State associations representing supermarkets in the Midwest and West face various proposals in their legislatures that could put fiscal strains on retailers' grocery businesses. Most of these proposals have to do with increasing revenues for the states through various revenue-generating measures like increases in bottle bill deposits, licensing fees and penalties in selling liquor -- as well as general hikes in sales tax. Presented here is part two of a two-part survey of the most important legislative issues being confronted by state grocery associations around the country. Part one, which covered Northeastern and Southern states, was published in SN's April 21 issue. Here are the most crucial issues facing associations in the Midwest and West.
The Iowa Grocery Industry Association, Des Moines, scored a major victory in the statehouse by limiting the penalties for retailers caught selling tobacco products to minors. Jerry Fleagle, IGIA's president, said the penalty was changed from a suspension of the retailer's tobacco license to a fine. Also, if the retailer has a documented employee-training program on selling tobacco but an employee is caught selling to a minor, the employee is subject to a fine and not the store.
The IGIA is still working to preserve a 7-cent transaction fee for retailers when Iowa rolls out its electronic benefits transfer program. When EBT legislation was first approved four years ago, the law called for retailers to receive a 15-cent transaction fee, but two years ago studies by the Food Marketing Institute, Washington, and PricewaterhouseCoopers, New York, showed that the cost of EBTs to retailers in the Midwest was between 7 cents and 7.5 cents.
The IGIA has its work cut out for it on two pharmacy issues. The association is "battling to keep the pharmacy reimbursement rate [for Medicaid prescriptions] from being drastically cut," Fleagle said. In addition, the organization is trying to prevent the state from requiring pharmacies to keep all products containing pseudophedrine behind druggists' counters. (Pseudophedrine, a common ingredient in many over-the-counter remedies -- including decongestants and weight-loss pills -- is also a central ingredient in illegally manufactured, and dangerously addictive, methamphetamines.)
The Associated Food Dealers of Michigan, Southfield, is fighting proposals to raise the cigarette tax by 25 cents, which, after last year's increase of 50 cents, would give Michigan the highest tax rate in the country for cigarettes. Mike Sarafa, president, said AFD "would mount a vigorous campaign to block" the tax increase.
AFD is also keeping a close eye on the proposed expansion of the state's bottle bill.
The major focus of the Minnesota Grocers Association, St. Paul, is getting wine into supermarkets.
Nancy Christensen, the MGA's executive director, said she is not sure of success this session. "If the legislators listen to their constituents, we should prevail," she said, adding that a recent poll showed voters favor making the fruit of the vine available in grocery stores by a 2-to-1 margin.
The major concern at the Nebraska Retailer Grocers Association, Lincoln, is that the state will attempt to balance its budget by increasing taxes on supermarkets, according to Kathy Siefken, NRGA's executive director.
At present, Nebraska does not levy a sales tax on food, and, as of late last month, the version of the streamlined sales tax being considered by the Legislature did not extend the tax to food either.
Siefken said she worries that in their search for ways to balance the budget, legislators might impose a tax on some food items, such as candy. "If they decided to tax candy, it would result in mass confusion," she said.
While industry associations in most other states are following the legislative process with deep concern, if not outright alarm, the North Dakota Grocers Association, Bismark, sounds calmly self-assured.
Tom Woodmansee, NDGA's president, told SN, "We've had a good session. There's not much happening to us. We're in good shape."
The Ohio Grocers Association is fighting some of the components of HB94, the state budget bill, which seeks to accelerate state sales-tax collection.
The OGA instead is proposing to increase the state sales tax by 1% from its current level of 5%. "I think the Ohio populace would be ready to receive a 1% increase in the sales tax," said Tom Jackson, president and chief executive officer of the Columbus-based OGA.
The greatest achievement this legislative season for the South Dakota Retailers Association, Pierre, was convincing the state Department of Revenue not to collect sales tax on vendor allowances, according to Jerry Wheeler, the SDRA's executive director.
The Madison-based Wisconsin Grocers Association's main legislative battle this year is to keep the cash-starved state government from taking away two significant sources of revenue for food and drug retailers: electronic benefit transfer reimbursements and Medicaid reimbursements, Brandon Scholz, the WGA's president, told SN.
On the EBT front, Wisconsin is looking to eliminate entirely the 8-cent per transaction fee it pays retailers, according to Scholz. If the state does stop reimbursing retailers for EBT, he noted, many retailers will stop using their own computer systems to record the transactions and request that the state provide them with a stand-alone EBT machine, which it is required to do by state law.
Rich Jennings, president of the Arizona Food Dealers Association, Phoenix, said his group's top priority involves outdoor lighting on parking lots. "We have a group based in Tucson called International Dark Sky Association that wants to preserve dark skies for astronomers in areas of Flagstaff and Tucson where observatories are located, and they've gone on record saying that moonlight provides enough light for parking lots at supermarkets and car dealerships in those areas.
"Our concern is the safety of employees and customers, and we believe there must be a minimum amount of light at night for safety and security. Dark Sky has tried to pass ordinances at the local and state levels to require lighting reductions to what we consider unacceptably low levels, and while we've managed to defeat them at the state level for the past two years, we were not as successful in Flagstaff or Tucson, which means that as supermarkets build new facilities there, they must use significantly less lighting. But we will keep fighting."
For the California Grocers Association, Sacramento, the top legislative concern this year is workers' compensation reform, Peter Larkin, CGA president, said. "California's troubled workers' comp system has been a major problem for years but now it is spiraling out of control," he said.
To help resolve the issue, CGA has created a Workers' Compensation Task Force comprised of retailers from throughout California that is working with other business associations "to develop a strategy to help bring costs back in line," Larkin said. "Four preliminary areas for change have been identified: placing limitations on chiropractic care; instituting new guidelines that set objective standards for determining permanent disability; reforming the current penalty for employers and insurers for late payments of claims; and exploring the use of alternative dispute resolution programs to lessen litigation and attorney fees."
In Colorado, the budget shortfall has prompted lawmakers to seek "more creative financing methods" to impose cost increases on business fees that affect the bottom line, according to Mary Lou Chapman, president of the Rocky Mountain Food Industry Association, which represents the food industry in both Colorado and Wyoming from its headquarters in Arvada, Colo.
One ongoing battle involves the association's effort to protect the sales tax vendor allowance [the portion of sales tax collected by businesses that they are allowed to retain] at 3.3% rather than lowering it to 2%, Chapman said -- money the state of Colorado wants to use to promote tourism.
Dick Botti, president of the Hawaii Food Industry Association, Honolulu, said his group is attempting to insert the term "non-dealer" into the state's existing bottle bill law so food retailers that are exempt from operating their own redemption centers can refer customers to "non-dealer redemption centers" rather than nearby "redemption centers" that are operated by retail competitors.
"With the original language, there were instances where retailers who don't operate a redemption center have to refer their customers to a competitor's store for redemptions. With the new language, they could refer them to the nearest non-retail recycling center," Botti explained. "We proposed the change, which is moving through the Legislature now, and we believe we will get it approved."
According to Pam Eaton, president of the Idaho Retailers Association, Boise, the biggest issue this year was a bottle bill -- which would have put a 5-cent deposit on all containers -- that was killed in committee "after a huge two-month battle. It failed primarily because it was a bad idea, and no one liked the concept of deposits, plus there were a lot of technical problems that would have arisen if it had been implemented," Eaton said.
William E. Stevens, president of the Montana Food Distributors Association, Helena, said most legislative issues in the state involve attempts to find additional revenues by raising taxes -- on cigarettes, beverages, beer and wine, and gross receipts.
"We've successfully beaten back efforts on beverages and beer and wine, and on gross receipts, we've been able to get the threshold for taxes raised from $10 million in sales minimum to $20 million before a 1% tax on gross receipts is imposed, which exempts most of our members," Stevens said.
The New Mexico Grocers Association, Albuquerque, was instrumental in the defeat of a beverage container bill -- "an age-old issue that we must defend every year," Gene Valdez, association president, said -- and the defeat of a bill that would have required retailers to be licensed to sell tobacco products.
Mary Lau, executive director of the Retail Association of Nevada, Carson City, said the state prohibits sales tax on any food sold that is not for immediate consumption, but the governor has proposed a gross receipts tax "that would be a backdoor way to tax food." The proposal is opposed by most businesses in the state except the gaming and mining industries, Lau said, "and passage is unlikely at this point. But alternative proposals are being considered, including a bill that would impose a sales tax on services."
Trying to keep state legislators from raising fees for supermarket operators -- or creating new ones -- has been a full-time job for the Oklahoma Grocers Association, Oklahoma City, according to Jim Hopper, the OGA's president and chief executive officer.
"Our legislative agenda has been defensive in nature this year," he told SN. "Everything is tied to the revenue shortfall."
Joe Gilliam, president of the Oregon Grocers Association, Portland, said the top issue is a bill that would repeal the minimum wage Consumer Price Index escalator that was approved by Oregon voters in 2002. Under that law, the minimum wage in Oregon is raised each year based on the U.S. City Average CPI for all urban consumers during the previous 12 months.
OGA favors repeal of the law, Gilliam said, because the law has generated less income for entry-level workers, prompting grocery industry employers to cut hours to balance the increases in wages, fringe benefits and energy. "When the number of hours is reduced to a breaking point, a position will be eliminated and working hours for the remaining employees may or may not be restored," he said. "In fact, by 2004, one out of every 10 existing entry-level jobs may be eliminated because 10 full-time entry-level jobs at $6.50 per hour -- the 2002 minimum wage -- is the same cost as nine full-time entry-level jobs at $7.10 an hour."
Rick Johnson, president of the Texas Grocery & Convenience Association, Austin, said his group is concerned with voter rights legislation involving whether grocery stores in Texas can sell beer and wine.
"We have dry counties and wet counties, but under the law, if a city is in two counties, there are more stringent regulations for placing the issue of whether to be wet or dry on the ballot. What we're trying to do is let cities in more than one county have the same rules and regulations as those in a single county. There have been several voter rights bills introduced in the Legislature that would allow residents of each city to vote if they want grocery stores to sell beer and wine, and we'd like to see that legislation pass so stores that want to sell beer and wine have the opportunity to do so."
James V. Olsen, president of the Utah Food Industry Association, Salt Lake City, said it was able to stop passage of a bill that would have reduced the retailers' reimbursement for collection of sales tax.
"The state of Utah gives retailers a 1.5% fee, based on the amount of sales tax collected, to compensate them for collecting the tax, but a legislative proposal would have reduced the fee to 1%. Defeating that was a high priority for us, and we were able to kill it in committee in the House of Representatives."
Amy Brackenbury, vice president, government affairs, for the Washington Food Industry, Olympia, said the biggest priority over the last 10 years has been reforming the state's unemployment insurance system.
"Washington's stable employers are subsidizing non-stable employers," Brackenbury said. "When they pay unemployment insurance taxes, the cap is set artificially low so they're overpaying for those who don't pay, which is really costly to the food industry.
"During the last legislative session, we were able to help pass legislative reform that increased the artificial cap and required more employers to pay their fair share. However, that law was opposed by the construction industry, which filed a referendum that ultimately overturned the Legislature, so we're going back to the table this year."
In Wyoming -- "The only state without a budget shortfall," according to Mary Lou Chapman, president of the Rocky Mountain Food Industry Association that represents the industry in both Wyoming and Colorado from Arvada, Colo. -- the Legislature passed a bill that raised the excise tax on cigarettes from 12 cents per pack to 60 cents, with the additional funds going toward health care.
While the association opposed any increase -- on the grounds it would prompt consumers to buy cigarettes out-of-state where the tax is less -- it helped bring the amount of the tax hike down from 60 cents to 48 cents, but it was unsuccessful in getting it down even lower, Chapman told SN.