LEGISLATIVE UPDATE - SEPTEMBER 1, 2005
Tax Reform; Dirigo Health; Study Committees; Rulemaking Proceedings – even though the Legislature is adjourned there is a great deal of activity in the policy arena that will impact the operation of your bank.
TAX REFORM: There have been several meetings of a group of 10 Democratic Legislators that want to push forward with many of the tax reform proposals that were present in LD 1595, which officially was carried over into 2006. LD 1595 had a number of different drafts, many of which would not have impacted banks at all. The overall goal of this proposal is to broaden the sales tax base and reduce the personal income tax.
The several reform proposals with the greatest legislative support were to tax certain types of amusements (i.e. Movies, golf, skiing), a limited number of services (such as haircuts), and most importantly, increase the real estate transfer tax. The increase to the real estate transfer tax is the most dramatic, in that for certain real estate transfers the tax would triple. The above package of tax changes would produce between $60,000,000 and as much as $100,000,000, depending on the final version of the change.
The realtors and others have worked diligently to oppose the dramatic increase to the real estate transfer tax. While none of the above package would directly impact the banking industry, there are several democratic legislators who have told their caucus that they will not support any tax reform package unless it includes an increase to the bank franchise tax. As of the end of the Session, this group of Legislators included Rep. Bill Smith of Van Buren (the sponsor of the bill that would have doubled the bank franchise tax) and Senator Ethan Strimling. Strimling serves on the Taxation Committee, and there were other Tax Committee members that would support increasing the bank franchise tax.
While this group of Democrats have met several times, and there are some that are urging the Governor to call a Special Session to deal with Tax Reform, at this time our sources indicate that any special session is unlikely prior to the full Legislature returning early in January.
DIRIGO HEALTH: This subject is covered in a separate Memo, but suffice to say that this fall will be a critical time for those interested in the outcome of the Governor’s Dirigo Health Plan. By late October, we will know IF there will be an assessment of up to 4% against the paid claims of all employers. Some business groups will intervene in the adjudicatory hearings before the Superintendent of Insurance this fall, which will determine whether Dirigo has met its burden of proof to show they have caused cost savings to the state’s health care system, and how much those savings are. Dirigo has budgeted $50,000,000 from assessments against employers for 2006!
STUDY COMMITTEES: There will be at least three Study Committees on issues that will affect banking, as follows:
1) Payday Lending, and whether Maine needs to change its laws so as to attract more payday lenders into Maine and meet a need for certain consumers. Director Will Lund of the Office of Consumer Credit Regulation will lead this Study, which results from Legislation proposed last Session that would have eased the laws on payday lenders. The Study will attempt to determine if there is adequate sources of credit for all borrowers. It will include interviews with existing borrowers to see if they were treated fairly by payday lenders and by other existing sources of credit, including credit card lenders. Maine Bankers Association will monitor this Study.
2) Security Breach laws, again this Study will be headed by Will Lund, and is a follow up to legislation that passed with MBA’s support last Session. The Legislation requires date aggregators to report if they suffer a security breach. The Study will determine if other businesses and possibly the State of Maine agencies would also have to report if they know of a security breach. Many states recently have passed laws much like that passed in Maine.
3) Titling Mobile Homes – for the second time in three years, legislation proposed to require the state to title mobile homes was tabled pending study by the Secretary of State’s office. In 2004, the Study was performed by the Corporate filing division and Deputy Secretary of State, this year the Study is being conducted by the Bureau of Motor Vehicles. By 2007 the Bureau of Motor Vehicles should have new computer system that would be able to track a mobile home title. MBA has been asked for its input to this Study, as to whether a titling system for mobile homes is necessary.
RULEMAKING HEARINGS: There are at least two that MBA has interest:
1) The Bureau of Banking has proposed repealing some requirements dealing with Deposit Production Offices. One benefit resulting from the proposed change would be the elimination of one annual report that is filed from each bank in Maine to the Bureau. MBA likely will support this proposal.
2) The Maine State Housing Authority has had two Rulemaking hearings on the same general subject – to award a preference to vendors who do business and bid on Housing Authority business who provide full employee benefits to their employees. This subject was proposed in legislation in 2005 and defeated, but the Housing Authority took the proposal that was defeated and placed it in is bid award process. Small contractors and their associations, general contractors, small business groups, and others have filed protests against the Housing Authority on this matter. At this time, Maine Bankers Association hasn’t commented on this proposed Rule. However, the first proposed Rule was withdrawn, and re-written, and we may comment at the second Rulemaking, which has been the subject of a Request for Public Hearing by a number of interested parties.
