Dan Pilcher

CACI Senior Vice President

& Chief Operating Officer

Phone: 303.866.9600

E-Mail: dpilcher@COchamber.com

www.COchamber.com

Friday, February 27, 2009

Governor Signs Bill Reducing Retailers’ Vendors’ Fee Allowance by $49.9 million to Supplement State General Fund; Small Businesses Exempted

Governor Bill Ritter yesterday signed SB-212, which will cost Colorado retailers $12.5 million in the current fiscal year, which ends June 30th, and $37.4 million in the next fiscal year, to help balance the state budget.

CACI and the Colorado Retail Council, which is a CACI member, along with a number of CACI members and other business organizations, had lobbied hard to lessen the impact on retailers from that of the introduced bill, which would have cost the business community $93 million over three fiscal years.

Retailers are currently allowed to keep three and one-third percent of the state sales and use tax that they collect to offset their administrative costs to collect and remit the tax to the Colorado Department of Revenue.  Although this allowance is the highest of the 50 states, Colorado has the most complex state and local tax system in the country, with several hundred taxing jurisdictions, including the home-rule cities.  The cost to businesses to fulfill this role is substantial.

This is the second time in seven years that the vendors’ fee allowance has been reduced to generate tax revenue for the Colorado General Assembly and a governor to use to help balance the state budget.  In 2002, the vendor-fee allowance was reduced by one percent for two years by the legislature to help balance the budget following the 2001 recession.

Here are the highlights of the new law:

• Businesses that collect $300 dollars or less per month in sales and use tax (which requires $10,345 in monthly taxable sales) are exempt from the bill and thus may continue to retain the full three and one-third percent as their allowance.  The number of these small firms is estimated to be 59,000, which represents two-thirds of all filers.

• Businesses that collect more than $300 in tax may keep 1.35 percent of the tax that they collect.

• This decrease in the vendors’ fee allowance will be for the period from March 1, 2009, until December 31, 2011.

• Businesses will be held harmless from penalties from the Colorado Department of Revenue for reporting sales taxes in error before April 1st.

On Monday, the House adopted on Second Reading an amendment offered by Representative Jerry Frangas (D-Denver), which contained the above provisions.  The business coalition worked hard to support the Frangas amendment to lessen the impact on retailers, particularly large retailers.

The House passed the bill on Third Reading on Tuesday on a 35-to-30 vote.  The Senate concurred Wednesday on the House amendment and re-passed the bill, thus sending it to the Governor.

The bill originated in the Senate, where it was amended with provisions similar to the Frangas amendment, and the business coalition lobbied in support of the amendment.  The House Appropriations Committee last Friday, however, stripped out the Senate amendment, amended the bill with a 3.5 year sunset provision and reinstated the cap that was in the introduced version.

The introduced bill would have affected 1,700 of the state’s 91,500 retailers, but it would have hit hard large retailers.  According to the legislative Fiscal Note, “Only vendors with taxable sales in excess of approximately $431,000 per monthly will be impacted.”  Here are the major provisions of the introduced bill:

• A cap of $417 per month, or $5,000 annually, that a vendor could retain to cover the expense of collecting and remitting the sales tax, which would have severely affected large businesses; and

• A sunset date of July 2013.

When “Transfer” at the State Capitol Really Means Something Else to the Business Community (to the Tune of Almost $112 million)

The House and Senate will meet in a conference committee to resolve differences between the two chambers over SB-208, the bill that would “transfer” more than $226 million from 38 different, special-purposes cash funds to help balance the state budget.

Of great interest to CACI and the business community is the provision that the bill would transfer $111.7 million from just three funds, which are supported by businesses through a special surcharge on their workers’ compensation insurance premiums.

The bill would transfer to the state general fund effective March 30th:

• $15.7 million from the Workers’ Compensation Cash Fund,

• $26.5 million from the Subsequent Injury Fund, and

• $69.5 million from the Major Medical Insurance Fund.

The bill originated in the Senate, which passed it on February 19th and sent it to the House.  The House Appropriations Committee last Friday amended it and sent it to the House Floor.

On Monday, the House voted on an amendment to the bill that CACI has labeled a KEY VOTE.  CACI regards the recorded vote on an amendment by Representative Kevin Lundberg (R-Berthoud) to be a KEY VOTE because the amendment stipulated that the legislature repay the funds when the state’s economy improves and state tax revenues increase.  The amendment failed, however, which indicates that the legislature has no intention of repaying the funds.

Moreover, Senator Moe Keller (D-Wheat Ridge) and chair of the Joint Budget Committee, said on the House Floor during the debate that the legislature “will never be able to pay them (the funds) back.”

If a vote on a bill is labeled a KEY VOTE by the CACI lobbying team, that means that CACI will take careful note of each legislator’s vote.  This vote will play an important role when CACI analyzes an incumbent’s voting record to decide whether or not to endorse the incumbent for re-election and provide financial support from CACI’s political action committees.

House Sends Senate HB-1001, the Governor’s Bill to Create a Tax Incentive to Encourage Job Growth

The House passed HB-1001 Wednesday on Third Reading, thus sending it to the Senate.  To participate in the program, a business would have to meet certain criteria and apply to the Colorado Economic Development Commission.  The firm would be eligible for a corporate income-tax credit of up to half of its annual FICA taxes on new workers.  The tax credit would be calculated on a year-to-year basis for five years according to the number of FTEs on the payroll of the business at the end of the year.  In order for the tax credit to be granted, a company has to prove that if it wasn’t for this program that the company would not move or expand its operations in Colorado.  CACI supports the bill.

Tuesday Hearing Set for HB-1170, which Would Provide Unemployment Insurance Benefits for Unionized Workers when “Locked Out” by Employers

The House Business Affairs and Labor Committee is scheduled to hear HB-1170 when it convenes on March 4th, in the Old Supreme Court Chamber after the House adjourns its morning floor session.  CACI opposes the bill.

This bill would allow workers to receive UI benefits when the employer initiates the “lockout” of the workers.  The bill defines “lockout” as “a refusal by an employer engaged in a dispute with a union to permits its employees to perform services on behalf of the employer.”  The bill also covers “multi-employment bargaining units,” which is defined as “any group of two or more employers bargaining with a union as a single unit with the consent of each employer and the union.”

The bill defines an employer-initiated lockout to “constitute a labor dispute” and thus the unemployed workers are eligible for UI benefits.  The exception to this change is that workers may be ineligible for UI benefits if “the lockout results from the demands of employees as distinguished from an effort on the part of the employer to deprive the employees of some advantage that they already possess.”

From CACI’s perspective, employers lock out workers when they fear that workers will damage the employer’s facility during a labor dispute such as a strike.  CACI has opposed similar bills in past sessions. 

Another Tuesday Hearing: HB-1210 Would Force Employers to Provide Paid Sick Leave

This bill, opposed by CACI, is calendared for a hearing on Tuesday before the House Business Affairs and Labor Committee, which convenes in Room 112 following the House recess.  Among other things, the bill would require that companies provide the leave according to the following schedule based on the size of firms:

• For companies with more than 15 workers, on hour of sick leave for every 30 hours worked up to a total of 72 hours paid sick leave in a twelve-month period;

• For employers with at least six workers and up to 15, one hour of sick leave for every 60 hours worked up to a total of 40 hours in a 12-month period.

Governor Ritter Spotlights Proposal to Use Hospital Fees to Leverage Federal Dollars and Provide Health Insurance for 100,000 Coloradans

Called the “Colorado Healthcare Affordability Act,” HB-1293 was unveiled yesterday at a news conference by Governor Ritter and legislators.  It would impose $600 million in fees on hospitals that could be used to obtain matching Federal funds to provide health-insurance to 100,000 residents.  For more on the proposal, click on:

http://www.denverpost.com/legislature/ci_11796387

On Wednesday, CACI President Chuck Berry sent a letter to Governor Ritter about the proposal, and here is the text of that letter:

The Colorado Association of Commerce and Industry appreciates you taking the lead to address the matter of the cost shift from the inadequate Medicaid hospital payment rates and the hospital care given to the uninsured.  Our member businesses are hopeful that this approach to secure additional funds will reduce the number of uninsured and decrease the hospital cost-shift to privately insured business and individuals.

There must be clear assurances, however, that the provider fee proposal will not add to the cost shift to Colorado businesses. Employers and their employees cannot afford higher premiums in these times of economic downturn and competition in a global market.  We hope there will be transparency in the program and evaluation of the fee so that business can be assured that a cost shift of the fee does not take place, resulting in higher premiums for employers. 

We believe that the governance of the Colorado Medical Services Board and the oversight by the Advisory Board will be critical in tracking and monitoring the program to reduce the potential for cost shifting.  Perhaps the Colorado Department of Health Care Policy and Financing should consider an external audit of the program.

As the details of the legislation become known, members of CACI’s HealthCare Council are committed to working with you and your staff, members of the General Assembly, the hospitals and others to achieve the goals you have outlined.

Upcoming CACI Council Meetings

The Energy and Environment Committee meets Wednesday, and the guest speaker will be Representative Kathleen Curry, Speaker Pro Tempore and Chair of the House Agriculture, Livestock, & Natural Resources Committee.

The Tax Council meets Friday, and the guest speaker will be Senator Mark Scheffel (R-Parker).

NOTE:  CACI councils meet at 12 Noon in the Conference Room at the CACI Office.  Information about council meetings and agendas can be accessed on the CACI Web site.  If you, as a CACI member, are not yet a member of these councils and want to join, please e-mail Misty Fox at mfox@COchamber.com

For More Information on Legislation . . . 

CACI members with questions about legislation that CACI opposes or supports should contact Chuck Berry, CACI President, at 303.866.9652 or e-mail him at cberry@COchamber.com

Questions pertaining to health-care bills should be directed to Ralph Pollock, Chair of the CACI HealthCare Council, at 303.866.9657 or via e-mail at ralph@apaccess.com