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State Policy Update Aug 11th

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Sugar / Soda Tax:

USDA and Illinois:  On August 7, the Department of Agriculture told the Illinois Department of Human Services that Cook County's newly implemented soda tax defies a federal statute that bars state or local sales taxes from being collected on items purchased with SNAP benefits.  The regional administrator for the Midwest Region at USDA's Food and Nutrition Service Tim English warned in a letter that if the county didn't change one of its options for collecting the tax (effective as of last week) it could lose funding for administering the Supplemental Nutrition Assistance Program.  English noted that Cook County changed how the tax would work in practice.  Politico reports that, at first, retailers were supposed to include the tax in the shelf price listed at the retail level.  In June, however, retailers were told they could add the tax at the point of sale - USDA says that does violate the law.   If retailers weren't able to modify their sales systems quickly enough, the county told businesses they could refund the tax charged on SNAP purchases in the interim, but USDA says it told the county via a phone call in late June that this was "unacceptable."   USDA is asking the county to eliminate the refund option or delay implementation so retailers can "appropriately program front-end point-of-sale systems."  The letter notes that when the tax cleared the Cook County Board of Commissioners in Nov. 2016, it was not supposed to apply to purchases that are tax-exempt under federal law, like SNAP purchases.  The state has 14 days to submit a corrective action plan, the letter says. 

Illinois:  Chicago’s sweetened beverage tax took effect on August 2 after a Cook County Circuit Court Judge Daniel Kuasiak decided in the county’s favor and threw out a lawsuit by the IL Retailer Merchants Association that argued the tax measure was vague and unlawful because it exempted custom-made sweetened beverages, such as coffee drinks made in a cafe, and only taxed pre-made beverages, such as sodas, sports drinks and flavored water.  CNBC reports, “In his order on Friday, Kubasiak agreed with the county that there was a significant distinction between taxing the two types of sugary beverages.  County attorneys had also argued that taxing custom-made beverages would put an excessive administrative burden on the county, and that taxing widely available pre-made beverages would be more effective in improving public health.  [Cook County Board President] Preckwinkle said in the statement that the county, which passed the tax in November, lost at least $17 million in revenue in the weeks in which the measure was delayed.  Kubasiak said in his order that he was aware of the county's "budgetary turmoil" as a result of the revenue loss but that it did not factor into his decision making. "The Court is not party to the County's budget matters and is not moved by its public airing of those matters," he said.

Illinois:  In a poll sponsored by the Illinois Manufacturers’ Association (IMA), nearly 87 percent of likely voters in Cook County, Ill., disapprove of the new soda tax there.  The IMA strongly opposes the penny-per-ounce tax on sweetened beverages.  The IMA President and CEO Greg Baise stated the “results clearly indicate that taxpayers aren’t buying this attempt by politicians to hoodwink them about the reason for passing it. It’s about money, not health.”  He further stated, “the IMA plans to continue being active in the effort to overturn the tax while it makes sure those who voted for it are pointed out to the electorate.”

Pennsylvania:  The Tax Foundation released a study on “Soda Tax Experiment Failing in Philadelphia Amid Consumer Angst and Revenue Shortfalls.”  In June 2016, the Philadelphia City Council adopted legislation implementing a city-wide excise tax on nonalcoholic sugar-sweetened and diet beverages.  Levied on distributors, the 1.5 cent-per-ounce beverage tax went into effect on January 1, 2017.  The tax, which is 24 times the state excise tax rate on beer, has received mixed reviews among constituents.  Its key findings include, in part:  “(1) Soda tax revenues are likely below expectations due to consumer mobility. Some soda consumers may drive out of town to buy groceries, rather than pay the higher taxes and (2) Poor revenue performance of Philadelphia’s beverage tax threatens the sustainability of the programs it funds.”


Missouri:  This week, Kansas City voters overwhelmingly approved a $10 minimum wage.  The Kansas City proposal created a minimum wage of $10 per hour on August 24 and increase it annually starting Sept. 1, 2019, eventually reaching $15 per hour in 2022.  However, a Missouri state law that goes into effect on August 28 preempts the city’s law and caps minimum wage at $7.70.  CNN reports, “The law has pitted voters in blue cities against voters elsewhere in red-state Missouri. In 2015, St. Louis voters approved raising the minimum wage to $10 an hour and then to $11 in 2018. But the state law will take it back to $7.70 this month.”

Maryland:  Montgomery County Executive Isiah Leggett (D) vetoed an increase in minimum wage in January and commissioned a study, which was released early August.  Washington Post reports that, according to the study conducted by a Philadelphia-based economic consulting group PFM, “Montgomery County would lose approximately 47,000 jobs by 2022 if it raises the minimum wage to $15 an hour,” and “Increasing the minimum wage to $15 would result in an aggregate loss of $396.5 million of income in the county by 2022 as businesses laid off employees, cut remaining employee hours and benefits, and suspended plans to invest in new locations and hire additional workers.”  Washington Post notes that no other jurisdiction in Maryland has embraced a $15-per-hour minimum wage, but several Democrats running for governor have included it in their platforms.

Arizona:  The Arizona Supreme Court released its opinion rejecting a challenge to a minimum wage increase approved in the November election.  Washington Times reports, “The court turned away arguments from the Arizona Chamber of Commerce and Industry and other business groups that Proposition 206 triggered a provision in the state Constitution requiring a new funding source.  The Chamber pointed to higher state costs for contractors providing elderly and disabled care through the state’s Medicaid program.  But the court said state expenditures were not required and it would be “implausible” for backers to scour every state business dealing to identify possible incidental costs. “A mandatory expenditure of state revenues does not occur if an initiative or referendum only indirectly causes an expenditure of state revenues,” Justice Ann Scott Timmer wrote for the court. If that were the law, she noted, initiative backers would have to account for and provide new revenue for “costs to train affected employees, contract for goods and services, or even to publish the new law itself.””

Paid Medical or Family Leave:

New York:  JDSupra addresses how employers can prepare for NY State’s Paid Family law that goes into effect on January 1, 2018:  “With limited exceptions, a private employer that has one or more New York employee(s) for at least 30 days in any calendar year is a “covered employer” and must comply with the PFLL. Generally, any employer providing required New York State statutory short-term disability insurance coverage for its employees will (as of January 1, 2018) be required to provide paid family leave (PFL) insurance coverage. Employers do not pay for this coverage, but as set forth more fully below, they are responsible for undertaking certain obligations in administering it.”  It also addresses the consequences of noncompliance and some general steps that employers should take, including:  “Employers should contact their short-term disability insurance carrier regarding PFL insurance coverage, confirm the required amount of payroll deductions for employees and discuss the procedures for administering leave and benefit requests under the PFLL; Employers should also contact their payroll services provider regarding the implementation of additional payroll deductions for PFL insurance; Before January 1, 2018, employers should update their employee handbooks or other written leave policies to include information concerning the PFLL and employees’ rights and obligations under the law; and As soon as the required forms of notice become available, employers should obtain the required notice of PFLL rights from their insurance carrier, which must be posted or maintained in a conspicuous place in the workplace.

Fair Scheduling:

Oregon:  Oregon just passed legislation that requires OR companies to given workers at least seven days’ notice about when they have to work.  The law also guarantees workers extra pay if their schedules get changed on short notice or if they are scheduled to work two shifts with less than 10 hours in between.  OR is the first state to pass a “fair scheduling” law along with a handful of major cities.  Bloomberg reports, “Workers’ rights advocates say that kind of unpredictability creates financial instability for workers and wreaks havoc on their ability to arrange childcare, school or a second job. They cite studies suggesting erratic scheduling creates more psychological distress and has an adverse effect on the amount of time parents spend with their kids.”  “Business groups, on the other hand, say regulating schedules creates more problems than it solves.”  Kevin Dugan of the New York State Restaurant Association stated, “We’re getting further and further down a path where people who aren’t familiar with what it takes to run a restaurant are trying to insert themselves in a conversation and dictating business terms…That gets very dangerous.”


Hawaii:  Liquor license fees may soon increase on Oahu, adding to the increasing costs for businesses.  This is the first time in 12 years that the Honolulu Liquor Commission is proposing a fee increase and for general restaurant and retail licenses, the fee would increase more than $800.  “Hawaii Restaurant Association member Michael Miller says mom-and-pop businesses and customers could feel the pinch as all these fees add up.”  Miller stated for the reporter, “Each business will make their own determination, but as overall fees, minimum wage, possible increase in mandatory sick leave might be a law that the legislature is going to pass, all these laws, all these fees add up and eventually you have to pass on the cost to consumer, and at some point, it’s just not viable for the consumer to eat or drink anymore.” 

Indiana:  A newly created Alcohol Code Revision Commission in Indiana is reviewing the state’s alcohol laws to determine how the entire code needs to be updated.  The General Assembly’s Legislative Council established the Commission and the Senate President Pro Tem made the appointments in early July.  State Senators Karen Tallian, D-Ogden Dunes, and Lonnie Randolph, D-East Chicago, are among the members.  “We are going to be learning about the various alcohol industries and how each one has an effect on one another," Randolph reported to the Chicago Tribune. "Our charge is to minimize the negative effect legislation has on any one industry.”  The Tribune further reports that, “Tallian said what she calls the relationships between manufacturers, distributors and retailers are also mired in confusing and outdated regulations. Distributors want to sell all categories of alcohol instead of being limited to beer and wine or spirits and wine. Legislation doesn't properly account for today's trends of microbreweries and micro-distilleries and they can distribute and sell their product, she said.”

Pennsylvania:  PA passed a law in 2016, which takes effect in August 2017, that provides first-time DUI offenders who blow a .10 or greater in a sobriety test will be required to install an ignition interlock in their vehicle instead of having their license suspended for one year. The law also allows repeat offenders, whose licenses are automatically suspended for one year, to apply for an ignition interlock halfway through the suspension.


Pennsylvania:  The PA legislature has been in a heated debate on the state budget, which includes the debate on expanding gaming (with a focus on video gaming terminals (VGTs)).  VGTs include mini-slots or poker machines and a big push is being made to legalize them for bars, restaurants and taverns across PA.  Slot machines are not currently legal in bars and restaurants.  Some state legislators support legalizing VGTs because how they can benefit small businesses as well as bring in additional revenue for the state.  York County Commissioner Chris Reilly told local reporters that if VGTs were legalized in Pennsylvania and allowed in bars and taverns, York County would see about $1.2 million in revenue, and it would bring businesses profit so they don't fear a shut down.

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