UPDATEUPDATE Pennsylvania 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.