepted into the Uninsured Fund, both the prime contractor and subcontractor would be jointly and severally liable for payments made by the fund. The new language states that if the “prime contractor has performed due diligence in all matters requiring and verifying a subcontractor’s maintenance of insurance coverage, then the prime contractor is not liable for any claim made hereunder against the subcontractor ...” The committee’s rewrite stayed pretty much in tact in the final version.
WVDOH CONTINUES DESIGN-BUILD PILOT PROGRAM
H.B. 2753 gives the West Virginia Division of Highways the ability to continue a pilot program to determine the benefits of the design-build method of procurement. The bill gives the WVDOH the ability to use design-build on ten pilot projects over the next three years. The legislation is a result of work of a joint WVDOH, CAWV and ACEC-WV task force that developed policies and procedures for awarding D-B projects.
H.B. 2863 REVISES WATER/SEWER PROJECT PROCESS
H.B. 2863 passed which deals with water and sewer projects funding by the WV Infrastructure and Jobs Development Council. It bases engineering design and construction inspection costs on the compensation curves for consulting engineering services on costs published by the American Society of Civil Engineers unless modified by the WVIJDC. The bill also states that if the project scope has to be cut due to construction costs coming in over estimates or other unexpected costs, the WVIJDC board must approve the scope change. Requirements also include any governmental agency using infrastructure council funds to develop and perform annual maintenance on the system. The bill adds the word “substantial” to the protest policy so every minor protest does not stall a project, reduces the review process of the Public Service Commission to 225 days and adds two additional members – from 11 to 13 – to WVIJDC. The bill is effective from passage.
H.B 2923 REQUIRED SUBMITTING SUB LIST WITHIN TWO HOURS
H.B. 2923, if passed, would have required contractors to submit a list of their subcontractors within two hours of the bid opening to the contracting agency or risk being declared irregular. While the bill only pertained to the low bidder, all bidders may have been required to submit their subs list. On projects where there are alternates, the low bidder may not be apparent, based on which alternates are selected. In order for contractors’ bids to be responsive, all bidders who may ultimately be declared the low, responsive bidder would have had to submit their sub list within two hours. Currently, the School Building Authority of WV is the only agency that has such a policy. H.B. 2923 would have required all public agencies to mandate this policy.
BILL PROPOSED LEASE-PURCHASE OF SCHOOL FACILITIES
Under S.B. 274, county boards of education could have had a private developer build a school and the county would lease it on an annual basis for twenty years. Counties saw this as a way to preclude getting money up front to build a facility. Voters in Preston County and other counties have voted down recent school bond issues. The Board of the School Building Authority met March 16 and heard proposals from developers on what they can provide to a county board of education. SBA board members had a number of questions on how the financing would be handled. The CAWV expressed concerns that the bill did not set forth policies and procedures on how projects would be financed, designed and constructed. The bill passed the Senate but did not advance in the House. The CAWV has agreed to work with supporters of the legislation to see what options there are for lease-purchase going forward.
QBS BILLS DON’T ADVANCE
H.B. 2799 and S.B. 511 would have changed the way the WV Division of Highways and Water Development Authority procure engineering services from the Quality Based Selection (QBS) to a low bid process for state-funded highway and water and sewer work. Projects that have federal funding would have continued the QBS selection process, known as 5G. Governor Manchin sought the change, noting decreased fees and better opportunity for engineering firms to be awarded contracts with the state under the low bid process. The engineering community responded by saying that 47 other states use the QBS system and that extenuating circumstances beyond the engineer’s control dictate costs. There may be a study resolution to review the awarding of engineering contracts.
MANDATORY HEALTH INSURANCE BILL DEAD THIS SESSION
The House did not pass H.B. 2478, a bill that would have required contractors bidding on public works projects to provide mandatory health insurance for 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.
HIGHER EDUCATION CONSTRUCTION IMPROVEMENT BILL DOESN’T ADVANCE
S.B. 63 increased the amount from the State Excess Lottery Revenue Fund that is deposited each fiscal year into the Higher Education Improvement Fund from $10 million to $15 million. The bill passed out of Senate but was one the budget bills that didn’t make it through the House. The education fund is one of the entities designated to receive excess lottery funds. Other construction programs receiving lottery proceeds are the West Virginia Infrastructure Council, School Building Authority and state parks improvement projects. S.B. 63 increased by $5 million the amount available for higher education construction projects. In a related issue, Senate Concurrent Resolution 14 authorized the issuance of revenue bonds payable from the State Excess Lottery Fund to provide for new capital improvements, consisting of facilities, buildings and structures for state colleges and universities. SCR 14 was approved by the Senate but not the House.
TRANSPORTATION INFRASTRUCTURE BANK LEGISLATION DIES
S.B. 328 and H.B. 2900 created the West Virginia Transportation Infrastructure Bank. The purpose of the legislation, which other states have enacted, was to create a fund that local governmental entities could utilize for local transportation projects. S.B. 328 was voted out of Senate Transportation and Infrastructure Committee but never progressed further.
S.B. 251 WOULD HAVE PROVIDED MONEY FOR CAPITAL PROJECTS
S.B. 251 authorized county commissions, municipalities and boards of education that receive lottery revenues to issue bonds secured by such lottery revenues to construct public projects. This would have allowed county commissions, municipalities and boards of education to construct more public projects which creates jobs and stimulates the economy. The bill was patterned after the bill that gave the School Building Authority the ability to use its annual lottery proceeds to pay debt service on bonds. Almost every county and municipality gets some amount of lottery proceeds, but in such small amounts that they can’t fund capital improvement projects. By allowing the annual allocation to be used for bonding, public agencies could see bonds to construct a major project. The bill has passed the House Political Subdivisions Committee and but did not get out of House Finance.
TOLL LIMITATIONS ON TURNPIKE DON’T ADVANCE
A number of bills limiting, or eliminating, tolls on the West Virginia Turnpike were introduced by a number of Southern West Virginia legislators. Their position is that the 88-mile, four-lane road should be maintained by WV Division of Highways revenues and the tolls should be eliminated once the existing bonds have been retired. With the WVDOH strapped for cash, taking the road into the state’s system was not supported by other legislators.