IN THIS ISSUE
** 2003 LEGISLATIVE SESSION BEGINS FEBRUARY 3RD
"SALES TAX ON PROFESSIONAL SERVICES" ON THE TABLE
** HENRY NAMES TOMLINSON AS TRANSPORTATION SECRETARY
** KICK YOUR MARKETING EFFORTS INTO HIGH GEAR
** ACEC CONSULTING CONGRESS DAY SET FOR MID-MARCH
** ACEC/PAC SET NEW RECORD WITH OVER $170,000 IN CONTRIBUTIONS
** 2003: DON'T GET CAUGHT OFF-GUARD BY A DROP IN BUSINESS
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The 2003 Session of the Oklahoma Legislature will convene on Monday, February 3rd, and this promises to be a very interesting and heated session.
Budget issues will dominate the session, as the state is facing a $600 million budget shortfall for the coming year from the amounts allocated for last year's budget. Newly elected Governor Brad Henry, a Democrat, will have allies in the Legislature with the Democrats controlling both the House and Senate, but that doesn't necessarily mean that things will be easy for the freshman Governor.
Just because they are from the same party doesn't guarantee "happy days." Previous Democratic Governors have not had an easy time working with their legislative counterparts and only time will tell how this Democratic Governor works with the Democratic legislative leadership.
Education funding will lead the issues to be tackled early in the session. Governor Henry's "Education Lottery" will probably be up early in the session. The Lottery will be met with stiff opposition, and not necessarily along party lines. Supporters and opponents come from both side of the aisle. There's a decent chance of passage in the Senate, but House approval will be very difficult.
But, passage of the Lottery, which will eventually take a vote of the people, will not solve the immediate budget deficit that the state faces. Even if the Lottery is approved by the Legislature and the people, it would take 12 to 18 months to "ramp up" the program, which means that it would be at least two years before any money was realized from the lottery.
What's the immediate solution?
Educators will be coming to the Capitol on February 12th for a rally to encourage Legislators to fund education first. Their goal is a 1-cent increase in the state sales tax and the ability to hike property tax rates. These would cause an immediate influx of new money to offset the budget deficits. However, unless the Legislature can muster a "super majority" of 75% of both houses, the sales tax increase would also have to go to a vote of the people.
So, what's left?????
Rep. Danny Hilliard, House Speaker Pro Tem, last week said that legislators may consider "temporary" elimination of tax exemptions to generate money for this year's budget. "I think that everything is on the table," said Hilliard, D-Sulpher. "It gives you instant revenue," Hilliard continued. "That's the quickest way to get cash, basically."
For CECO members, "temporary" elimination of tax exemptions means SALES TAX ON PROFESSIONAL SERVICES!!!!!!! Even on a temporary basis (and we all know what temporary means), this would be devastating to design professionals who compete for projects not only on a local and state level, but on interstate and international levels as well.
Hilliard's proposal isn't receiving backing from party leaders on either side of the aisle, including his party's highest profile leader, Governor Brad Henry. The Governor's spokesperson acknowledges that the Governor knows discussions are going on, but maintains that the Administration's focus is going to be examining every agency for inefficiencies and trying to redirect any revenue to areas like education and health care.
So, only time will tell as to whether or not Sales Tax on Professional Services will be one of the many revenue sources the Legislature seriously considers. Regardless, CECO will be watching this issue very closely and will keep you updated on any developments.
** OTHER ISSUES OF INTEREST
To date, there have been over 1700 House and Senate bills introduced. House introductions have ended, and Senate filings close later this week.
While CECO is reviewing several pieces of legislation, we have identified two which should be of interest to members and which we will track carefully.
** HB 1385 and SJR0001 Increase in the state motor fuels tax. As reported in the last newsletter, SJR 0001 (Milacek) would put an increase in the state motor fuel taxes to a vote of the people. HB 1385 (Ferguson) is a mirror to the Milacek and will be the main vehicle for the proposed increase as under the Oklahoma Constitution all tax bills must start in the House.
The downside to having a vote of the people is that the Constitution requires that any tax increase measure may only be voted upon during a General Election. So, if this proposal is approved by the Legislature, the vote cannot happen until November, 2004.
The CECO Board has endorsed this proposal, and we are currently involved with a coalition of other associations that will push for approval of this legislation and eventually with the effort to seek voter approval.
** HB1451 This bill would make changes in the State Architectural Act which have been needed for many years. Under the proposal, the current statutory definition for which an Architect would be required will be changed from a "laundry list" of building types to "Code Use Groups". These "code use groups" are more specific to building type, size and occupancy rates. Over the years there have been several efforts to make these types of changes, but this bill looks to have a better chance than any in the past.
As final bill drafting is completed, CECO will have a better idea of other bills which may impact or be of interest to our members. We will review all of the bills and keep you up-to-date on all of these issues as the session progresses.
And, as always, if you have any questions or need information on any legislation, please do not hesitate to contact CECO.
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HENRY NAMES TOMLINSON AS TRANSPORTATION SECRETARY
Gov. Brad Henry has named a retired commercial real estate investor from Shawnee as Secretary of Transportation.
Phil Tomlinson, who served in the administrations of Republican Gov. Dewey Bartlett and Democratic Gov. David Hall as economic development coordinator, will oversee state transportation initiatives and the Oklahoma Department of Transportation and the Oklahoma Turnpike Authority.
"Phil Tomlinson understands Oklahoma's transportation needs and the steps we need to take to build the best highway system in the country," Henry said.
Tomlinson, 64, has an undergraduate degree in marketing and a master's degree in business administration from Oklahoma State University. He has been working as part of Henry's transition team since November.
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KICK YOUR MARKETING EFFORTS INTO HIGH GEAR
ACEC's new seminar, Marketing: Raising the Bar, which is being held Feb. 21-22 in New Orleans, will kick your firm's marketing efforts into high gear.
For more information, contact Sandrine Mailli (smailli@acec.org or 202-347-7474).
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ACEC CONSULTING CONGRESS DAY SET FOR MID-MARCH
CECO will again be participating in the annual ACEC Consulting Congress Day (CCD) activities, March 18th and 19th. "Engineers Move America" is this years theme, and CCD is the premiere legislative conference of the engineering industry. It offers ACEC members the opportunity to promote and defend key issues on Capitol Hill.
Congress will address issues in 2003 that will affect the bottom line at your firm including, OUTSOURCING OF ENGINEERING SERVICES, INFRASTRUCTURE FUNDING, PROCUREMENT REFORM, and REGULATORY STREAMLINING.
Attendees will hear representatives of Congress and the Administration discuss the legislative agenda of the 108th Congress and undertake an aggressive lobbying effort on the Hill in one-on-one meetings with Members of Congress. CECO will be arranging meetings with all seven members of the Oklahoma Congressional Delegation, which will be your opportunity to discuss important issues directly with your elected officials. This is a once-a-year opportunity to show a strong, united industry presence to America's decision makers. With so much at stake in 2003, your participation is critical.
In addition to the CCD activities, ACEC will host two other major events concurrent with CCD. The annual Federal Markets Conference will be held on Monday, March 17th. The federal government generates billions of dollars of business for engineering firms annually. However, each year the rules of the game change. Key officials of the Corps of Engineers, Naval Facilities, General Services and other federal agencies will brief attendees on the latest business opportunities, changes in procurement policy, and the impact of the September 11th attacks on budget priorities.
Also, ACEC will host the annual Engineering Excellence Awards gala on Tuesday evening, celebrating the nation's most significant engineering achievements of the past year. CECO has three entries in this year's competition and believes that all of the entries will be very competitive.
All events will be held at the Grand Hyatt Washington in downtown DC, conveniently located near the White House and Capitol Hill and easily accessible by Metro. The hotel is offering ACEC meeting attendees a discounted room rate of $213 single/double occupancy; contact the hotel directly at 202-582-1234 or 1-800- 233-1234 for reservations. Call by February 14, 2003 and reference ACEC to receive the discounted rate.
Registration for CCD is $175.00 per person, the Engineering Excellence Awards gala is $250.00 per person, and the Federal Markets Conference is $395.00 per person. Registration deadline is February 14th to take advantage of these prices. After that date, registration fees increase.
This is an outstanding combination of events, and we urge all CECO members to help "Engineers Move America" by attending this year's CCD events.
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ACEC/PAC SET NEW RECORD WITH OVER $170,000 IN CONTRIBUTIONS
The fundraising bar was pushed to new heights in 2002 as ACEC members contributed more than $170,000 to ACEC/PAC to support the Council's legislative agenda-the best year ever for ACEC/PAC!
ACEC/PAC has played a critical role in helping to advance ACEC's legislative agenda in 2002, including:
* Securing passage of legislation to restrict the ability of federal agencies to compete with member firms and promote more outsourcing;
* Defeating all efforts by public employee unions to shut down government outsourcing;
* Killing costly new federal regulatory mandates; and,
* Protecting the federal investment in the nation's transportation system.
"We pass the legislation we want passed with members of Congress who share our views," said Joe Paoluccio, chairman of ACEC/PAC. "Our PAC helps elect such members of Congress. Your contributions to the PAC secure the future of our industry-no less."
With TEA-21 and AIR-21 reauthorization scheduled for 2003, and Congress expected to address other key legislative priorities such as curbing government competition, FLSA reform and tort reform, it becomes increasingly important to grow ACEC/PAC to $1 million. For more information on ACEC/PAC, contact Lorna O'Hara (202-347-7474 or lohara@acec.org).
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2003: DON'T GET CAUGHT OFF-GUARD BY A DROP IN BUSINESS
By John P. Kreiss, AECWorkForce
It's time to plan for 2003. The economy was starting to slow before the September 11th terrorist attacks and many contractors have only recently started to feel the effects. Design firms began feeling the effects prior to September 11th and since that event, many general contractors started seeing their backlogs drop significantly. Subcontractors that haven't felt the pain yet should be prepared for the uncertainty that 2003 presents. It has been more than 10 years since the last recession and many companies now in business didn't even exist back in 1990. For those companies, and for companies looking for a refresher, here are some things to help you prepare for this year.
Cash is king. The expression, "cash flow to a business is like blood to the human body," couldn't be truer today. Without cash flow, you can be out of business quickly. Most companies that fail during a recession do so because they don't cut costs fast enough and their cash flow dries up quickly. Look at your cash flow projections for the next three to six months. This should be watched closely. If it appears that your costs are higher than your revenues, it's time to take action before it's too late. The firms that can remain profitable during recessionary periods are the ones that will be a lot stronger when the economy eventually recovers.
Check your accounts receivables and confront slow payers. It's common to see more slow payers during a recession, but slow payers eat into cash flow quickly. Collection calls are not a comfortable thing to do especially with long-term clients, but keeping your receivables down is critical during this period.
Start at the top when trimming payroll. Too often companies let the junior workers go first. They often ignore the senior people who've been burning payroll for the last 10 years and not pulling their weight like some of the others. The problem with this method is that it leaves a company top-heavy, and this often leads to too many high-priced management people. Ignoring the top-level people and cutting the junior people also can leave a firm lacking enough junior people who actually do the work.
This makes it very difficult for a company to run its operation. Look at your lowest performers at each level in your company along with their salary in relation to your entire payroll. Notice that I said, "lowest performer." I didn't say poor performer. You may have three good estimators, but if your backlog is indicating that you can get by with one or two, then make the cut. Salary should be a factor in this decision. If Estimator B is just as productive as Estimator A, but costs $10,000 a year less in payroll, then Estimator A should go regardless of how long that person has been with you.
Talk to your non-competing peers. One electrical contractor I know started his business during the eighties boom. He had never been through a recession so when the early nineties recession arrived and his work started drying up, he called a couple of leaders of non-competing subcontracting companies who had been through turbulent times in the past. He took a few of them out to lunch and then asked them for advice on what they learned when they were managing their companies during recessionary periods. This electrical contractor said that he found this advice extremely helpful. He also credits the advice he learned from people who were in the trenches for why his company is still around and prospering today.
Finally, make sure that you update your business plan and prepare for a year that may present a lot of challenges. If you don't have a plan that includes looking at your marketing, human resources, information technology, finance and accounting, then it's time to get one. The firms that have solid business plans in place will have a tremendous advantage over their competitors.
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AECWorkForce Employer News is a bi-weekly update on AEC trends, careers, and recruitment strategies for architecture, engineering, construction firms, and allied professional service firms. New subscribers can join AECWorkForce Employer News by visiting us online at www.aecworkforce.com/enews.
AECWorkForce is the Internet job portal powered by ZweigWhite, a trusted name in AEC management information and expertise. AECWorkForce is devoted exclusively to companies and professionals in the Architecture, Engineering, and Construction industry, and is the preferred recruitment solution of ACEC.
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