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Lawmakers and taxpayers alike love sales tax holidays, saying they give consumers a much needed financial break. But critics claim the holidays are merely a gimmick that drains still-shaky state coffers.

Tax holidays have big pros, bigger cons

This summer, a dozen states are giving their residents a temporary tax break on back-to-school purchases, including clothing, shoes and even personal computers. While these "state tax holidays" are popular with shoppers, some critics say they are just political gimmicks that cost states millions of dollars in revenue. The number of states offering sales tax holidays is actually up this year. Only nine states offered such programs in 2003: CONNECTICUT, GEORGIA, IOWA, NEW YORK, NORTH CAROLINA, SOUTH CAROLINA, TEXAS, VERMONT and WEST VIRGINIA. FLORIDA, which had dropped its tax holiday program in 2002 due to budget constraints, reinstated it this year, while MASSACHUSETTS and MISSOURI are trying sales tax holidays for the first time.  

Ryan Burruss, a spokesman for the Federation of Tax Administrators, a Washington, D.C.-based organization that assists state tax officials, said the increase in the number of participating states is a result of the improving financial picture nationally. Another reason for the growing popularity of the programs is that they appeal to both Republicans and Democrats. According to Sujit M. CanaRetna, a state budget and tax specialist with the Council of State Governments, Republicans like them because they're tax cuts, and Democrats like them because they're aimed at helping working families. 

But the programs aren't favored by everyone. Risa Williams, editor in chief of state-tax-related publications at VIRGINIA non-profit Tax Analysts, calls sales tax holidays gimmicks that don't really benefit consumers. Williams says during the tax holidays, retailers often raise their prices, so consumers who turn out in numbers thinking they're getting a big break on the sales tax actually end up paying more for products than they would have on any other day. 

William Ahern, a spokesman for Washington, D.C.-based think tank the Tax Foundation, says the sales tax holiday is "a nice idea for families with a lot of kids going back to school. But it's not the greatest tax policy." It makes more sense economically, Ahern says, for states to just have a lower sales tax rate all year long. Detractors also point out that states take huge revenue hits as a result of the programs. The amount of that hit depends mainly on the duration of the program, the state's regular sales tax rate and the products that are exempted. Massachusetts figures to lose between $6 million and $10 million from its first tax holiday on Aug. 14, while Texas projects its Aug. 6-8 holiday will cost the state $36 million. That disparity is due not only to Texas' higher tax rate (6.25 percent versus Massachusetts' 5 percent) and the longer length of its holiday, but also because the Lone Star State's program has been in place since 1999 and residents now schedule major purchases for the holiday period. 

Some believe states simply can't afford the loss of revenue at this point in time. "States are still not completely out of the woods in terms of revenue numbers," said CSG's CanagaRetna. While the Rockefeller Institute of Government reported this month that state tax revenues increased for the third quarter in a row -- up 6.7 percent for the quarter ending in June -- the institute also cautioned that revenue levels "still have a way to go before they have fully recovered from the recession." (STATELINE.ORG, MIAMI HERALD) 

CA BECOMING NEW LAS VEGAS? CALIFORNIA is in the middle of a gambling boom that some say could enable the state to replace NEVADA as the nation's gambling capital. The boom essentially began with the passage of a pair of ballot propositions in 1998 and 2000 that allowed Indian tribes to establish the first casinos in the state. Since then, tribal casinos have amassed more than 60,000 slot machines, helping to make Indian gaming a $5-6 billion-a-year industry in the Golden State. That still leaves it quite a bit smaller than Nevada's, with its 220,000 slots and $9 billion in annual revenue. 

But that could be changing in the near future. New tribal gaming agreements negotiated by California Gov. Arnold Schwarzenegger (R) in recent weeks lifted a 2,000-slot-machine-per-casino limit imposed by former Gov. Gray Davis (D), as well as allowed for the creation of four new casinos, which will bring the state's total to 58. Gambling industry officials and economists say the expansion currently under way could double the state's gambling revenue in the next few years, surpassing Nevada's take by 2010. One reason for their bullishness is that unlike Nevada, which derives most of its gaming revenue from out-of-state visitors, California has a large population of its own to draw on. What's more, casino tribes have become a powerful political force in California, spending $175 million on elections since 1998. "You can't find any legislator who will go up against the Indians; that's how powerful their dollars have become," said Bruce Thompson, a former state assemblyman. Observers, however, say California's Indian casinos are unlikely to ever surpass the Las Vegas Strip as a tourist destination simply because of their lack of proximity to one another. (LOS ANGELES TIMES) 

BUDGETS IN BRIEF: VIRGINIA Gov. Mark R. Warner (R) said last week he will use part of the $323.8 million budget surplus he announced last month -- much to the dismay of lawmakers who opposed the $1.4 billion tax package he pushed through the Legislature in April -- to increase the state personal income tax exemption $100, from $800 to $900 (VIRGINIAN-PILOT [NORFOLK]). * FLORIDA's prepaid college tuition plan will sell its one-millionth contract this fall, even as other states are struggling to keep their tuition programs going. The Sunshine State's Prepaid College Plan, started in 1988, has $5.3 billion banked, making it larger than all 19 of the other tuition plans in the country combined (MIAMI HERALD). * IOWA Gov. Tom Vilsack (D) announced he will call the Legislature into special session the week of Sept. 6 to restore funding for the Grow Iowa Values Fund, the state's centerpiece economic development program, which was derailed by the courts in June (ASSOCIATED PRESS, IOWA CITY PRESS-CITIZEN). * NEW JERSEY's Office of Legislative Services has reported that due to lower-than-expected business and sales tax revenues and unbudgeted aid to poor school districts, the state is facing a $550 million deficit seven weeks into its new budget, instead of the $400 million surplus that had been projected earlier. The nonpartisan OLS actually delivered the bad news earlier this month but it went largely unnoticed because of the McGreevey scandal (TIMES [TRENTON]).

 -- Compiled by KOREY CLARK

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Governors

CODEY PREPARES TO TAKE TROUBLED NJ HELM: While Gov. Jim McGreevey (D) has been busy fending off an attempt to get him out of office earlier than his scheduled Nov. 15 departure date, Senate President Richard Codey (D) has been quietly preparing himself to take on what is sure to be a highly charged term of office. Codey, who will serve out the balance of McGreevey's term unless the governor unexpectedly changes his mind and leaves prior to Sep. 3, has already made a few staff appointments and begun to discuss the transition process with McGreevey's staff. 

But the transition could be the easiest part of the job, as numerous problems await the next Garden State governor. Foremost will be crafting a 2006 budget without the luxury of borrowing measures (allowed for McGreevey but since banned by the state Supreme Court) and developing the infrastructure to manage two huge environmental and anti-sprawl measures McGreevey started that environmentalists are already lining up to fight tooth and nail. And because it is an election year, Codey can almost certainly expect Republicans to push for big tax cuts. He will also have to work on amending the state constitution to allow him to serve as both Senate President and acting governor, all while countering a growing number of lawmakers and government watchdogs that want any constitutional changes to include the creation of a lieutenant governor position (See Politics & Leadership in this issue). Finally, he will have to deal with the pent up frustrations of party bosses on both sides that want McGreevey to step down early so they can run a party favorite for the office.

Codey has undoubtedly never been that person. He has repeatedly infuriated Democratic leaders over the last 20 years by winning as a solo artist in party primaries rather than a cog in a party-assembled ticket. Republicans, meanwhile, say they will continue to push McGreevey to vacate the office immediately. That is surprising to people like Montclair State University associate political science professor Brigid Harrison, who says that by all accounts the GOP does not have a single candidate who could beat Sen. John Corzine, the anticipated Democratic candidate, should there be an election. That hasn't stopped Republicans from taking their shots at Corzine on the possibility there might yet be a special election, as they began airing radio ads last week linking the Senator to McGreevey and "the Democratic party bosses who have thwarted real change like `pay-to-play' and ethics reform." 
Codey warns that a protracted GOP campaign against him based on McGreevey's troubles will not fly with voters. "They tried to run an anti-McGreevey campaign last year and look what happened: the Democrats took over both houses of the Legislature. It's over, and let's not rehash it." (NEWARK STAR-LEDGER, NEW YORK TIMES) 

GOVERNORS IN BRIEF: Sources close to NEW YORK Gov. George Pataki (R) say he is considering a run at the White House in 2008. Rumors of Pataki's presidential aspirations have been swirling for years, but to date he has neither confirmed nor denied that he will seek the GOP nomination (NEW YORK POST). * OREGON Gov. Ted Kulongoski (D) is seeking a review of the Beaver State's mandatory sentencing law. Any changes in the current statute will likely bring the governor to loggerheads with state Republican Party chairman Kevin Mannix, who wrote the law in question. Kulongoski barely edged Mannix out for the governor's office in 2002. Both men are widely expected to take another crack at each other in 2006 (CORVALLIS GAZETTE-TIMES). * A new Tribune/WGN-TV poll of 700 registered voters shows the approval rating of ILLINOIS Gov. Rod Blagojevich (D) has climbed to 51 percent, its highest mark since January. Blagojevich's rating had dropped as low as 40 percent during the state's recent protracted budget stalemate (CHICAGO TRIBUNE). * ARIZONA Gov. Janet Napolitano (D) rejected a state salary commission proposal last week to raise her annual salary by $65,000. A raise of that magnitude would have made Napolitano, who currently makes $95,000 a year, one of the highest paid governors in the nation. Arizona currently ranks 35th in gubernatorial pay (ARIZONA REPUBLIC). * FLORIDA Gov. Jeb Bush (R) announced he will not be on hand at this week's Republican National Convention in NEW YORK to see his brother receive the nomination for a second term as president. Bush said his absence is unavoidable due to ongoing state efforts to recover from the damage caused by Hurricane Charley (FORT WAYNE JOURNAL GAZETTE). 

-- Compiled by RICH EHISEN

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Politics & leadership

MCGREEVEY RESIGNATION REIGNITES CONSTITUTIONAL DEBATE: NEW JERSEY Gov. James McGreevey's (D) decision to delay his resignation over an extramarital affair with another man until November has revived an old debate over the Garden State's constitutional succession plan. New Jersey, unlike most states, has no lieutenant governor. So, if McGreevey steps down after Sept. 3 -- less than 60 days before the general election -- Senate President Richard Codey (D) will serve as acting governor for the remainder of McGreevey's term, which ends in January 2006. As both Senate leader and governor, Codey could potentially introduce a bill, cast the deciding vote on it and then sign it into law. That scenario has led to calls for a constitutional change to create a second-in-command. Six measures concerning constitutional succession have been introduced in the state's Assembly, and Speaker Albio Sires (D) has promised to fast-track legislation creating the office of lieutenant governor. Another Assemblyman, John Wisniewski (D), said previous attempts to address the issue have failed because opponents argued that gubernatorial vacancies would rarely happen. Experts say the state's unorthodox succession plan has actually been used nearly half a dozen times, including in 1913, when Gov. Woodrow Wilson (D) left office to become president of the United States, and just three years ago, when Gov. Christine Whitman (R) was appointed administrator of the Environmental Protection Agency. Wisniewski believes the public attention that has been generated by the McGreevey scandal will finally produce a change. (STATELINE.ORG) 

AT THE POLLS: While some incumbent legislators easily defeated their opponents in ALASKA's primary election last Tuesday, two appointees of Gov. Frank Murkowski (R) faltered in their first test before the state's electorate. The two Republican House members -- Rep. Nick Stepovich and Rep. Dan Ogg -- were picked by Murkowski to fill mid-term vacancies (ANCHORAGE DAILY NEWS). 

SINE DIE: The LOUISIANA Legislature concluded its first regular session under the leadership of Gov. Kathleen Blanco (D) on June 21. Although coming off the success of a well-managed special session on taxes that earned her praise from lawmakers on both sides of the isle, Blanco advanced only a modest general session agenda. Instead, the governor championed the causes of others, relying on her skills as a consensus-builder to transform unlikely bills into the major legislative achievements of the session. Blanco managed to bring action on such perennial non-finishers as a motorcycle helmet requirement, a ban on alcohol in motor vehicles and a major restructuring of the state's river pilot system. The governor did push through a few significant measures of her own, including bills prohibiting lawmakers from accepting campaign contributions during the legislative session and imposing reporting requirements on individuals who lobby the executive branch. Blanco also used the weight of her office to block legislation to give legislators and elected officials huge pay raises. But despite her successes during the session, some lawmakers said Blanco missed an opportunity to address truely substantive issues while she enjoyed the good will of lawmakers, and that next year the honeymoon will be over. (NEW ORLEANS TIMES PICAYUNE)

POLITICS IN BRIEF: ILLINOIS Senate Minority Leader Frank Watson (R) believes the Democrats' public infighting and failure to address medical malpractice reform this session could allow Republicans to take control of the chamber. The GOP needs only four seats to do so (QUAD-CITY TIMES). * CALIFORNIA Sen. Don Perata (D) was elected Senate President Pro Tempore by the chamber's majority Democrats in a close, secret-ballot vote last Tuesday. Perata will take over the position -- generally considered the state's second-most-powerful post -- when Sen. John Burton (D) steps down in November (SACRAMENTO BEE). * ALABAMA Gov. Bob Riley (R) announced last week that he probably won't call a special session on health care before November, if at all, due to slower-than-expected progress by his health care task force. Riley created the task force in April to recommend ways to cut health insurance costs for the state's 200,000 public employees (BIRMINGHAM NEWS). 
 

-- Compiled by KOREY CLARK

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Bird's eye view

Sales tax holiday

Lawmakers in a dozen states offered consumers a temporary "sales tax holiday" in 2004, three more than did so last year (See SNCJ Spotlight in this issue). Supporters say the holidays are a boon to local economies and a welcome respite for working parents, but detractors say they are merely a political gimmick that makes lawmakers look good at the expense of cash-strapped state coffers. TEXAS, for example, says its Aug. 6-8 holiday will cost the state $36 million in sales tax revenue. The map above shows the 12 states that have tax holidays this summer. 

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BUSINESS: PENNSYLVANIA State University officials reach an agreement with the recording industry that allows professors to directly link copyrighted works to their online course syllabi. Students can subsequently download the music on their home computers. Last year Penn State became the first university in the nation to pilot the downloading program, but it was restricted to the 12,000 students living on campus. The new policy will allow about 75,000 students at the 23 Penn State campuses to participate in the program (PITTSBURGH POST-GAZETTE). * The CALIFORNIA Senate endorses SB 1829, a measure that would ban state agencies from contracting out services to companies that use overseas labor. It ships out to the Assembly, which is expected to also ratify the measure on its way to the governor's office (CONTRA COSTA TIMES). * The CALIFORNIA Assembly approves legislation that would raise the state's minimum wage to $7.75 over the next two years. Gov Arnold Schwarzenegger (R) is expected to veto the measure (ORANGE COUNTY REGISTER). * ILLINOIS Gov. Rod Blagojevich (D) signs SB 3111, which requires organizers of exotic animal swap meets to keep records of transactions to make it easier for Prairie State officials to trace diseases and illegal animals (CHICAGO TRIBUNE).

CRIME & PUNISHMENT: The CALIFORNIA Assembly overwhelmingly endorses AB 488, which would allow law enforcement officials to place the names, photos and home addresses of most convicted sex offenders on the Internet. It moves to Gov. Arnold Schwarzenegger (R), who has not taken a public position on the bill (SAN DIEGO UNION TRIBUNE). * Still in CALIFORNIA, the Assembly narrowly approves SB 1399, a measure that would mandate the Golden State prison system evaluate inmate educational backgrounds and use that information to devise individual rehabilitation plans for each inmate. It heads back to the Senate (SAN DIEGO UNION TRIBUNE). * The CALIFORNIA Senate also addresses prison life, signing off on a bill that will ban all tobacco products in Golden State prisons. SB 384 drifts back to the Assembly (CONTRA COSTA TIMES). * ILLINOIS Gov. Rod Blagojevich (D) signs legislation that requires drug stores to lock up cold medicines that contain chemicals used to make methamphetamine. The new law also requires that cold medicines contain no more than three grams of those ingredients (CHICAGO SUN-TIMES). * DELAWARE Gov. Ruth Ann Minner (D)  signs legislation that makes it a Class E felony to plant any type of terror hoax device in the First State. Violators face a three-year prison term (NEWS JOURNAL [NEW CASTLE-WILMINGTON]). * ALABAMA Gov. Bob Riley (R) announces a major Heart of Dixie crackdown on speeding. The effort will include adding 300 sheriffs deputies to the force of 363 state troopers currently patrolling all interstates and roadways (BIRMINGHAM NEWS). 

EDUCATION: The IDAHO Supreme Court unanimously kills a state law that could have allowed judges to require property owners to pay higher taxes to fund repairs on unsafe schools. The court ruled the law unconstitutional (IDAHO STATESMAN). * The CALIFORNIA Senate approves AB 2455, a bill that would require the state education board to seek out reasonable prices on textbooks, and to establish price limits by 2007. Under current law, book publishers submit a price for books that education officials must either accept or reject as is. It heads back to the Assembly (CONTRA COSTA TIMES). 

ENVIRONMENTAL: The CALIFORNIA Senate approves AB 2628, which would allow electric-gas hybrid vehicles to use freeway carpool lanes even if there is only a single occupant. Gov. Arnold Schwarzenegger (R) is expected to sign it into law (CONTRA COSTA TIMES). 

HEALTH: The CALIFORNIA Senate breathes life into AB 894, which would fine drivers $25 for smoking when transporting passengers who are six-years-old are younger, or weigh 60 pounds or less. It moves back to the Assembly (SAN DIEGO UNION TRIBUNE). * Still in CALIFORNIA, the Assembly okay's SB 379, a bill that would limit the amount hospitals can charge uninsured patients. Hospitals around the country regularly charge uninsured patients significantly higher amounts than patients who are covered by health insurance. It moves to Gov. Arnold Schwarzenegger (R), who has not stated a position on the bill (CONTRA COSTA TIMES). * The CALIFORNIA Assembly also approves SB 1444 and SB 1630. The former would ban the sale of performance-enhancing supplements to anyone under the age of 18; the latter would require high school coaches to complete an education course on the dangers of steroids. Both measures head to Gov. Arnold Schwarzenegger (R) (CONTRA COSTA TIMES). 

SOCIAL POLICY: The CALIFORNIA Senate snuffs out legislation that would have banned smoking on all Golden State beaches. Several local governments have already banned the butts on their beaches (SAN DIEGO UNION TRIBUNE). 

POTPOURRI: The CALIFORNIA Assembly gives a thumbs-up to SB 1520, a bill that would ban the sale and production of foie gras, also known as fattened duck and goose liver. It now waddles back to the Senate (SAN JOSE MERCURY NEWS). * The CALIFORNIA Assembly also decides to ban .50-caliber BMG rifles, military weapons that can hit targets up to four miles away. It shoots off to Gov. Schwarzenegger (R) (SACRAMENTO BEE). 
 

-- Compiled by RICH EHISEN

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Once around the statehouse lightly

HOPE THE SHOW WAS BETTER: The Dave Mathews Band probably has a few less fans in Chicago these days. That's because, reports the Quad City Times, on the way to an Aug. 8 trip into the city a bus driver for the band allegedly dumped the contents of the bus's septic tank -- about 800 pounds worth -- off of a bridge over the Chicago River. The contents fell into the water...and onto a tour boat passing underneath, dousing more than 100 people with a wave of foul-smelling liquid waste. The ILLINOIS attorney general's office says that constitutes a violation of state water pollution and public nuisance laws, and has filed a lawsuit seeking $70,000 in civil penalties. The tour boat immediately returned to dock and refunded everyone's money, but angry passengers continued to clog the phone lines for days seeking refunds for damaged personal items and clothes. No word on whether anyone had tickets to see the band. The driver denies the allegations. 

BRUIN OR BREWIN? Ursus Americanus, otherwise known as the black bear, has a pretty standard diet -- nuts, berries, succulent greens and even bugs. But, reports the Los Angeles Times, WASHINGTON wildlife officials at a resort 80 miles east of Seattle recently discovered one shaggy bruin that had added a new staple -- beer. Surprised campground workers found the bruin sleeping on the resort's lawn, surrounded by as many as 36 empty cans of brew he had pilfered from campers' coolers. They tried to chase the boozy bear away, but he promptly climbed up a tree to sleep it off. Turns out the furry guzzler also had particular tastes. After downing one can of the mass-market Busch brand, he switched to a micro-brew ale made by local brewery Rainier. Wildlife agents eventually trapped and relocated the thirsty omnivore by luring him with a collection of doughnuts, honey and -- yep -- two cans of Rainier. 

REAGAN, VENTURA, SCHWARZENEGGER...PISCOPO? As if NEW JERSEY doesn't already have enough troubles, CNN reports that comedian and one-time Saturday Night Live cast member Joe Piscopo is making noises about running for governor. Piscopo, who calls himself a lifelong Democrat and a friend of scandal-ridden outgoing Gov. James E. McGreevey, says a group of "young, very concerned New Jersey citizens" are pushing him to make a run at the Garden State's top office. He declined, however, to name this shadowy group of youngsters, saying they preferred to stay "in the background" for now. Piscopo also did not reveal if he would succumb to the outcry for his candidacy, although he did indicate he would not follow Arnold Schwarzenegger's lead by announcing his candidacy on The Tonight Show, saying, "Arnold is like -- Arnold's a mega-gazillion, you know, dollar superstar. I'm just a Jersey guy. I think I'll go on the New Jersey network."  Great. 

WEASELING ITS WAY IN: With CALIFORNIA lawmakers furiously sending bills his way in an effort to beat the end of session deadline (see Hot Issues), Gov. Arnold Schwarzenegger has his hands full. In addition to hundreds of bills addressing grave matters like how to educate the state's ever-growing inmate population, offshore outsourcing and increased teen steroid use, the San Diego Union Tribune says the Governator will also be the final word on amnesty for...ferrets. After 70 years of living the outlaw life, ferrets are now only a signature away from their freedom, or at least the freedom to be house pets. Under SB 89, ferret owners would have to register the animals as pets, and a fund would be set up to study if they are dangerous or not. Legislation to legalize the furry, weasel-like critters has been the source of great ridicule around Sacramento for years, and this go-around is no different. Assemblyman Lloyd Levine (D) expressed his feelings last week thus: "If ferrets continue to be outlawed, only outlaws will have ferrets." Republican Assemblyman Doug La Malfa also chimed in, saying that "If we're required to register our ferrets now, soon we'll have to register our assault ferrets." Assemblyman Joe Canciamilla (D) probably summed it up for everyone when he said, "If you want to do nothing else but get rid of this bill, I urge an aye vote." His fellow lawmakers agreed, sending the matter to Schwarzenegger, the first time any ferret bill has made it to the governor's office. 

--  By RICH EHISEN

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Executive Editor: A.G. Block
Associate Editors: Rich Ehisen, Korey Clark
Editorial Advisor: Lou Cannon
Correspondents: Richard Cox (CA), Steve Karas (CA), 
Bruce McKeeman (CA), Kelli Harvell (FL), 
Linda Mendenhall (IL), Lauren King (MA) 
and Troy Cassel (PA)
Design: Richard Hansen, Heather Conway

Copyright 2004 State Net
ISSN: 1521-8449