On the last day of the 2013 Legislative Session, Senate President Pro Tem Tom Dempsey gave his reasoning for keeping lawmakers firm on finding a fix Missouri’s failing Second Injury Fund, “We knew there was a problem and so we acted like real statesmen and fixed it.”
That attitude made all the difference this legislative session, according to Dan Mehan, Missouri Chamber president and CEO. “Lawmakers acted like statesmen in 2013 and Missouri employers and workers will benefit as a result. After years of impasse, lawmakers secured resolution to a serious, growing problem for both Missouri workers and employers by securing workers’ compensation reforms. We consider the reforms in Senate Bill 1 one of the most important pieces of legislation passed this session, but it is not the only victory for Missouri employers. Historic tax relief, unprecedented progress on labor issues, and common sense reforms to Missouri’s unemployment insurance system are also in the win column for business –and are all issues that eluded lawmakers in previous sessions.”
Workers’ Compensation Reforms
Through the work of Sen. Scott Rupp and Rep. Todd Richardson, employers will see a significant decrease in financial and legal liability as a result Senate Bill 1. The Missouri House gave final approval to the hard-won compromise and the legislation is now heading to the governor’s desk for signature.
“Missouri employers and employees will be better off in the future than they are today as a result of this hard work,” said Dan Mehan, Missouri Chamber president and CEO. “The legislation narrows the claims that are currently run through the Second Injury Fund. Expansion of eligible claims over the last two decades is the reason the fund was insolvent in the first place. The legislation also brings the vast majority of occupational disease back under the workers’ compensation system, where this belongs. The long-term financial and legal liability this legislation removes from employers’ backs is great. It also helps employees get the benefits they deserve, and that’s also good for business.”
Among its provisions:
- SB 1 limits the types of claims that can be run through the Second Injury Fund. The bill removes all permanent partial disability from SIF, which is 80 percent of all SIF claims.
- The bill provides a long-term plan to pay off the $1 billion in liability that currently exists within the system. Currently the Second Injury Fund is $32 million in the red, with more than 1,200 people with outstanding claims. However, more than 30,000 claims are pending adjudication, saddling Missouri employers with great financial liability.
- SB 1 also reduces the interest rate from 9 percent to 5 percent that employers are currently paying on outstanding claims. This will save employers millions of dollars annually.
- The bill brings the vast majority of occupational diseases back under the workers’ compensation system, where these conditions have been handled since Missouri’s workers’ compensation system was established.
- Nine toxic exposure conditions will be eligible for enhanced remedy of up to $150,000 and guaranteed death benefits.
- The toxic exposure condition of mesothelioma will be eligible for $500,000 in enhanced remedy.
- SB 1 provides an employer the option to have coverage for mesothelioma under work comp policy, to pay for remedy out of a pool to be administered by the Department of Labor, or address any mesothelioma cases in circuit court.
“This option gives employers the choice on how to handle these risks,” said Mehan. “Rather than continue to let occupational diseases be a target for trial attorneys, SB 1 provides protections for both employers and employees. Currently, employees can take common ailments such as carpal tunnel syndrome and repetitive motion injuries to the courts, requiring months and thousands of dollars to resolve.”
Senate Bill 1 awaits signature by Gov. Jay Nixon.
Unemployment Insurance Reforms
The Missouri General Assembly also passed legislation to keep Missouri’s unemployment insurance program in compliance with federal mandates and protect federal funding that Missouri employers receive. The mandates were required under the federal Trade Adjustment Extension Act of 2011, and are billed as a way to combat fraud and protect the integrity of states’ unemployment funds.
The legislation is House Bill 611, sponsored by Rep. Bill Lant. The bill contains these provisions:
HB 611 would require employers to provide separation information more quickly. The Trade Adjustment Extension Act of 2011 prohibits relieving an employer from charges of benefit payments (known as non-charging) when the employer fails to respond timely or adequately to a written request for separation information.
Another provision of HB 611, as mandated by the Trade Adjustment Extension Act of 2011, is designed to penalize claimants who fraudulently continue to accept unemployment benefits after returning to work. House Bill 611 requires states to impose a penalty of 15 percent of the amount of overpayment to be deposited in the state’s unemployment insurance trust fund.
Another mandate of the Trade Adjustment Extension Act of 2011 is designed to address current gaps in employment service registration by requiring more stringent use of the federal New Hire Directory.
Failure to meet compliance was attached to a heavy price tag: More than $1 billion would be lost to Missouri employers and the state. Missouri employers would lose FUTA tax credits – $859 million annually. The state would have lost federal grants – approximately $46 million – it receives each year to administer the unemployment compensation system. Missouri would also lose $13 million in federal funds the Department of Economic Development-Division of Workforce Development receives each year to administer re-employment services. Non-compliance could have jeopardized all federal funding for the Tile IV-D program – more than $58 million. It would also risk the loss of federal funding for the Temporary Assistance for Needy Families (TANF) program – up to $217 million.
Another provision of HB 611 contained system reforms important to Missouri employers, by redefining “misconduct” for which an employee may be disqualified from unemployment benefits. The language was identical to provisions within Senate Bill 28, sponsored by Sen. Will Kraus. The legislation was passed overwhelmingly by the Senate after debate that included stories about Missouri workplaces where employees were granted benefits after being fired for stealing from employers, taking illegal drugs at work, and even public urination while on the job at a school. The Missouri House also soundly passed the legislation.
“This is about integrity of the fund,” Mehan said. “Missouri employers solely fund our UI system, and it is a slap in the face when they have to turn around and payout benefits in cases where an employee is clearly breaking company policy and in some cases breaking the law.”
The Department of Labor projections for the Unemployment Trust Fund shows that $527 million of the borrowed funds is still outstanding and must be paid back. Missouri will continue to have a deficit balance until 2016, a debt that is compounded by abuses to the system.
“Narrow interpretation of the definition of misconduct will continue to allow cases like these to erode the system without this legislation,” Mehan said. “We need to protect the system for the purpose it was intended.”
Both HB 611 and SB 28 await signature by Gov. Jay Nixon.
Labor issues made unprecedented progress in the 2013 Legislative Session.
“In the past, we were lucky to see labor legislation even receive a hearing,” Mehan said. “This session, lawmakers took bold measures to debate and pass strong measures that will benefit Missouri taxpayers and workers.”
Waiting signature by Gov. Jay Nixon is House Bill 34, legislation that eliminates the prevailing wage mandate on new construction of public projects in much of outstate Missouri (3rd and 4th class counties). House Bill 34 is sponsored by Rep. Casey Guernsey.
“Prevailing wage law is antiquated policy that has outlived its purpose. This legislation addresses that fact and provides relief to outstate Missouri, where it is needed most,” said Mehan. “We believe it will save thousands of taxpayers’ dollars on public projects. This is money that can instead be spent on education and other public needs, not artificially inflated wages. This is a first step to eliminating this mandate statewide.”
Senate Bill 29, legislation that would protect employees’ paychecks from going to political candidates and campaigns for which they do not support, also awaits signature by Gov. Jay Nixon. The legislation is sponsored by Sen. Dan Brown.
The bill would require an employee to give approval in writing to an employer or labor organization before a political contribution could be taken out of that employee’s paycheck.
“Using employees’ money for politicians or issues that they do not support goes against the very tenants this country was built upon,” Mehan said. “Employees have a right to say what is taken out of their paychecks for political campaigns; just like each year employees have the option to choose how much is withdrawn to go to organizations like United Way or how much money is taken out of their paychecks for their Cafeteria or 401K plans.”
Corporate Tax Relief
The largest corporate tax cut in history is contained within House Bill 253, sponsored by Rep. T. J. Berry. Specifically, the legislation cuts the corporate tax rate in half and reduces individual taxes by $384 million. The cuts would be phased in over ten years.
“Broad-based tax relief is one of the strongest economic development tools we can provide,” said Mehan. “It allows existing businesses to keep more of their earnings to reinvest in workers and expansion. At the same time, it’s a strong recruiting tool to use to lure prospective companies from any industry. What’s more, it gives workers an opportunity to keep more of their paychecks.”
The bill contains protections for the state, should the economy take a swing downward. The tax reductions would not be implemented unless state tax collections exceed the highest tax collections from the previous three years by $100 million.
“And when Missouri’s economy grows, we are going to be investing in our businesses and workers, not putting increased revenues into the growth of government,” said Mehan.
In addition to the tax cuts, the legislation also includes provisions that would allow Missouri to take steps toward securing sales tax from Internet sales. The legislation also would implement a tax amnesty program.
HB 253 awaits signature by Gov. Jay Nixon.
Another significant tax measure that was passed by the Missouri General Assembly is contained within House Bill 128. Amended to the bill is a provision that provides Missouri manufacturers a new option for filing income tax. The Missouri Chamber, which advocated for the measure, calls it the “Made in Missouri Act,” because it would help businesses that manufacture products in Missouri for sales outside the state grow production in Missouri rather than shifting the jobs into other states. Currently, Missouri tax policy can be a disincentive for manufacturers that have sales out of state.
Since 1973, Missouri has had a single sales apportionment factor that taxes Missouri businesses on products manufactured in or distributed from Missouri but sold in other states. Apportionment formulas are important features of state corporate income taxes. They determine how much of a business’s income is taxable and affect the rate and competitiveness of the tax. Utilizing single sales apportionment factor creates an economic development incentive for companies to invest in Missouri property or to hire more people to sell products outside of Missouri.
“The Missouri Chamber supports allowing an alternative to file a pure single sales apportionment factor that does not punish Missouri based businesses for manufacturing products in or distributing products from this state when calculating their taxes. This option will make Missouri a more attractive location for new and expanding facilities, thereby creating jobs and growing our economy,” Mehan said.
Series LLC Organization
Another positive bill for business is House Bill 510, legislation that would give LLC businesses an option to organize as a “series” or distinct operating units of assets. The bill is HB 510, sponsored by Representative Noel Torpey. Under a series arrangement each series operates similarly to a single LLC. The debts, liabilities, and obligations incurred by a particular series are enforceable only against the individual series and not against any of the other series or operating units. Also, any of the individual series may be dissolved without having to dissolve any other series or the entire LLC.
“Currently, five border states – Illinois, Iowa, Kansas, Oklahoma and Tennessee – which we compete with to attract businesses, and ultimately jobs, allow series LLCs. In fact, in recent years, the LLC structure has overtaken corporations as the preferred business entity,” said Mehan. “As LLCs have become more complex and expansive in their business interests, organizing as a series LLC allows a holding company to more efficiently allocate their resources in the setup of the company and treat its entities as distinct while retaining administrative control of the business.”
House Bill 510 awaits signature by Gov. Jay Nixon.
Also awaiting signature by Gov. Nixon is House Bill 446 & 211, sponsored by Rep. John Diehl. The legislation would change the laws regarding the enforcement and servicing of real estate loans.
The legislation was prompted last year by passage of the St. Louis County Council of the Mortgage Foreclosure Intervention Code, which required lenders to offer mediation to homeowners before foreclosing on residential property.
That ordinance adds a costly and time consuming mandate on lending institutions and also makes Missouri’s lending environment inconsistent and unpredictable should other local governments pass similar ordinances.
This legislation requires the enforcement and servicing of real estate loans to be governed by federal and state law, not local ordinances.
“HB 446 & 211 provides consistency in the application of banking laws and regulations here in Missouri,” Mehan said. “The passage of this bill is a positive step to keep the cost of home loans low and property values stable for all Missourians.”
Initiative Petition Reform
Passed in the final hours of the legislative session is House Bill 117, legislation supported by the Missouri Chamber that would tighten up the process for getting initiative petitions on the ballot. The explosion of initiative petition drives in the last decade, often pushed by out-of-state special interests, necessitates these reforms. The legislation is sponsored by Rep. Tony Dugger.
“The use of the initiative petition process is only going to continue to grow. It is our intent to put safeguards in place that protect this tool for Missouri citizens and keep the process ethical and free of fraud. The initiative petition process should be one that involves Missouri citizens not for special interests who buy their way into our state’s law.”
The Missouri Chamber of Commerce and Industry (www.mochamber.com) was founded in 1923 and is the largest business organization in Missouri, representing almost 3,000 employers, providing more than 425,000 jobs for Missourians.