UPDATEUPDATE Affairs of State

A PUBLICATION OF KIRKPATRICK & LOCKHART LLP’S GOVERNMENT AFFAIRS PRACTICE OCTOBER 11, 2002

Legislative Alert NOTE FROM THE EDITOR The 2001-02 Legislative Session is coming to a close, but not without some intense legislative action on the eve of the November 5th election and, we expect, the legislative equivalent of a “free-for-all” during the post- election “Sine Die” Session (which ends on November 30th).

While the House is scheduled to return to voting session during the week of October 21st, not much is expected to occur that week. Both the House and Senate will return again to voting session on November 12th, which will kick off the Sine Die Session. The proposals to be considered between November 12th and November 30th could have a significant impact on business, industry, non-profit organizations, local governments and consumers.

September’s Legislative Alert, published by K&L’s Government Affairs Practice, highlighted a broad range of issues likely to be considered prior to November 30th. This Alert updates many of the issues contained in September’s report and highlights a number of new issues that should be reviewed carefully.

Please do not hesitate to contact Peter A. Gleason at (717) 231-2892 or [email protected] with any questions on the matters highlighted below or other government affairs related questions you may have.

TOP LEGISLATIVE ISSUES

CURRENT FY REVENUE SHORTFALL ■ Pending PACE bankruptcy – 1991 REVISITED? Commonwealth revenue collections for the month of ■ Demands to expand PACE September were 5.3% less than anticipated or $101.1 ■ Pressure to increase funding for schools million short of the projections contained in the ■ Proposals to replace local property tax revenues FY 02-03 Budget. If this trend continues, as many with a state revenue source expect it will, combined with a number of increasing ■ Anticipated Medicaid cost increases in the and very real demands on the Commonwealth hundreds of millions budget, the General Assembly and the next Governor ■ Attempts to provide short-term relief for health may be forced to look closely (again) at the CSFT care providers affected by high medical phase-out, along with other equally (if not more) malpractice premiums painful revenue raising devices to balance the budget. A brief look at some of the following Think back to 1990 and 1991. There are remarkable, if competing budget priorities is sufficient to not scary, similarities. In 1990, like 2002, the demonstrate the extent of the challenge for next Governor and General Assembly escaped raising year’s budget: taxes by enacting largely painless revenue raising

Kirkpatrick & Lockhart LLP measures, without any real effort at cutting costs. In Governor Ridge, when he became Governor, froze all 1991, and possibly like 2003, the General Assembly of the Redevelopment Assistance projects that were and the Governor, in order to close a gap less than $1 part of the former Casey Administration “fire sale” in billion, raised taxes by nearly $3 billion. The the weeks before Governor Ridge’s inauguration. potential scenario grows even more ominous if While the projects ultimately were released, there is different political parties control the Executive and no guarantee the next Governor will honor this Legislative Branches. Governor’s commitments. This is one of the reasons why Governor Schweiker is likely to apply the “under The business community, especially manufacturers, contract” criteria for this round of Redevelopment in Pennsylvania should start planning a strategy to Assistance releases. respond effectively to the very real possibility of a major tax increase in 2003. Additionally, parties VENUE REFORM FOR MEDICAL MALPRACTICE interested in the continued allocation of existing LIABILITY CASES – MORE TORT REFORM? funds, including the Tobacco Settlement Fund, The General Assembly took another major step in should be prepared to defend the current allocations. addressing the medical malpractice crisis facing health care providers in PA by enacting a venue The Governor’s Budget Office is preparing the restriction on medical malpractice claims. The outline for next year’s budget in an effort to allow for relevant provisions of SB 138 would require that an efficient transition to the next Governor. medical malpractice claims be brought against health Immediately following the Election on November 5th, care providers only “in the county in which the cause the next Governor and his team will begin preparing of action arose.” This is a major victory for health budget priorities. It is important to ensure that the care providers, who raised this as one of their top transition team, the House and Senate Leaders, and priorities both during and following the original other key players be educated on the deleterious medical malpractice reform. Their remaining priorities effects of increased taxes and reallocation of key include: caps on non-economic damages; and, funds in such a fragile economy. “short-term” financial assistance with skyrocketing medical malpractice insurance premiums. You may CAPITAL BUDGET/REDEVELOPMENT ASSISTANCE access SB 138 by the following link: SB 1213 (Thompson), the Capital Budget Itemization http://www.legis.state.pa.us/WU01/LI/BI/BT/2001/0/ SB0138P2283.HTM Act, and SB 832 (Jubelirer), the increase in the Redevelopment Assistance cap by $250 million, are While this reform effort does little to aid the efforts of on the way to the Governor’s desk and are likely to the broader class of defendants – especially be signed by the Governor, with a few possible line manufacturers in Pennsylvania – that suffer from item vetoes on the authorization bill. Access the similar venue shopping abuses outside of the medical following link to read SB 832 and SB 1213: malpractice area, it provides a valuable argument (albeit on the intellectual side) into the mix — i.e., http://www.legis.state.pa.us/WU01/LI/BI/BT/2001/0/ SB0832P2296.HTM what is appropriate for one industry’s potential http://www.legis.state.pa.us/WU01/LI/BI/BT/2001/0/ defendants should be appropriate for other industries SB1213P2292.HTM as well.

There will be a lot of pressure on the Governor to There is still a possibility that, after the November 5th release nearly all of the Redevelopment Assistance election, the General Assembly will take up additional money under the cap. This will not be an easy task tort reform proposals. It remains to be seen whether and the Governor’s Office is not likely make a and to what extent the business community, in Redevelopment Assistance commitment unless a general, as opposed to just health care providers, “match” is in place and the project can be “under may benefit from this effort. contract” before the next Administration takes over in mid-January.

2 PENNSYLVANIA AFFAIRS OF STATE There remain many large manufacturers who exceptions, that no state and local government may participated in the joint & several liability reform “substantially burden a person’s exercise of religion, effort still chafing at the General Assembly’s last including any burden that results from a rule of minute move to limit the application of that reform to general applicability.” This is likely to be of interest injuries arising after the effective date of the act, not only to government bodies, but also to private instead of applying the reform to all claims filed after entities that may find themselves in “competition” the Act’s effective date. This is to be distinguished with religious entities. You may read the bill by from the General Assembly’s treatment of the venue hitting the following link: reform measure for health care providers, which http://www.legis.state.pa.us/WU01/LI/BI/BT/2001/0/ extended the venue change language to all claims SB1421P2259.HTM not yet filed. Perhaps proponents of the broader joint and several reform application may benefit from KEYSTONE OPPORTUNITY ZONES (KOZ) AND the precedent set in this venus enactment. KEYSTONE OPPORTUNITY EXPANSION ZONES (KOEZ) The Senate Finance Committee reported SB 1478 (D. GROSS RECEIPTS TAX (GRT) SURCHARGE NEGOTIATIONS White) as committed. The bill would open the KOZ As last month’s K&L Legislative Alert predicted, the Act and allow local governments to agree to add an Governor’s Office and the Public Utility Commission additional 1500 acres per KOEZ. It would also extend are convening discussions on alternatives to Act 89 the life of the program to 2028 and grant individual of 2002’s GRT surcharge for PURTA-related litigation businesses 15 years of tax-free treatment from the losses. The Administration will consider only date they move into the KOZ. The bill can be read at “revenue neutral” alternatives (i.e., at a minimum, the the following link:

PURTA litigation losses must be offset dollar-for- http://www.legis.state.pa.us/WU01/LI/BI/BT/2001/0/ dollar by another revenue source). SB1458P2056.HTM

For the most part, industry efforts to date revolve HERSHEY TRUST “FALLOUT” – around 2 options: (1) enact a “consumer-based” RESTRICTIONS ON TRUST INVESTMENT energy consumption tax; and, (2) allow GRT rate AND MANAGEMENT DECISIONS payers to pass the surcharge on to consumers. The Senate adopted HB 2060 (Lewis) with an There are not many opportunities to accomplish this amendment that restricts charitable trusts with matter inasmuch as it will require either a Tax Reform respect to asset management where the trust has a Code legislative vehicle (which, almost without controlling interest. The bill would appear to affect exception, are not considered outside of the Budget any charitable trust that holds a controlling interest process) or, possibly, an Administrative Code in a publicly traded corporation. The bill, as legislative vehicle (also few and far between). amended, can be found by clicking the following link:

However, the alternative, waiting till late Spring or http://www.legis.state.pa.us/WU01/LI/BI/BT/2001/0/ early Summer for the annual Tax Reform Code vehicle HB2060P4466.HTM may not be an inviting prospect in light of the anticipated poor revenue picture. LOCAL PROPERTY TAX REFORM To suggest that this effort is getting off to a slow RELIGIOUS FREEDOM PROTECTION ACT start would be an understatement in the extreme. SB 1421 (Jubelirer) is on “Third Consideration” in the Nevertheless, just before breaking on Wednesday Senate (i.e., it is fairly well advanced in the process), until October 21st (or, possibly, November 12th), the the Senate Pro Tem/Lieutenant Governor is the Senate Rules Committee amended and reported SB sponsor and a strong proponent of the bill and the 374 (Wenger), a Public School Code vehicle, to religious community lists this as their number one include an act entitled “The Taxpayer Choice Act.” priority. Essentially, SB 1421 declares, with few The proposed legislation new Article within the

OCTOBER 11, 2002 Kirkpatrick & Lockhart LLP rd School Code entitled “Taxation by School Districts.” ■ 123 (Schuylkill, Lucyk retiring): Goodman (D) The article is very similar to Act 50, with one major v. Holman (R). Holman ran a solid, yet exception – it requires a local referendum allowing unsuccessful campaign against Lucyk 2 years the voters of each school district to choose whether ago. He is a strong candidate, with deep to replace local school property taxes with a local community ties. While this is a “D” voter earned income tax. The bill will appear on the Senate registration district, Holman stands a good Calendar for consideration after the November 5th chance of winning. election. SB 374 may be read via the following link: th ■ 134 (Lehigh, Baker retiring): Raynock (D) v. http://www.legis.state.pa.us/WU01/LI/BI/BT/2001/0/ Reichley (R). While the democrats have a slight SB0374P2305.HTM voter registration edge, this district has been Republican held for years. Certainly, this is a POLITICAL NOTES “target,” but the GOP should hold this one.

th ■ 148 (Montgomery, Cohen retiring): Kaskey GOVERNOR’S RACE (D) v. Murphy-Weber (R). While Republicans The latest polls show with an apparent have a voter registration edge here, Lower Merion sizable lead among likely voters. The Fisher and Montgomery County have been trending campaign believes voters simply haven’t focused yet towards Democrat and, combined with the on the Governor’s race and that the gap will close in Rendell effect, this one will be closely watched. the weeks ahead, and have pointed out that Governor Republicans should hold. Ridge was behind by similar margins at this time

th during his race against Mark Singel. ■ 178 (Bucks, Reinard retiring): Cherkin (D) v. Petri (R). While the Republicans hold a modest STATE HOUSE voter registration edge, this, too, is one of those Republicans maintain a 7-vote majority in the House suburban Philly areas where the combination of (105-98) and are well positioned to maintain (if not Rendell and a strong D candidate make this race expand) upon their majority as a result of competitive. This one will be tight. redistricting. The “wild card” remains in the Southeast where folks are debating the merits of STATE SENATE “Rendell effect” (i.e., coat tails). To overcome the Republicans also maintain an 8-vote majority in the 105-98 margin, combined with the clear Republican Senate (29-21) with a recent victory in the October 1st advantage in the 3 newly created seats in Lancaster, Delaware County Special Election to fill the vacancy York and Bucks – which, essentially, could put the created by Senator Bell’s death. As it stands now, House R’s margin around 108 to 95 — the Democrats the Republicans will have to defend most of the SE will have to pull off a host of stunning (if not seats they occupy on Election Day and, thus, the unprecedented) upsets on November 5th. That said Rendell effect is a concern. Most attention has been there are enough “open” or otherwise competitive on 3 SE races: races in the SE that should keep both campaign th committees working overtime between now and ■ 6 (Bucks, Tomlinson incumbent): Kostmeyer November 5th. The following House seats are worth (D) v. Tomlinson (R). This was a race to watch. watching: However, recent polls have the Republican Tomlinson way ahead of the Democrat, former ■ 15th (Beaver, Colafella retiring): Biancucci (D) Congressman Kostmeyer. v. Camp (R). Admittedly, this is a long shot for th the R’s, but Camp has very good name ■ 24 (Montgomery, Holl retiring): Maza (D) v. recognition and is running a solid race in this Wonderling (R). This is the best shot the otherwise solid Democratic district. Democrats have of picking up a seat in the

4 PENNSYLVANIA AFFAIRS OF STATE Senate. The polls are tight, but there is some CONGRESSIONAL RACESRACES: dissension within Montgomery County Republicans currently hold a 1-vote margin in PA’s Republicans (e.g., former Reagan Sec. of Congressional delegation (11-10). The 2000 Census Transportation and candidate for PA Governor, required the General Assembly to draw a map based Drew Lewis, endorsed the Democrat Maza). Also, upon 19 Congressional districts. The Republicans the Lower Merion area is one of the few areas of have 10 “safe” seats, the Democrats 5 … and 4 the SE where Republicans believe Rendell remain “competitive” (albeit some more than others), coattails may appear. including: 6th District ( v. Dan Wofford); 13th District (Joe Hoeffel v. Melissa Brown); 15th th ■ 44 (Chester, Gerlach retiring): Jacobs (D) v. District (Jim Toomey v. Ed O’Brien); and 17th (George Rafferty (R). The Republicans should hold onto Gekas v. ). this seat, but the numbers are still pretty close in this otherwise solid Republican seat with a wide Republican voter registration edge. PETER A. GLEASON [email protected] 717.231.2892

OCTOBER 11, 2002 Kirkpatrick & Lockhart LLP Services Provided by K&L’s Government Affairs Practice LEGISLATIVE AND REGULATORY MONITORING: COMMONWEALTH PROCUREMENT: ■ Review all bill introductions, legislative ■ Monitor and identify procurement opportunities amendments and proposed regulations. throughout state government. ■ Monitor the procedural and substantive ■ Communicate client capabilities to relevant evolution of specific bills, amendments and agencies and advocate for the establishment of regulations, including committee activity, public-private partnerships between state consideration of the legislative and Independent agencies and our clients. Regulatory Review Commission calendar. ■ Prepare procurement proposals and responses to ■ Analyze relevant media and political state government requests for proposal (RFP’s), developments affecting client legislative and and negotiate contract terms. regulatory interests, including Governor’s Office and agency positions and activity. GENERAL FUND AND CAPITOL BUDGET APPROPRIATIONS: ■ Assess the significance of proposed legislation or regulations and advise, where necessary, on an ■ Advocate for increased or new General Fund appropriate course of action in response. appropriations for specific projects and programs. ■ Prepare a customized weekly report, highlighting the relevant legislative and ■ Advise clients on the Capitol Budget/ regulatory issues of interest. Redevelopment Assistance Program and develop a strategy to obtain specific Redevelopment LEGISLATIVE AND REGULATORY ADVOCACY: Assistance authorizations and appropriations. ■ Develop and implement a comprehensive legislative and/or regulatory strategy to ensure ADMINISTRATIVE AGENCY ADVOCACY/GRANTS AND LOANS: the most effective advocacy on a particular matter; ■ Represent clients before state government agencies on a wide range of administrative ■ Identify and provide access to the “players” in decisions, including licensing, permitting, and the legislative and regulatory process, including enforcement actions. the legislative leaders, committee chairpersons, key House and Senate staff, the Governor’s ■ Assist clients in identifying and qualifying for Office, and administrative agency decision existing state grant and low-interest loan makers. programs. ■ Assist in the development of grass roots POLITICAL AND CAMPAIGN FINANCE ADVICE: campaigns and coalition formation among ■ similarly situated groups and organizations to Advise clients on the developing political create the necessary momentum in support of or landscape in Pennsylvania, including regular against a particular matter. updates on “targeted” federal, state and local races and other campaign related information. ■ Research and draft legislation, regulations and ■ testimony before legislative and administrative Advise clients on the political and legal bodies. implications of Political Action Committee (PAC) or other political contributions.

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