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Legislature Prepares for New Session
by Lori Lustig
The State Legislature is currently between sessions, but much work continues behind the scenes with legislators, staff, constituents and lobbyists working to ready the issues and prepare the bills that will be the subject of the 49th Legislature, Second Regular Session.
To everyone's relief, this next legislative session may be more "business as usual" than last session. If you recall, Senate President Bob Burns put aside regular legislative business (i.e., legislation) for work on the budget.
Although the House introduced bills and moved them gradually through the legislative process of committee hearings, floor debates and floor votes, the Senate held bills until June, unleashing a marathon effort to vet and pass legislation.
Sen. Burns has announced that in January, he will let bills be introduced and heard in the more normal fashion while efforts to adopt a balanced budget are simultaneously ongoing. With the continued decline in state revenues and further requests for agency cuts, little extraneous legislation is expected to be introduced or considered. However, we expect to see legislation of interest/concern for the homebuilding industry.
William A. Mundell, director of the Registrar of Contractors, agreed to share with us his perspective on the challenges facing his agency and the construction industry in the upcoming months.
The Registrar of Contractors is what is referred to as a 90/10 agency. There are approximately 30 such agencies in Arizona. This means that for every dollar collected from the issuance/renewal of contractor licenses, 90 cents (90 percent) stay with the Agency and 10 cents (10 percent) are deposited into the State General Fund. The amount retained by the Agency is used to comprise the Recovery Fund (used for the administration and payment of adjudicated consumer complaints) and the ROC Fund (used for the administration of the agency).
The Agency receives no state appropriations from the General Fund. Unfortunately that has not spared the Agency from state sweeps of Agency funds for redistribution for other necessary state expenditures. Over the last three fiscal years, the Agency has seen the redirection of close to $20 million. In fiscal years 2008 and 2009, all 90/10 agencies shared similar fates.
In an effort of fiscal responsibility, the director has pared the agency from 144.8 FTEs down to 101. In Fiscal Year 2010, their budget will be at the same level as FY 2005. Claims paid out last year totaled $6.3 million-dollars paid for claims arising out of poor workmanship or contractor abandonment. Those same dollars are often funneled back into the local economy by the claimant hiring contractors to complete or correct the work. The good/bad news is that although the agency is seeing a measurable decline in contractors' licensure, claims have declined only slightly.
The end of the Third Special Session in August left the Agency in limbo. SB 1025, vetoed by the governor for reasons unrelated to the Agency, contained an important provision for the Agency's ability to prepare its 2010 budget. SB 1025would authorize the Registrar of Contractors to expend 14 percent of the prior fiscal year revenues for securing employees and contracted services, procuring equipment, and for operational costs, rather than 10 percent of the Fund balance. This change would lessen recent fluctuations. Until the Legislature returns to another special session to address these and other necessary agency funding issues, the Agency is at odds to know how to develop its operating budget going forward.
The governor's request for additional 15 percent cuts in agency spending may also result in further legislative revisions to their funding formula, as has occurred in previous downturns.
In anticipation of the next session, the director is exploring legislation that could proactively offer the agency additional savings. Small claims cost the Agency as much in time and expense to litigate as do large claims. He is considering the alternative of arbitrating smaller claims, the parameters of which are still to be decided.
The irony is that while legislation will go forward in a "business as usual" manner, it will be unusually budget-oriented. We will be covering all of these items and more in the coming months! Watch for the new session beginning Jan. 11, 2010.
Lori Lustig, RN JD, is a State Lobbyist who has represented Arizona homebuilders' associations at both the state and municipal levels.
