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BPAA Biweekly State Policy Updates - February 22

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LABOR UPDATE

  • Lexology reports - Illinois Becomes Fifth State to Pass $15 per Hour Minimum Wage Increase: Fulfilling one of his campaign promises only a month into his administration, on February 19, 2019, Governor J.B. Pritzker signed a bill that will raise the Illinois minimum wage rate to $15 per hour by 2025. A similar measure passed in 2017 before being vetoed by former Governor Bruce Rauner. Illinois follows California, Massachusetts, New York and New Jersey in passing a $15 per hour statewide minimum wage increase. Under the law, the statewide minimum wage rate first increases from $8.25 per hour (which was the minimum wage established in 2010) to $9.25 per hour effective January 1, 2020. The hourly minimum wage rate for employees in Illinois will increase over a period of six years as follows (with scheduled increases for employees in Chicago and Cook County also noted): Illinois’ current minimum wage of $8.25 per hour would rise to $9.25 on Jan. 1, 2020, and $10 on July 1, 2020. The minimum wage would then climb $1 per hour on the first day of subsequent years, reaching $15 on Jan. 1, 2025
    • The bill preserves the reduced scale permitted for employees who receive gratuities and also allows a lower minimum wage rate (peaking at $13.00 per hour in 2025) for employees younger than 18 who work fewer than 650 hours per year.
    • Groups representing business interests have raised concerns that rising costs associated with the wage increase (estimated at $1.1 billion for state government employees alone) will force additional businesses to close or move out of Illinois. In an attempt to ease that burden, the law creates a tax credit for businesses with 50 or fewer employees that offsets some of the out-of-pocket costs of the increase. Small employers will be able to claim a tax credit for up to 25 percent of the actual cost of the wage increase to their business in 2020. The tax credit reduces annually with the wage increases and eventually ends at 5 percent in 2025. The smallest employers (no more than five employees) can continue to claim the 5 percent tax credit through 2027.
    • What This Means for Employers: Employers with employees who will be impacted by the initial or subsequent minimum wage increases should start planning now for the increases, given the potentially significant impacts on labor costs and staffing. Furthermore, the minimum wage rate increase is likely the first of many employee-friendly changes to Illinois law that employers should anticipate in the coming months of Governor Pritzker’s administration, such as a ban on salary history inquiries, which has been passed by the legislature twice in recent years only to be vetoed by Governor Rauner each time. In addition to ensuring employees are paid according to the required minimum wage increase, employers should be alert for coming changes and review their policies and practices to ensure compliance.
  • Bloomberg Government reports - Lower Arizona Student Wage Plan: Arizona employers could pay some full-time students less than the state’s minimum wage under a bill proposed by a Republican lawmaker. The bill would let businesses pay the federal minimum wage to workers who are younger than 22, employed part time, and full-time students. Arizona’s minimum hourly wage is $11, whereas the federal minimum wage stands at $7.25. The bill passed its first committee Feb. 11. Democratic lawmakers and worker organizations oppose it. Republicans hold the majority in the state House and Senate, plus the governor’s office, held by Gov. Doug Ducey.
  • Bloomberg Government reports - Maine Paid Leave Proposals: Maine Speaker of the House Sara Gideon (D) will propose creating a paid family and medical leave insurance program. The legislation, to be filed this month, will join three other paid leave bills and a paid leave proposal in the state’s largest city, Portland. The speaker’s bill would require employers in Maine to give workers up to 12 weeks of paid family leave and 20 weeks of paid medical leave annually. The payroll tax percentage needed to fund the program would fall between 0.5 percent and 1 percent, according to Mary-Erin Casale, Gideon’s communications director, who called the proposal a high priority. Gov. Janet T. Mills (D), elected in November, has expressed support for paid leave, while former Gov. Paul LePage (R) was opposed. Three other Democratic paid leave bills are pending in the Maine State Legislature—L.D. 69, L.D. 369, and L.D. 462—while Portland’s City Council also considers a local sick leave ordinance.
  • Bloomberg reports - Michigan - Nessel Asked to Review How Wage, Sick Day Laws Were Gutted: Lansing, Mich. (AP) -- Democratic Attorney General Dana Nessel was asked Wednesday to review the constitutionality of Michigan Republicans' unprecedented maneuver to significantly scale back minimum wage increases and paid sick leave requirements, which are due to take effect in six weeks. To prevent the measures from going to the electorate in November, after which they would have been much harder to change if voters had passed them, GOP legislators preemptively approved them in September so they could be pared back after the election with simple majority votes and the signature of then-Gov. Rick Snyder. Former Attorney General Bill Schuette, a Republican, endorsed the legality of the contentious strategy in December. But his opinion differed from one issued in 1964 by former Attorney General Frank Kelley, a Democrat. In asking for a new opinion, Democratic Sen. Stephanie Chang of Detroit said the "plain language" of the state constitution limits the Legislature's ability to change a legislatively enacted initiated law in the same session. She cited wording that says lawmakers can enact a proposal, reject it — putting it to a statewide vote — or propose an alternative to appear alongside the measure on the ballot.
    • If Nessel issues an opinion, it would bind state agencies that will enforce the new laws, unless her opinion was reversed by a court.
    • Her request was applauded by the groups that organized the ballot drives. The laws are the third and fourth that were enacted by the postelection lame-duck Legislature and Snyder, and are now under review by Nessel , who pledged to carefully evaluate Chang's request.
    • One gradually increases the state's $9.25 minimum wage to $12.05 an hour by 2030 — maybe later in the case of a recession — instead of $12 by 2022 as was initially enacted.
  • Paid Leave Plan, $15 Wage Floor Proposed by Connecticut Governor: Connecticut’s new governor will include a paid family and medical leave insurance program and $15 minimum wage proposal in his fiscal year 2020 state budget blueprint. Gov. Ned Lamont (D) announced Feb. 13 that his state budget includes proposals for a paid leave plan that workers would fund by paying a 0.5 percent tax on their pay and a plan to raise the state’s current $10.10-per-hour minimum wage to $15 by 2023.
    • The proposal comes amid moves in various parts of the nation to provide or expand paid leave programs and push state and local wage floors to $15 an hour. Lamont said in a statement that while many middle- and upper-income employees have access to paid family and medical leave, only about 6 percent of the state’s low-income workers do.
    • Lamont proposes raising the state minimum wage to $11.25 in January 2020, followed by an increase of $1.25 every year until it reaches $15 per hour in 2023. Massachusetts has already passed legislation to raise its minimum wage to $15 by 2023, Lamont noted.
    • More details about the paid family and medical leave insurance plan will be included in the governor’s fiscal year 2020 budget proposal, set to be released Feb. 20. Democrats, who took control of the state Senate and increased their majority in the House, have pegged creating a state family and medical leave insurance program and a $15 minimum wage as their top legislative priorities for 2019.
  • Business Owners Spar Over Proposal To Raise Maryland’s Minimum Wage: The debate over Maryland’s minimum wage continued in a Senate committee hearing Thursday, with business owners mounting dueling arguments for and against a proposal that would raise the wage to $15 statewide. Maryland’s minimum wage is currently $10.10, except in Montgomery and Prince George’s counties, where it’s $12 and $11.50, respectively. The “Fight for $15” bill, introduced by Democrats from Baltimore and Prince George’s County, would raise the state’s minimum wage to $15 by 2023. It would also phase out the lower minimum wage employers are allowed to pay tipped workers, such as waitstaff. Representatives from Vigilante Coffee and a local string of Ace Hardware stores testified in favor of the bill, saying higher wages help attract and retain qualified workers and boost economic activity by putting more money into employees’ pockets. Read more at WAMU.org.

TAX UPDATE

  • Bloomberg Government reports - Connecticut Governor Floats Nation’s First Statewide Soda Tax: Connecticut would be the first state in the country to implement a tax on sugary drinks under a provision in Gov. Ned Lamont’s budget proposal. Facing a $3.7 billion deficit over the next two years, Lamont (D) has proposed a state budget containing a host of “sin taxes” that includes a 1.5-cent per ounce tax on sugar-sweetened beverages, as well as a 10-cent tax on plastic bags and a 75 percent tax on electronic cigarettes. If approved by the General Assembly, the sugary drinks tax would take effect July 1, 2020, the first day of the state’s fiscal year 2021 budget, and would raise an estimated $163.1 million. Melissa McCaw, secretary of the state’s Office of Policy and Management, told reporters in a Feb. 20 budget briefing that the tax on sugary drinks and the other sin taxes were included by the governor in his budget proposal as much for their environmental and health benefits as for the revenue they will generate. The American Beverage Association, a Washington, D.C.-based trade group, has sued other government entities that enacted a tax on sugary drinks, including the city of Philadelphia. But others say taxing sodas and other sugary beverages slows the sale of unhealthy drinks and raises money for needed programs. “Families in communities across the country are benefiting from the revenue generated by sugary drink taxes,” Nancy Brown, CEO of the American Heart Association, said in a statement. “Connecticut has potential to stand as a leader in the national movement to drive down consumption of sugary drinks and improve heart health across the state.”
  • California Soda Tax Ban Could End This Year: A statewide tax on sugary drinks is part of a package of bills California Democratic lawmakers announced to take aim at the soda industry. The proposal would undo a 12-year ban on soda taxes enacted in June. Lawmakers also want to ban super-sized sugary drinks, place health warning labels on soda containers, and keep soda dispensers away from store checkout counters. If it’s enacted, California would be the first state with a state-wide soda tax. Connecticut Gov. Ned Lamont (D) proposed a 1.5-cent per ounce soda tax as part of his budget plan Feb. 20. The American Beverage Association will oppose the bill. “These kinds of regressive taxes are not supported by the people of California because they place an unfair burden on working families and neighborhood businesses already struggling with the state’s high cost of living,” ABA spokesman Steven Maviglio said.
    • While state tax and health-warning-label bills aimed at sugary beverages have failed in the California Legislature in recent years, local taxes have since passed in San Francisco, Oakland, and Albany, as well as in Philadelphia, Seattle, and Boulder, Colo. Cook County, Ill., enacted and then repealed a soda tax, while Arizona and Michigan have enacted statewide bans on local soda taxes.
    • Former New York Mayor Michael Bloomberg, a long-time critic of the health effects of sweetened beverages, favors Philadelphia’s soda tax and has paid for advertising that supports it and similar taxes. Bloomberg Tax is operated by entities controlled by Michael Bloomberg.
  • Bloomberg Government reports - Wisconsin GOP and Governor Butt Heads on Paying for Tax Cuts: Legislation cutting income taxes for millions of Wisconsin taxpayers is headed to Gov. Tony Evers, who has already said he opposes any tax bill that squanders a state surplus estimated at $600 million. The Wisconsin Senate passed A.B. 4, a measure cutting the tax obligations of middle class taxpayers roughly 10 percent, by a 19-14 vote on Feb. 13. The Assembly passed the measure Feb. 12 by a vote of 61-33. Republican legislative leaders characterized A.B. 4 as a bonanza for middle-income taxpayers, who will see an average net reduction of $170 on their state income tax returns. Leaders portrayed A.B. 4 as a prudent investment, providing approximately $340 million in relief annually at a time when the state is running a surplus estimated at more than $600 million by the nonpartisan Legislative Fiscal Bureau (LFB). Evers (D) has said he opposes any strategy that uses the surplus to pay for tax cuts. The bill was championed by Republicans, who control both legislative chambers but do not have veto proof majorities. The action in the Senate came two weeks ahead of the release of Evers’ 2019-21 Biennial Budget proposal. Democrats, who largely opposed A.B. 4, called the bill an unsustainable “partisan gimmick” designed to paint the governor into a corner ahead of his plan for state spending. Evers has not said he would veto the measure, but has previously announced his intention to present a middle class tax cut funded through cuts in Wisconsin’s Manufacturing and Agriculture Credit (MAC).
  • Bloomberg Government news - Arkansas Tax Cut Passes Legislature, Heads to Receptive Governor: An Arkansas proposal to drop the state’s top income tax rate by a full point by the start of 2021 is headed to the desk of Gov. Asa Hutchinson, who has pushed the proposal as an economic boon. The Senate’s 82-14 tally on S.B. 211 Feb. 14 eclipsed the 76-vote supermajority required for approval. The Senate passed the bill in a 28-5 vote Feb. 6. “The long-term benefit to all Arkansans is that the lowered tax rate puts us in the same bracket with most of our neighboring states, which is significant to CEOs who want to move into other states,” Hutchinson (R) said in a news release. The legislation will be signed into law next week, according to the governor’s office. Hutchinson on Jan. 30 unveiled a revised version of his tax cut that would drop the state’s top rate to 6.6 percent at the start of 2020, followed by a drop to 5.9 percent at the beginning of 2021.
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