February 18, 2014

Things are Getting “Curiouser and Curiouser”

The threat level from this legislative session has been rather low.  This is a condition that fits the old warning “Subject to change without notice.”  Here then is a blend of bills mentioned previously with updates.  The main message as this session approaches the halfway mark would best be summarized as – relax but know that the South Dakota Chamber of Commerce is being ever vigilant on your behalf.

That bill about replacement parts and service as a consumer protection.

SB 136 – Main sponsor Rep. Latterell (R-Tea).  The first half of this bill’s hearing was held on Thursday and because time was limited, the only presentation was by Rep. Latterell himself.  The scope of his testimony was very focused on consumer electronics such as smart phones, tablets and computers.  Many of these products cannot be repaired by independent shops and some have warranty periods that preclude repairs after the warranty expires. 

Rep. Latterell put forth an argument that it is not in the best interest of consumers who could be forced to replace items that could be repaired just because the manufacturer refuses to work on them.  His answer?  Force manufacturers to keep parts inventory for seven years (regardless of the manufacturer’s warranty period) and require that they share information with independent repair shops.

The problem?  The bill doesn’t follow the rhetoric.  This is not a rare situation during legislative sessions where a good sound bite can trump a well-reasoned argument any day of the week.  While your left ear is hearing about consumer protection, your right eye needs to read the definitions.  For example, here is the definition of “electronic goods”:

Electronic goods - any device or piece of equipment that includes or relies upon embedded software.

That goes well beyond a smart phone.  SB 136 would put a severe hardship on a number of South Dakota manufacturers that produce very sophisticated electronics.  South Dakota has 1,100 manufacturers employing 42,000 people.  Of these, about 40 of them manufacture electronics or equipment that uses “embedded software”.  These businesses have made it clear in their communication with the South Dakota Chamber of Commerce and Industry that the mandates in SB 136 could threaten their ability to compete.

The Representative has offered an amendment that would exclude South Dakota manufacturers from section two of the bill.  At the risk of practicing law without a license (or without a clue) this seems to rub up against the constitution’s thoughts about interstate commerce.  Even if it did protect in-state manufacturers, it would most likely mean that every manufacturer from out-of-state would simply stop selling things in our state. 

The hearing continues today when opponents will have an opportunity share these problems with the committee. 

Education Standards – Common Core – and a not-so-common periphery

SB 129 (Jenson R-Rapid City) and HB 1243 (May R-Kyle) are twin bills designed to stop any further implementation of the Common Core education standards that were adopted by the South Dakota Board of Education back in 2010.

A number of conservative groups have been very active in trying to create doubt about these standards and have been working throughout the country to get individual states to turn their backs on them.   Most of the criticism of Common Core is aimed at the process used to develop the standards and the way the standards were adopted.  Opponents of the Common Core standards believe that they will lead to national control of curriculum and that the Federal Government is the real power behind them.  Many of the specific critiques of these standards are based on information that is not complete or not completely accurate. 

To the opponents, these standards are like a stinky new kid in school . . . the further away they can get from them, the better off everyone will be.

There was an extensive process used to adopt the standards.  The legislature was informed, Common Core is supported by teachers, school boards, school superintendents, and many business groups across the country.  The Common Core standards were developed with the leadership of the National Governor’s Association, leading education groups, and business groups such as the US Chamber of Commerce.

The standards are designed to prepare students with stronger skills in science, technology engineering and math (STEM topics) plus communication and reading skills.  These new standards teach a different approach for reading technical material and reading creative works.

There is an unavoidable fact – the business battle ground is global.  Businesses that have operations overseas will attest to the high quality of the education of their foreign employees and have made it clear that South Dakota must keep pace. 

The South Dakota Chamber of Commerce and Industry reviewed the standards, talked to both proponents and opponents and came to the conclusion that South Dakota needs to follow rigorous standards.  The fact that the Common Core standards were developed as a nationwide effort that was inclusive of many stakeholders only strengthens the Chamber’s willingness to support the standards. 

If not Common Core - then what?  The Chamber is not blindly stuck on the Common Core standards but it is stuck on South Dakota having rigorous education standards and strongly believes that if the state is to turn away from Common Core, it must embrace another standard.  SB 129 and HB 1243 fail to replace Common Core with any new standard but rather would have the state halt Common Core for some vague development of a standard that would be developed for South Dakota schools.  The new standards envisioned by these bills would not possibly be available for at least three years and would cost millions to develop.  Education standards are very technical and take years to develop.  The state cannot risk adopting the strategy required by these bills.

To put it bluntly, the Chamber is willing to invite the new stinky kid to lunch . . . heck, we’ll help clean him up and hopefully keep him from doing anything too boneheaded before it’s too late for others to see his real value. 

There’s no jury in the court of public opinion, where accusation often equals conviction.

HB 1207 Kirschman (D – Sioux Falls) Repeal certain provisions, commonly known as the gag law, prohibiting certain disclosures by a state agency of information concerning a private entity.

Under the current law, state agencies are prohibited from disclosing when and/or if they are conducting a “financial investigation, examination or audit” of a private entity.  HB 1207 would repeal that prohibition, making it allowable for agencies to disclose when a private entity might be the subject of a financial investigation, examination or audit.

The South Dakota Chamber of Commerce and Industry generally believes in having the public’s business conducted, well . . . in public.  Records and meetings of public groups whose decisions can have an enormous impact on the general citizenship or the business community should be open to observation.  The problem with simply repealing the section of statute known as the gag law comes from the definition imbedded in the statute.

Here is a list of information that is also protected from disclosure by this statue (this is the text taken from the bill; the overstrikes on the text indicate language being taken out of the statute):

 All proprietary or trade secret information obtained by a state agency from or concerning a private entity is confidential, except as provided by § 1-27-31. 

 (4)    "Proprietary information," information on pricing, costs, revenue, taxes, market share, customers, and personnel held by private entities and used for that private entity's business purposes;

            (5)    "Trade secret," information, including a formula, pattern, compilation, program, device, method, technique, process, marketing plan, or strategic planning information that:

            (a)    Derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can obtain economic value from its disclosure or use; and

            (b)    Is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. 

The Chamber sees two possibilities, both of which are bad.  One is trial in the media with the release of information that a business might be subject to a financial investigation, examination or audit, which quite often might be in the headlines.  What happens next when nothing is found to be wrong?  It is also a potential fact that all too often this kind of news gets ignored or is a story that gets buried along with the obituaries.  This would be especially onerous when it comes to routine audits, which are done each year by the Department of Revenue and that might be misunderstood by the public.

The second debacle would be having propriety trade secrets made public which could wipe out a business.  Unless there are other protections against disclosure of trade secrets or sensitive information elsewhere in statute, the repeal of this bill could make South Dakota one of the most hostile business environments in the country. 

Capitol-ism can’t help but wonder why this topic wasn’t brought up by someone when the Governor’s Office and the Attorney General’s office did an extensive review of public records and open meetings with a special task force back in 2012. 

If it is time to examine this statue, the Chamber would appreciate the legislature using a scalpel and leaving the power saw approach for autopsies being performed on entities that are already dead . . . not ones dying as part of the process.

Business Day at the Legislature is this Thursday.  Register today.

The South Dakota Chamber has set up bill tracking page where members may review bills of interest to the South Dakota Chamber.  Click here to reach the page.    Click on E-Subscribe (My LRC), then 2014 and Session Bills.  The log in is SDChamber and the password is member.

Thank you for your support of the South Dakota Chamber of Commerce and Industry.