LEGISLATIVE UPDATE

TO: CEOs, Presidents & Legislative Contacts

FROM: Charles M. Miller, SVP / Director of Legislation & Regulation

DATE: February 6, 2009

________________________________________________________

House Bill 1204 got what it needed and nothing more – that is 75 yes votes. This legislation to raise the tobacco tax in Arkansas needed 75% of the House of Representatives in order to move to the Senate for consideration, which it did on Thursday. HB 1204 will increase the current tax on cigarettes by 56 cents and fund health related programs in our state. What started out as a mechanism to fund a state-wide trauma system has morphed into much more. If passed by the Senate, the legislation will fund the trauma system, expand coverage for the ArKids First program, add revenue to community heath centers and substance abuse programs as well as fund a new northwest Arkansas campus for the University of Arkansas for Medical Sciences.

Of particular interest to us as bankers is the fact that the alternate funding bill for the trauma system did not advance. HB 1238 proposed to raise the needed money through increases in various fines and earmarking insurance premium taxes. Banks, as all do all businesses, pay premium taxes, therefore the ABA is opposed to this legislation.

We are still working with the Department of Finance and Administration (DF&A) on a solution to obvious problems created by the forged lien release case out of Washington County. Unfortunately, DF&A has come up with little regarding suggested changes in their policies or legislation. Therefore, I have asked a few of my colleagues at other state bankers associations how their state law would address such a case.

As far as dollars sent directly from banks to the State of Arkansas, i.e. assessments paid by Arkansas banks, we continue to watch two bills. HB 1137 is the Bank Department’s appropriation for 2009-10, and it is still under consideration by the Joint Budget Committee. Senate Bill 10 would convert our assessments to general revenue and remove the Bank Commissioner’s control of these revenues. We maintain our position that assessments paid by banks should be used for no other purpose but to regulate banks.

Let me mention one more bill that we are currently tracking. Senate Bill 32 would require motor vehicle liability insurers to include the vehicle’s listed lien holder as payees on claims for damage in excess of $500. Although not filed at our request, the ABA is supporting this legislation because it could help protect a bank’s collateral by insuring that a vehicle is repaired when it is damaged. The insurance lobby has been strongly opposed to SB 32; however, they did offer an amendment this week. I am not sure if the used car dealers association will agree to the amendment but it appears that the bill’s sponsor would like to compromise.

In spite of the fact that we have only had a few direct threats to our industry during this session, your Association persists in representing the banks of Arkansas. As the only trade association devoting full time lobbyists to this industry, we are at the Capitol every day answering legislators’ questions and analyzing each bill that is introduced.