01/21/2009

Legislative Update

Prepared by John T. McGough

REVIEW OF 2007-2008 LEGISLATIVE SESSION

S.B. 196 Ohio Preneed Consumer Protection Act Effective April 6, 2009

On January 6, 2009 Governor Strickland signed into law S.B. 196 sponsored by Senator Tim Schaffer (R-Lancaster). S.B. 196 was modeled on draft legislation prepared by OFDA after receiving comments from interested parties. The purpose of the legislation is to enhance protections for Ohio's preneed funeral contract purchasers.

Ohio currently has a strong preneed funeral contract law. Preneed funeral contracts that include funeral services must be sold by a licensed funeral director and funds from a preneed contract must be either placed in trust with a financial institution or used to purchase a life insurance policy from a company licensed by the Ohio Department of Insurance.

S.B. 196 reflects input from the State Board of Embalmers & Funeral Directors, the Ohio Department of Insurance, the Ohio Department of Commerce, the Funeral Consumers Alliance, life insurers and Ohio cemetery associations. The major provisions of the bill are:

Consumer Protections
It is extremely rare for a purchaser of a preneed funeral contract not to receive the funeral goods and services they have contracted for when they die. However, in recent years there have been instances when funeral directors and/or insurance agents have acted improperly with respect to preneed funeral contract funds. S.B.196 should help to prevent cases of preneed fraud from occurring. The legislation requires a set of disclosures in each preneed funeral contract which will give detailed information to consumers such as how the contract is funded, what revocation rights the consumer has, under what circumstances the consumer may transfer a contract to another funeral home, that the consumer is entitled to receive price information prior to purchase in accordance with the Federal Trade Commission's funeral practices industry rule, etc.

In addition, the legislation requires financial institutions acting as trustees and life insurance companies to notify consumers when preneed funeral contract funds have been received. These "front-end disclosures" should alert consumers if their funds have not been placed in trust or with a life insurance company. The legislation also includes criminal penalties for violations of the disclosure and notification requirements.


Preneed Funeral Contract Transfer Provisions
Another major provision in the bill recognizes that our society has become more mobile and that purchasers may change their mind as to which funeral home they want to perform their funeral. In an effort to accommodate the contract purchaser, S.B. 196 authorizes purchasers of irrevocable preneed contracts to transfer their preneed contract to another funeral home willing to provide the funeral goods and services outlined in the contract.

Regulation of Insurance Agent Activities
S.B. 196 also includes language that clearly enunciates what activities an insurance agent may engage in to sell an insurance policy to fund a preneed funeral contract. The language is consistent with an Ohio Attorney General Opinion issued several years ago that outlines appropriate activities by licensed insurance agents. The language makes it clear that these activities do not rise to the level of "funeral directing" and are appropriate under Ohio law. In addition, the bill gives enforcement powers to the Ohio Department of Insurance to the extent that any insurance agent or insurance company fails to comply with applicable provisions of the legislation.

Annual Reports of Preneed Funeral Contracts
Finally, the legislation requires that all sellers of preneed funeral contracts, whether funded through a trust or life insurance, shall annually submit a report to the Board of Embalmers and Funeral Directors listing all the preneed funeral contracts sold during the preceding year. Previously, only contracts funded through a trust had to be submitted to the Board.



H.B. 429 (Origin-Based Sourcing of Sales Tax Collections) - Effective April 18, 2008

During the past few years, the State of Ohio and the Ohio General Assembly have been debating whether to be a full participant in the Streamlined Sales and Use Tax Agreement ("the Agreement"). The Agreement is a multiple-state initiative to make sales tax laws, rules and systems more uniform across the states. The major concern the OFDA has had with the Agreement is with the sourcing provisions which would require Ohio retailers that sell and ship goods across county lines in Ohio to charge the sales tax rate that exists in the county where the merchandise is delivered, not the tax rate for the county where the goods are sold. This could have the effect of many funeral and burial transactions resulting in taxes being collected in two taxing jurisdictions as part of one funeral and burial.

During the past few years the Ohio General Assembly has passed legislation to delay the time when small employers would have to move to destination-based sourcing of sales tax collections. However, in December of 2007, the Streamlined Sales and Use Tax Agreement was amended to permit member states to use origin-based sourcing for transactions occurring wholly within a state. As a result of this amendment, Representative Bob Gibbs (R-Lakeville) introduced H.B. 429 on January 10, 2008 to authorize vendors currently using origin-based sourcing to continue using that method for intrastate sales and to require all vendors to use origin-based sourcing by 2010 for sales occurring entirely within Ohio. The bill does, however, eliminate origin-based sourcing for interstate sales.

The bill was signed into law by Governor Strickland and became effective on April 18, 2008.



S.B. 175 (Interment of product of Fetal Death) Effective September 12, 2008

S.B. 175 was introduced by Senator Kevin Coughlin (R-Cuyahoga Falls) on May 23, 2007. This bill, entitled the Grieving Parents Act, relates to fetal deaths. The bill provides that a cemetery, on the request of a mother of the product of a fetal death, shall inter the remains in accordance with one of the following:

1. In a single grave within the cemetery that contains, or will contain, the remains of a parent, sibling, or grandparent;
2. In another location of the cemetery, including a separate burial ground for infants, on a temporary or permanent basis.

The bill also establishes guidelines relating to the re-interment or disinterment of the product of a fetal death. The bill was signed into law effective September 12, 2008.



2008 Election Summary

OHIO STATEWIDE ELECTIONS

The November 4th election results show that both incumbent Republican Justices of the Ohio Supreme Court were easily re-elected receiving over 60% of the vote. Justice Maureen O'Connor defeated Cuyahoga County Common Pleas Court Judge Joseph Russo and Justice Evelyn Stratton defeated Cuyahoga County Common Pleas Court Juvenile Division Judge Peter Sikora. This means that the Republicans retain their 7-0 majority.

In the race for Attorney General to fill the unexpired term of Democrat Marc Dann who resigned, current Democrat State Treasurer Richard Cordray won easily over Republican Michael Crites with 57% of the vote. Recently, Governor Strickland appointed Columbus City Councilman, Kevin Boyce to replace Corday as State Treasurer.

U.S. HOUSE OF REPRESENTATIVES

In the U.S. House of Representatives there are five new Ohio members. They are:

District 1 (Cincinnati area) Democrat State Representative Steve Driehaus narrowly defeated incumbent Republican Congressman Steve Chabot.
District 7 (Springfield & surrounding counties) Republican State Senator Steve Austria was elected to this seat which became open as a result of the retirement of Republican Congressman David Hobson.
District 11 (Cleveland) Democrat Marcia Fudge easily won this seat that became open due to the recent death of Congresswoman Stephanie Tubbs Jones.
District 15 (Columbus area) In one of the closest races in the country, Democrat Franklin County Commissioner Mary Jo Kilroy defeated former Republican State Senator Steve Stivers.
District 16 (Canton area) Democrat State Senator John Boccieri defeated Republican State Senator Kirk Schuring with 54% of the vote. This seat became open as a result of the retirement of Republican Congressman Ralph Regula.

OHIO STATE SENATE

Republicans retained their 21-12 majority. There are 6 current Republican State Representatives who were elected to the Senate: They are: House Speaker Jon Husted, Chris Widener, Jim Hughes, Jimmy Stewart, Bob Gibbs, and Tom Patton. The other new Senator is Republican Karen Gillmor who previously served in the State Senate. A couple of months ago, Democrat Nina Turner was appointed to the 25th Senate District in Cleveland to replace Lance Mason who was appointed a Cuyahoga County Common Pleas Judge by Governor Strickland. Senator Bill Harris (R-Ashland) was re-elected as Senate President and Capri Cafaro (D-Hubbard) was elected Minority Leader.

OHIO HOUSE OF REPRESENTATIVES

Democrats have picked up 7 seats in the Ohio House to take a 53-46 majority. Representative Armond Budish (D-Beachwood) has been elected as the new Speaker of the House. Representative Bill Batchelder (R-Medina) will serve as Minority Leader. Of the 99 seats, 32 will be filled by a new member of the House. The results show that Democrats picked up 9 seats held by Republicans and Republicans picked up 2 seats held by Democrats.


Governor Strickland lists possible "worst case" scenario budget cuts

In December, Governor Strickland released a document that listed possible areas of budget cuts if Ohio faces a "worst case" scenario $7.3 billion deficit for the biennium starting on July 1, 2009. For purposes of the analysis, debt service, tax relief and Medicaid were not cut which would require a 25% cut in funding from all other state agencies. Below is a summary of how certain agencies could be affected:

Ohio Department of Education Funding would have to be reduced by $2 billion in FY 2010 (which starts on July 1, 2009). This would be a funding level similar to FY 2001.
Ohio Board of Regents Current funding for colleges is $2.83 billion; a 25% cut would be a reduction of $707 million. There would be a reduction of state support per full-time students statewide of $1,987, meaning that student tuition and fees would need to be increased by almost $2,000.
Ohio Department of Job and Family Services With limited staff at the local level, there would be waits for food stamps and child care services leaving people waiting for services when the need is immediate. Approximately 56,000 children, a 40% reduction, would not have access to early care and education services.
Ohio Department of Aging PASSPORT (in home care alternative to nursing homes) reduction in 6,480 people served in FY 2010 and 6,800 in FY 2011.
Assisted Living reduction from $9.5 million to $7.5 million in funding.
Ohio Department of Mental Health Offices of Children's Services and Prevention, Forensic Services and Residency programs would be eliminated. A behavioral health hospital could be closed.
Ohio Department of Alcohol and Drug Addiction Services Eliminate alcohol and drug treatment services for over 10,000 consumers. Reduction of over 15,000 youths, college students and community residents would not receive prevention services.
Ohio Department of MRDD reduce waiver expenditures by 10% affecting 18,000 individuals and families.
Ohio Department of Health Major staffing reductions and loss of federal funds based on grant matching guidelines.
Ohio Department of Rehabilitation and Corrections Reduction of approximately $370 million in GRF funding in FY 2009, leaving a deficit of about $370 million for FY 2010.
Department of Youth Services - $85.6 million in cuts resulting in the closing of 2 large juvenile correctional facilities and one private facility 30% reduction in bed space.
Ohio Department of Development - $4.2 million reduction in Thomas Edison Program, $2.5 million reduction in Rapid Outreach Program, $4.2 million reduction in Third Frontier Action fund which would reduce private investment by $17 million, and reduction of $3.2 million in Workforce Guarantee training resulting in 3,200 workers not receiving training.
Ohio Department of Natural Resources Closure of facilities; Division of Water would not be able to provide match for federal grant for Flood Plain Management Program; Soil and Water, Oil and Gas and Coal regulatory all negatively affected.
Ohio Department of Agriculture Significant staffing cutbacks in Food Safety and Meat Inspection Divisions.
Adjutant General's Department Reduction of $3.2 million in FY 2009 and risk losing air bases if state support drops below minimum requirements; severely strain ability to maintain readiness of forces; If state cannot meet obligation to support the National Guard the federal government may seek to reduce the size of National Guard in Ohio, putting at risk the $500 million in federal dollars that come to the state on an annual basis.