Industry Insight

September 2008

MARK YOUR CALENDAR TO ATTEND UPCOMING STATE CHAMBER/AIA COMMITTEE MEETINGS
The State Chamber/AIA Education and Health Committees have scheduled meetings to discuss issues for our 2009 Legislative Agenda. The Health Committee will meet at 9:30 a.m. on Friday, September 26 and our Education Committee will meet at 9:30 a.m. on Wednesday, October 1.

In addition, the State Chamber/AIA’s new Task Force on Energy will meet at 2 p.m. on Tuesday, October 7. The Task Force is meeting to organize and identify its purpose. Some of the issues that will be discussed will include the new Progress Arkansas organization, a broad discussion about energy policy for the State Chamber/AIA and an update on the current status of the Global Warming Commission.

All three meetings will take place in the State Chamber/AIA conference room at 1200 W. Captiol Ave. in Little Rock. Please mark your calendars and make plans to attend these important meetings.

INFORMATION ON STATEWIDE BALLOT ISSUES PROPOSED BY PETITION OF THE PEOPLE
Amendment 7 to the Arkansas Constitution gives the people of Arkansas the power to propose legislation or constitutional amendments by initiative petition, and to order the referendum against any measure passed by the General Assembly. The petition must be signed by eight percent (8%) of the voters in the last gubernatorial race in the case of proposed legislation, ten percent (10%) in the case of proposed constitutional amendments, and six percent (6%) in the case of a referendum. Sponsors were required to submit the appropriate number of signatures to the Secretary of State for certification by July 7, 2008.

Proposed Constitutional Amendment No. 3 sponsored by Hope For Arkansas is: A Constitutional Amendment Authorizing the General Assembly to Establish, Operate, and Regulate State Lotteries to Fund Scholarships and Grants for Arkansas Citizens Enrolled in Certified Two-Year and Four-Year Colleges and Universities in Arkansas. Lt. Gov. Bill Halter’s proposal to amend the Constitution to allow state lotteries contained 123,961 verifiable signatures, and 91,149 of them were found to be valid, well above the 77,468 required to get on the November 4 ballot. As the title implies, Halter’s proposal would mandate all lottery proceeds (after paying expenses and prizes) go toward college scholarships. The scholarships would be available for any Arkansan, regardless of age, attending any certified institution in the state. Lottery proceeds would not be subject to appropriation by the Legislature and could not be used to replace existing educational funds.

The proposal itself does not designate the form of the lottery. Instead, it authorizes the General Assembly to enact laws establishing, operating and regulating a state-run lottery. So if the amendment passes, Legislators will have the ultimate say in what form any possible lottery would take. Legislators would also establish how the scholarships would be structured and awarded.

Estimates on how much a lottery in Arkansas would raise range from the Department of Finance and Administration’s (DFA) $55 million calculation to Halter’s quote of about $100 million per year. DFA based their estimation on comparisons to Kansas which has about the same population as Arkansas, while Halter’s estimate is based on per-capita lottery ticket sales of neighboring states such as Louisiana, Missouri, Texas and Tennessee. Payouts and administrative expenses would depend on the type of lottery established and games that are included. Other states with lotteries allocate approximately 40 to 60 percent on prize money and 5 to 7 percent on administrative fees. In Arkansas, the remainder would be available for scholarships.

Arkansas is one of eight states without a lottery. Previous attempts in 1996 and 2000 to establish a lottery in the state have failed. But those proposals had provisions in them, such as authorizing casinos, which voters found objectionable. A pure lottery proposal like the one to be on this November’s ballot has polled well in the past.

The complete ballot title of Proposed Constitutional Amendment No. 3 can be found on the Secretary of State’s website here.

Proposed Initiative Act No. 1 sponsored by theFamily Council Action Committee is: An Act Providing that an Individual who is Cohabiting Outside of a Valid Marriage May Not Adopt or be a Foster Parent of a Child Less than Eighteen Years Old. The Secretary of State’s office determined the first submission of petitions by the Family Council Action Committee contained 57,888 valid signatures. This put the group short of the 61,974 requirement, but state law allows for an additional 30 days to make up for the shortfall and on August 21 the Family Council Action Committee submitted a second set of petitions. The Secretary of State’s office verified 27,501 signatures in the second set of petitions bringing the total number of verified signatures to 85,389 and qualifying the proposal for the November 4 ballot.

The proposed initiated act would ban unmarried co-habitating couples in Arkansas from adopting or providing foster care to children under the age of 18. Specifically, it would ban placement in a home where the caretaker is “cohabitating with a sexual partner outside of a marriage which is valid under the constitution and laws of this state.” Amendment 83 to the Arkansas Constitution describes marriage as being between only “one man and one woman”.

The proposal would allow a single person, regardless of sexual orientation, who does not live with a sexual partner to adopt or become a foster parent. It would apply to all adoptions in Arkansas including private adoptions of children who have never been in the foster care system.

The Arkansas Department of Human Services already has a policy that prohibits co-habitating couples from acting as foster parents.

The complete ballot title of Proposed Initiative Act No. 1 can be found on the Secretary of State’s website here.

TAKE ACTION AGAINST PROPOSED UNION CARD CHECK LEGISLATION
The website for “Arkansans FOR The Secret Ballot—Protect Your Privacy at Work” is now available. Please visit www.yoursecretballot.com to find information on the proposed federal Employee Free Choice Act (EFCA) and for the tools you need to contact members of Arkansas’s Congressional Delegation.

EFCA, aka Card Check, is a drastic and dangerous piece of legislation that if passed will be the most radical change to labor law in more than 60 years. It will be brought before Congress in early 2009. The proposal takes away the long-held tradition of using secret ballots for union elections. Instead, the union leaders propose using a card check system – a process where votes are cast in public and can be collected by union leaders at a worker’s job, home or on-line.

What you can do:

· Join the coalition by visiting the website or calling the State Chamber/AIA office and ask to be added to the Arkansans FOR The Secret Ballot.
· Send a letter (by fax or to district offices) to Senators Lincoln and Pryor and your Congressman.
· Make an appointment to see Senators Lincoln and Pryor and your Congressman and tell them how this will affect your business and the community.
· Write a letter to the editor of your local newspaper.
· Spread the word about EFCA and ask other members of your community to join the Arkansans FOR The Secret Ballot.

All State Chamber/AIA members are strongly encouraged to spread the word about this issue to fellow members of the business community as well as to employees. It is vitally important that our members of Congress hear the business perspective on this issue.

If EFCA passes, it will strip workers and businesses of critical rights and protections. Please join the Arkansans FOR The Secret Ballot and help us protect privacy and promote democracy in the workplace.

VOTER REGISTRATION DEADLINE QUICKLY APPROACHING
If you are not registered to vote, you have until October 6 to register at your County Clerk’s office. To register you:

Must be a U.S. citizen.
Must be an Arkansas resident, having lived here for at least 31 days prior to the first election in which you vote.
Must be 18 years of age on or before the next election.
Cannot be a convicted felon who has not served your sentence or been pardoned.
Cannot be currently adjudged mentally incompetent by a competent jurisdiction regarding your ability to vote.
Cannot be registered elsewhere, such as another state or Arkansas county.

Remember that if you are a registered voter but have moved or had a change of address since the last election your voter registration does not automatically transfer. You must contact your County Clerk to update your voter registration and receive your new polling location information.

All State Chamber/AIA members who are registered are encouraged to vote on November 4. This year’s election will be a pivotal one for Arkansas and for our Nation and it is vital that the voice of the business community be heard!

Members of the National Association of Manufacturers (NAM) will be able to participate in an on-line “Get-Out-The-Vote” (GOTV) Webinar on September 29, 2008 from 2:00 to 2:45 p.m. (EST). NAM will walk you through all the materials on their Get-Out-The-Vote website and suggest ways that you can utilize them to maximize your company’s voter education efforts in this important election year.

To register for the webinar click here . You must be registered by Friday, September 26. Once NAM receives your registration, they will send you a confirmation, complete with a password to log into the webinar. For more information contact Jeff Noah at jnoah@nam.org or (202)-637-3048.

MANUFACTURING EXECUTIVES CALL FOR A NEW U.S. INDUSTRIAL POLICY

Dow Jones Newswires reported that Dow Chemical Co. CEO Andrew Liveris called "for 'a new industrial policy' that he said is needed to increase investment in the U.S. manufacturing base and create jobs." Liveris made the comments "during an event to kick off plans for a national convention next year," called the National Summit, "regarding a number of issues that affect U.S. economic competitiveness." Liveris argued "that the U.S. is facing a crisis in its industrial sector that is undermining the nation's strength." He said that the U.S. industrial policy is "mostly an 'anti-industrial policy'...with 'contradictory, ill-planned and ultimately self-defeating laws and regulations that are creating havoc at the manufacturing base."

Michigan's WWJ-AM added that Ford Motor Co. Chairman Bill Ford "said his auto company is profitable virtually everywhere except the United States," and "pointedly noted that 'most countries where we operate, the employer doesn't carry the healthcare burden' as Ford does in the U.S." in "a hint of a desire for healthcare reform that would remove employers from responsibility for providing insurance." Ford also said that "a national manufacturing policy should address 'trade policies...some markets are not open to us, some are only open in theory,' signaling taking a tougher stand on free trade."

Michigan's Oakland Business Review pointed out that Liveris "used an impassioned speech before the Detroit Economic Club Monday to argue the U.S. needs a bold new industrial policy to stabilize an industry bleeding jobs and reverse a worsening economic decline."

WORKERS COMPENSATION UPDATE: COURT OF APPEALS WEAKENS ACT 796 OF 1993
This article first appeared in The Defensive Front, a newsletter distributed by Dover Dixon Horne PLLC. It is reprinted here with the permission of, and gratitude to the author Joseph H. Purvis.

On May 26, 2008, the Arkansas Court of Appeals handed down two decisions that raise serious concerns about Act 796 of 1993, the current Workers’ Compensation Act.

First, in the case of Rutherford v. Mid-Delta Community Services, Inc., the Court of Appeals reversed the Arkansas Workers’ Compensation Commission and held that no permanent partial impairment rating or any sort of ratable condition is necessary as a prerequisite to consideration of a claim for permanent and total disability. In this case, there was no permanent impairment rating assigned to the Claimant and the Workers’ Compensation Commission denied his claim for permanent total disability. The Court of Appeals reversed its earlier holding in Wren v. Sanders Plumbing Supply, 83 Ark. App. 111 (2003), in which it held that assignment of a permanent impairment rating was a prerequisite to considering whether an individual was, in fact, permanently and totally disabled.

The second case, Singleton v. City of Pine Bluff, CA-07-1163, seriously undermines the requirement of A.C.A. § 11-9-704(c) that a permanent impairment rating be supported by objective findings. This case was initially heard by the Arkansas Supreme Court in 2007, which considered the difference between a “compensable injury” and a “permanent impairment”. The Claimant, a Pine Bluff Police officer had been injured with bullet fragments in his ankle as a result of an attempted arrest. The Claimant was seen by eight different physicians. The only physician who concluded the Claimant had any permanent impairment was a physiatrist who assigned the Claimant an eight percent permanent impairment rating to the leg because of the fragments in the ankle and the limp which the Claimant displayed in the physician’s office. To the contrary, two orthopedists who treated the Claimant came to a different conclusion, noting that there was no objective evidence to support a permanent impairment finding. They also noted that the A.M.A. Guides to Permanent Impairment had no provision for bullet fragments being lodged in an ankle.

At the direction of the Court of Appeals, the Workers’ Compensation Commission reviewed at length all of the medical evidence and concluded that they gave more weight to the testimony of the two orthopedists over the one physiatrist, noting among other things that there was no objective finding as required by A.C.A. § 11-9-704(c). The Court of Appeals reversed, ruling that the Workers’ Compensation Commission must consider “subjective factors” in determining the Claimant suffered permanent impairment. The Court held that the mere presence of bullet fragments in the ankle meant that there must be some sort of permanent impairment. This ruling, if allowed to stand, would seem to seriously undermine the “objective finding” requirement of the statute.

This material is for informational purposes only and is not legal advice. For more information, contact Joseph H. Purvis at jpurvis@ddh-ar.com or (501) 375-9151.

MANUFACTURING PRODUCTION DOWN DURING AUGUST
The Federal Reserve reported on September 15 that manufacturing production fell by a full percentage point in August, the largest monthly drop in three years. The decline in manufacturing output was caused primarily by an 11.9 percent drop in motor vehicle production, the biggest monthly decline in a decade. This reverses two monthly gains in motor vehicle output that were mainly the result of a resolution of a strike at the end of May. Excluding motor vehicles, manufacturing production fell by 0.3 percent in August, marking the third consecutive monthly decline. Significant production declines took place in industries closely connected to housing such as wood products, furniture and nonmetallic minerals.

DEMOCRATS WILL ALLOW OFFSHORE DRILLING BAN TO EXPIRE

On Wednesday the Los Angeles Times reported, "A long-standing congressional ban on new offshore oil drilling will expire in seven days, with Democratic leaders conceding Tuesday they stand no chance of renewing it this year over President Bush's opposition -- and in an election year in which gasoline prices have become a hot campaign issue." When the ban expires, oil companies "could seek federal approval to drill three miles offshore or farther."

The New York Times pointed out, however, that "eliminating the drilling restrictions will have no immediate consequences since leasing would take place through a long Interior Department process. But it will leave the future of offshore drilling to the next administration." Still, "Republicans hailed the decision as a major step forward on domestic energy production."

Last week, the AP noted, "the House passed legislation to open waters off the Atlantic and Pacific coasts to oil and gas drilling but only 50 or more miles out to sea and only if a state agrees to energy development off its shore." And "while the ban on energy development will be lifted if the Senate goes along with the House action, it doesn't mean any federal sale of oil and gas leases in the offshore waters -- much less actual drilling -- would be imminent." Currently, the Interior Department's "five-year leasing plan includes potential leases off the Virginia coast but probably would not be pursued unless the state agrees to energy development. And the state is unlikely to do so without Congress agreeing to share federal royalties with the state."

The Hill explained that House Appropriations Committee Chairman David Obey (D-Wisc.) broke the news Tuesday night, when he "announced an agreement on a continuing resolution to keep the government funded through March 6, which he said he expects the Senate and White House to agree to. 'I wouldn't be here if I didn't think we had an agreement with the Senate,' Obey said. Asked if he believed the White House would sign the bill, Obey said: 'I wouldn't expect them to endorse it, but I have every reason [to believe] they will accept it.'"

EPA RULES SMALL-ENGINE MANUFACTURERS MUST CUT EMISSIONS

The Washington Post reported that the Environmental Protection Agency (EPA) "tightened emissions standards for new gasoline-powered lawn mowers, weed trimmers, and boat engines, reducing the amount of smog-causing pollution these motors will be allowed to emit." The "long-delayed rules...will require small gas engines to have catalytic converters like those that have been installed in cars since 1975." In approving the rules, "the Bush administration overruled the initial objections of both engine manufacturers and their GOP allies in Congress, who argued that installing the devices in small engines could pose a fire threat."

The New York Times noted that EPA administrator Stephen L. Johnson said that when it is fully implemented, "the rule will yield annual emission reductions of 600,000 tons of hydrocarbons, 130,000 tons of nitrogen oxide, 5,500 tons of direct particulate matter, and 1.5 million tons of carbon monoxide." Also, "he added, Americans could save about 190 million gallons of gasoline each year."

The Detroit News explained that the "new regulation applies to lawn mowers with a 25-horsepower engine or smaller and will reduce smog-forming emissions by 35 percent. Recreational boats will see a 70 percent reduction in evaporated fuel and NOx emissions." The rules "take effect in 2010 for personal watercraft with inboard or outboard motors and for lawn and garden equipment in 2011." Currently, "lawn-care and boat engines are major emitters of air pollution. The EPA said they account for about a quarter of carbon monoxide and other emissions."

The AP pointed out that "some in industry resisted the change," and the "regulation had been delayed for years by opposition from Sen. Kit Bond (R-Mo.) who took up the cause of small-engine manufacturer Briggs & Stratton Corp., which builds many of its engines in Missouri." And though "industry groups said exact figures were difficult to calculate...the California Air Resources Board has estimated that walk-behind mowers would cost 18 percent more under the new regulation, while the price of commercial turf care mowers would rise about three percent."

Focusing on small-engine manufacturer Briggs & Stratton, Wisconsin's Journal Sentinel added that "Laura Timm, Briggs' director of corporate communications, said Thursday that the rules in their final form had been modified to the satisfaction of the outdoor power-equipment industry." But, "in addition to engine makers, other Wisconsin companies such as Brillion-based Ariens, a maker of snow-removal equipment and garden tractors, and John Deere, with operations in Horicon, will have to adapt." The companies expect to "meet with their suppliers and learn how new engines will meld with existing products."

U.S. CONTRACT MANUFACTURERS HAVING SUCCESS COMPETING AGAINST CHINA

Inc. Magazine reported that across the country, "mid-size U.S. contract manufacturers are successfully wooing new business by promising lower costs than the competition. The only thing surprising about their success is that the competition they're beating is China." Inc. points out that "manufacturing wages average 67 cents an hour in China, compared to $17.23 in the United States." Also, "One hundred Chinese cities have populations of more than one million people, compared to nine in the U.S. China's only labor union is controlled by the state and is largely considered useless." Still, many small and medium companies "cannot always justify the expense of shipping to China. The price for sending a 40-foot shipping container from Shanghai to the West Coast is $6,000." Add to that "China's export tax (up to 20 percent of the value of the goods) plus land transport in China and the U.S., [and] the total shipping price tag runs closer to $8,000." The magazine notes that manufacturers are also drawing business away from China through customer service and customization.

INDUSTRYWEEK COMPILES CANDIDATES' POSITIONS ON MANUFACTURING ISSUES

In its cover story for October, IndustryWeek profiles the U.S. presidential candidates' positions on issues important to manufacturers. IndustryWeek chides Sens. Barack Obama (D-Ill.) and John McCain (R-Ariz.), noting that "we certainly haven't heard much from them about what role government should play in promoting the growth of the manufacturing industry." However, the publication compiles the candidates' views on government investment projects, trade, intellectual property, energy, windfall profits tax, the automotive industry, innovation, and carbon footprints, furnished by the candidates' campaigns. According to IndustryWeek, "the goal here is to offer you some clarity in the voting booth when trying to decide which candidate is most in tune with the manufacturing industry."

NAM STUDY SUGGESTS EMPLOYERS INCREASINGLY OFFER INCENTIVES TO PROMOTE WELLNESS PROGRAMS

The Central New York Business Journal reported, "The number of major U.S. employers offering incentives to promote employer-sponsored health and wellness programs rose nearly 10 percent from 2007 to 2008," according to a study released in June by the ERISA Industry Committee (ERIC) and the National Association of Manufacturers (NAM). Using a "Web-based survey of 225 major U.S. companies," the study also found that an increasing number of companies are "offering wellness programs to help achieve results," with 77 percent "using formal health and wellness programs," compared to 72 percent the year before. Researchers also investigated how and when incentives are being offered. Gift cards ranked as "the top incentive choice among the employers surveyed," and "nearly 40 percent of employers offered incentives" to employees at the completion of wellness programs. Notably, "the proportion of those companies with programs successfully measuring return on investment (ROI) increased from 14 percent in 2007 to 26 percent in 2008."

EPA ACCEPTING COMMENTS ON ADVANCED NOTICE OF PROPOSED RULEMAKING
The Environmental Protection Agency (EPA) will be accepting comments through November 27 on an Advanced Notice of Proposed Rulemaking (ANPR) on whether the EPA should use the Clean Air Act (CAA) as a tool in implementing federal regulation of greenhouse gas emissions. The National Association of Manufacturers (NAM) favors a comprehensive legislative solution to climate change issues in a manner that will inflict no economic harm, and opposes use of the outdated CAA as the primary vehicle for a federal climate policy. Working with state association allies, the NAM has developed a letter to be filed in the EPA docket expressing opposition to the proposal. NAM members can contact Bryan Brendle, (202) 637-3176, for details.