Budget and Finance

***Boosting Revenues -- In the closing days of the 1981-82 session, the Senate Republican majority pushed through two measures designed to increase state revenues by about $400 million a year and thereby shore up the administration's deteriorating budget situation.

Voting strictly along party lines, the Republican majority approved 26-22, House Bill 682, which permanently raises the personal and corporate net income taxes. The measure was signed as Act 246 on Dec. 9, 1982. The Senate also approved House Bill 1649 by a vote of 26-23, also signed Dec. 9, 1982 as Act 248, which gives the commonwealth power to collect accounts in banks and other financial institutions that have been inactive for only seven years.

Increases in the personal and corporate net income taxes are expected to generate an added $300 million annually. The accelerated takeover of inactive bank accounts may bring in an extra $60 million to $80 million a year.

Senate Democrats opposed both proposals because the tax hikes were being advanced well before the presentation of a budget or revenue projections for 1984-85. Democrats also noted that before the November, 1982 general election, the governor through commercials and news accounts was widely quoted as saying his budgets have all been balanced without the need for general fund tax increases.

House Bill 682 makes permanent the increases that have raised
the corporate net income tax to 10.5 percent, the highest of any state
in the Northeast, and the personal income tax to 2.2 percent. Both
taxes were slated to drop to 9.5 percent and 2 percent, respectively,
on Dec. 31, 1983.

Other provisions in HB 682 include exempting certain periodicals and the sale and use of school buses from the state sales tax; exempting from the Public Utility Realty Tax (PURTA) lands and facilities used to generate hydroelectric power; and\exempting from the Realty Transfer Tax transfers of land to nature conservancies.

House Bill 1649 changes the state's escheats law whereby the commonwealth can claim inactive bank accounts after only seven years instead of the current 21 year waiting period. Senate Democrats objected this was an attempt to balance the budget on the backs of widows and others who tend to leave legacies untouched in bank accounts for relatively long periods .

***1982-83 State Budget -- A Republican controlled conference committee threw a $10.8 billion combined budget for 1982-83 into a 1981-82 supplemental appropriation bill (SB 929) and rammed the measure through the legislature strictly along partisan lines. The budget package, insulated from amendments by rank and file members through this parliamentary maneuver, was approved 26-23 in the Senate and 102-93 in the House, reflecting the Republican majorities in those
chambers. The Senate Republican leadership refused even to explain the budget package on the Senate floor, which only an hour earlier had been flushed through a conference committee.

Senate Bill 929 was a $79 million supplemental appropriation bill to pay mostly for under-funded special education and welfare costs for 1981-82.

It was amended in conference committee to include a $7.2 billion General Fund budget, which covers such general government costs as education, health and welfare; a $1.2 billion Motor License Fund budget, which pays for highway and bridge construction and maintenance; and a $2.3 billion federal augmentation budget. This maneuver permitted rank and file legislators only a yes or no vote on the entire budget package.

Usually, these budgets are passed as independent bills, capable of receiving amendments from the floor.

The $7.2 billion General Fund budget for 1982-83 compares with a $6.8 billion 1981-82 budget. Chief criticism by Senate Democrats centered on inadequate funding for education and the removal of funding for Department of Aging programs.

The basic education subsidy to the state's 501 school districts remains at $1.55 billion for 1982-83, meaning the state's share for this cost will slip to 39 percent or 11 percent below the mandated 50 percent state share. This is triggering a heavy round of local school district tax increases. The new budget does provide for $72 million as a supplement for student learning, which will be distributed under a new formula contained in HB 517 which was also signed by the governor (see education).

For the first time, the budget will not support programs in the Department of Aging. Instead, the administration will draw $18 million from the Lottery Fund to underwrite the department's costs.

In higher education, the 13 state colleges and Indiana University were given a $13 million increase to $230.4 million. But this is considered insufficient to avert a $230 a year tuition increase next year.

Support for the state's general hospitals was reduced $800,000 to $1.2 million. The reduction is expected to cripple financially the general hospitals at Hazleton, Nanticoke and Connellsville.

The desperate job situation in Pennsylvania, which has suffered a net loss of 78,300 jobs between 1979 and 1981, was not helped in this budget which slashed a current $5 million appropriation for the Port of Philadelphia down to $1 million.

The $1.2 billion Motor License Fund budget includes $13 million less for highway maintenance than the 1981-82 budget, despite three successive tax increases granted the governor for road repairs.

The governor was given a two-cent a gallon increase in the state gas tax in 1979, worth $100 million. The next year, he was given an additional $95 million in registration fee increases--which included boosting the state inspection sticker fee from 25 cents to $1. The sticker fee this year was raised to $2. Also, last year, a 3.5 percent oil franchise tax was approved, calculated to pour $200 million into the highway budget.

Senate Bill 929, the combined budget package, was signed into Act 2A by the governor May 11.

***Bridge Building Project And Axle Tax -- In the final week of the session, bills were enacted authorizing massive bond-financed bridge building projects and a new axle tax on heavy trucks.

Senate Bill 831, signed Dec. 8, 1982 into Act 235, authorizes a $980 million bond sale to help finance the repair or rebuilding of more than 900 bridges throughout the commonwealth. The cost of the project is variously estimated to range from $1.2 billion to $1.6 billion, with about nine years to put all the money together. About $400 million to $500 million in federal matching funds is expected.

Senate Bill 457, signed Dec. 8, 1982 into Act 234, provides for a $36 per axle tax on trucks over 26,000 pounds. However, a corresponding reduction in fees for Pennsylvania trucks will mean the effect of the new tax will apply only to out-of-state trucks. The axle tax is expected to generate about $69 million a year which will be used to retire the bond debt.

Steel used in the bridge projects, according to the legislation, must be made in the United States unless the Secretary of Transportation determines "that certain required products are not
produced in the United States in sufficient quantities." The legislation also provides that "Pennsylvania based facilities shall be actively solicited to make bids on contracts to furnish products and materials ."

***Non-Preferred Appropriations -- Nearly $371 million in non-preferred appropriations for state related schools and cultural and health institutions were approved for the 1982-83 fiscal year.
These expenditures, contained in 42 separate bills (SBs 1445-86) will boost the General Fund budget for 1982-83 to about $7.6 billion.

Overall, the non-preferred appropriations amount to a $19.5 million increase over 1981-82. The bulk of the money in the non-preferred measures goes to the state related colleges and medical
schools.

They include, a $143,481,000 appropriation for Penn State, compared with $135,552,000 in 1981-82; a $78,235,000 appropriation for the University of Pittsburgh, compared with $73,956,000; a
$87,083,000 appropriation for Temple, compared with $82,411,000; $4,441,000 for Lincoln, compared with $4,084,000; $22,892,000 for the University of Pennsylvania, compared with $21,787,000.

Also, $3,707,000 for Hahnemann, compared with $3,507,000; $6,092,000 for Thomas Jefferson, compared with $5,854,000; $2,349,000 for the Medical College of Pennsylvania, compared with $2,231,000; $3,800,000 for Philadelphia College of Osteopathic Medicine, compared
with $3,585,000; and Drexel University, $4,079,000, compared with $3,940,000.

***PUC Budget, 1982-83 -- The Senate, after adjourning for the summer June 8, was recalled to act on a budget for the Public Utility Commission on the eve of the 1982-83 fiscal year. A budget (SB 1135) totaling $20,526,000 was approved by the Senate 44-4 and signed by the governor June 29 into Act 187.

The new budget represents a 9 percent increase over the $18.9 million budget for 1981-82. It is also $800,000 higher than the $19.7 million budget recommended by the governor.

Democrats tried and failed to amend the PUC bill to include provisions that would hold down utility rates and monitor nuclear facilities.

***Capital Budget, Prison Project -- A $237 million supplement to the 1981-82 state capital budget was signed by the governor Dec. 22,1981 into Act 166. It includes $128 million bond authorization to expand the state prison system with 2,380 new prison cells.

The capital budget supplement had been approved as a conference committee report on House Bill 1645. It was sent to the governor as a $251 million bond authorization, but $14.3 million were line-item vetoed.

The largest deletion was $7.8 million for Locust Mountain State General Hospital, Schuylkill County, which the administration is closing.

The prison projects outlined in HB 1645 include, Graterford, $28.6 million; Muncy, $990,000; Huntingdon, $27 million; Cambria, $16 million for conversion of Cresson Center; Dallas, $6 million; Greensburg, $5 million; Mercer, $6 million; Luzerne, $15 million for the conversion of Retreat State Hospital; and $21.6 million for Pittsburgh.

***Capital Budget Increased -- An amendment to the capital budget for 1981-82 was approved and signed by the governor June 19 into Act 164. The measure increases the total project authorization for the Department of General Services from $251,206,000 to $257,316,000.

The increase includes improvements to the Pittsburgh State Office Building at $6 million and refurbishing the McKeever Environmental Center at $110,000. Total project authorization for the Department of Transportation was increased from $31,025,751 to $41,100,751 to include a
$3,208,000 project for the Allegheny Port Authority, about $3.5 million for Philadelphia street projects and a number of other projects.

***Capital Budget Increased Again -- An additional $39,180,000 was authorized for projects in the 1981-82 budget in House Bill 2304, which was signed into Act 222 on Dec. 6, 1982. The new projects include $3,460,000 for the construction of a research facility for coal desulphurization at a yet undetermined site; $29,600,000 for a center for rehabilitation of physical and neurological developmental disabilities at the Hershey Medical Center; $2,660,000 for construction of an adolescent and child psychiatric unit at the Hershey Medical Center; and $3,460,000 for a gymnasium, auditorium and study building at Penn State's Wilkes-Barre campus.

**Capital Budget Amended -- The capital budget for 1979-80 was amended by House Bill 2622, approved unanimously by the Senate and awaiting the governor's signature. The measure deletes boiler plant projects at Warren State Hospital and Woodville State Hospital and expands the boiler plant project at Mayview State Hospital to $5,160,000.

It also provides an additional authorization of $35.2 million for the construction of a new state correctional institution in Schuylkill County and for improvements in the state's computer communications network.

Another $20 million is authorized for a remote communications center.

**More Capital Budget Changes -- The Senate unanimously concurred in changes to the 1971-72 capital budget contained in Senate Bill 1533 which now awaits the governor's signature. The measure increases the total spending authorization by $446,000 to $62.1 million.  It also deletes a $1.9 million student union and parking project at the University of Pittsburgh's Bradford campus. Instead, a $1.4 million project was added for repairs at the University of Pittsburgh's Western Psychiatric Institute and Clinic. Also added was $935,000 for construction of an emergency services training center at Westmoreland County Community College and $50,000 for a flood wall at Danville, Montour County.

***Vietnam Herbicide Commission -- The Senate unanimously approved House Bill 2623 which was signed into Act 250 on Dec. 9, 1982.

The legislation makes the $150,000 appropriation for 1981-82 to fund the new Vietnam Herbicides Information Commission a continuing appropriation which would lapse June 30, 1983.
***Flood Recovery Fund -- An additional $2.7 million bond financed
expenditure for a flood protection project in Indiana County was approved under HB 164, now Act 42. This increases the total bond authorization to repair damage incurred in the 1977 flood to $52.7 million.

***General Fund Budget Cut -- In December, 1981, because of a projected cutback of $267 million in federal funds, a proposed reduction in the $6.8 billion General Fund budget for 1981-82 was inserted into a conference committee report on Senate Bill 618, a federal augmentation bill. The governor had proposed an across-the-board one percent cut, but the conference committee report, amended in committee and on the Senate floor, exempted education and welfare grants from the cuts.

The bill, signed Dec. 21 into Act 57A, ended up as a $27 million cut in the 1981-82 budget. The projected cutback in federal funds included a $115 million tax break for business. The business tax break stems chiefly from federal approval of more rapid depreciation allowances which would affect state taxes as well because Pennsylvania's corporate net income tax is pegged to the federal depreciation tables.

However, state legislation enacted at the end of December will delay the tax breaks until 1983.

***Corporate "Windfall" Tax Break -- Despite Democratic objections, the Republican legislative majority in both the Senate and House voted to pass a bill (HB 82), Act 141, which paves the way for a "windfall" tax break for Pennsylvania corporations - at a time when no such relief is in store for Pennsylvania's individual taxpayers.

Although it will not begin to become effective until next year, the "windfall" will come in the form of state tax savings on top of the federal tax savings Pennsylvania corporations have already
garnered from the Reagan administration.

And, the state tax break for big business will eventually be fully retroactive to 1981.

Specifically, Pennsylvania corporations will reap 50 percent of the windfall state tax break in 1983, and 100 percent of the windfall state tax break in 1984 and thereafter. And, the legislation provides that state tax breaks deferred in 1981 and 1982 and the other 50 percent deferred in 1983 will be fully recovered by business at the rate of 25 percent per year or $10,000 per year (whichever is greater) beginning in 1984 and for as long as it takes.

The issue revolved around the fact that Pennsylvania's tax depreciation schedules for corporations are tied to the same schedules used by the federal government.

As a result of the Reagan administration's action to permit businesses to greatly accelerate the depreciation of buildings, machinery and other property for tax write off, or tax savings purposes, Pennsylvania was automatically faced with a huge state corporate net income tax revenue loss.

Pennsylvania, however, had the clear option of totally severing its depreciation schedules from the federal government's tables - thus avoiding the windfall tax break to Pennsylvania corporations and thus avoiding any additional revenue loss to the state.

Instead, the Republican legislative action - which Democrats contended was at the direction of the Thornburgh administration - only defers the added tax break to business and delays the day of reckoning to pay for that break which, according to estimates, could amount to a billion dollars or more over the next 10 years.

And, like the federal program, there is no requirement that Pennsylvania corporations must use any of these tax savings to reinvest and create jobs in Pennsylvania.

***Gypsy Moth Spraying -- Despite a $27 million reduction in 1981-82 spending, the legislature approved a $4 million appropriation for gypsy moth spraying for the fiscal year (HB 1643). It was signed by the governor Feb. 2 into Act lA.

**Land Sale and Fee Increases - Another $21 million in revenue will be raised to support the 1981-1982 general fund budget with SB 425, now Act 48.

This legislation will enable the governor to sell state lands under an omnibus bill that does not require affirmative action by the legislature. The plan would be approved if not rejected by the legislature or if it successfully passed a petitioned vote by legislators.

Senate Democrats had opposed SB 569, the original land sale bill, because the administration did not provide an inventory of lands to be sold. Instead, the administration indicated sufficient lands would be sold to raise $15 million for fiscal 1981-82. Democrats feared the lack of proper bidding procedures could invite abuses.

Senate Democrats also objected to the original measure's inclusion of state forests and recreational lands. When the measure was finally approved as SB 425, it included the Democratic amendment to exclude state forests and recreational lands from the bill.

Senate Bill. 425 also provides for $6 million worth of various fee increases. These include a host of fees charged for an assortment of licenses and permits.

***Federal Augmentation, Block Grant Program -- Some $2.2 billion in federal funds were approved to supplement the 1981-82 general fund budget. Included in the augmentation funds are seven block grants totaling about $208 million. The measure (HB 1290) was signed into Act 56A by the governor Dec. 21.

***Adjustments in State And Federal Money for 1982-83 -- State and federal appropriations for 1982-83 were adjusted in Senate Bill 939, signed Dec. 9, 1982 into Act 51 A. The federal augmentation for the general fund budget was increased $201,809,000 to a total of $1.3 billion.

The increase was divided among a number of state agencies.

Increases in state appropriations in the general fund are Attorney General, $641,000; Treasury Department, $560,580; Commerce Department, $50,000; Community Affairs, $25,000; Philadelphia Municipal Court, $25,000; and DER for flood repair in Danville, Montour County, $50,000.

Senate Democrats objected to the noticeable lack of an increased appropriation for the Auditor General, the only statewide post held by a Democrat.

***Oil Franchise Tax -- Passage of the $1.2 billion 1981-82 highway budget was keyed to passage of" a 3.5 percent franchise tax on gasoline and oil products sold in Pennsylvania. The measure, SB 161, is now Act 35.

Oil companies have already passed the tax through to consumers by a 4-cent per gallon increase in the price of gas, despite assurances from the administration that the oil companies could deduct partially the new state tax from their federal taxes.

The 3.5 percent oil franchise tax will provide the administration with an additional $192 million in highway revenues. The 4-cent hike at the pumps means consumers are paying a state gasoline tax of 15 cents a gallon.

This was the third year in a row that the governor won an increase in highway taxes. He was given a 2-cent a gallon increase in the state gas tax in 1979, his first year in office. This was worth $100 million. The next year he was given an additional $95 million in registration fee increases.

**Urban Tax Relief -- A proposed constitutional amendment (HB 202) which would pave the way for real estate tax relief to longtime residents of homes in areas of urban renewal in Allegheny and Philadelphia counties cleared the General Assembly for the second successive
legislative session. "

The proposed amendment now goes to the voters for final approval.

*School Property Tax Reform -- The Senate passed (30-16) a bill (SB 1085) which would have allowed school districts to replace residential real estate taxes with a locally based income tax to finance a significant share of the costs of public education.

The measure died in the House.

*Property Tax Ratio -- The Senate passed a proposed constitutional amendment (SB 1345) which would have enabled the General Assembly to establish a different property tax ratio for owner-occupied property in Pennsylvania.

The measure died in the House.

***Electric Fund Transfers -- A measure (SB 1309) that permits the state Treasury Department to revamp internal audit procedures and pay vendors by electric fund transfers as well as by check cleared the legislature and was signed into law (Act 195).

***Thrift Deductions -- The General Assembly has passed legislation (HB 1093) providing for a deduction and carryover of net operating losses for Pennsylvania's mutual savings banks and savings and loan associations in their determination of net earnings for corporate net income tax purposes.

The measure would permit a loss carryover for thrift institutions for up to three years and phase in the practice over a three year period. The bill became Act 184.

***Sales Tax Exclusion -- The Serrate and House have passed (SB 826) and the governor has signed into law (Act 109) a measure excluding the state sales tax from supplies and materials sold to tourist promotion agencies for distribution to the material. public as promotional.

The exclusion, which is retroactive to January 1, 1978, is limited to those agencies which receive grants from the commonwealth.

***Pittsburgh Tax Delinquency Charge -- A package of bills (HBs 1997, 1998, 1999) enabling the Pittsburgh School District to increase the interest charged tax delinquents was passed and signed into law (Acts 124, 125, 134).

The interest rate on delinquent school property taxes, delinquent mercantile taxes, and delinquent employer remittance of employee wage taxes would be boosted from 6 percent to a rate based on the Federal Reserve Discount Rate in the Pittsburgh area.

***Employee Tax Deferral -- Legislation (SB 1243) intended to permit employee contributions to the State Employee Retirement System to be treated - for federal tax purposes - in a manner similar to an Individual Retirement Account or IRA passed the General Assembly.

The legislation would enable state employees to defer the payment of federal income taxes on that portion of their salary which is paid into the retirement system. The federal taxes would be paid at the time of retirement.

***Inheritance Tax Changes -- The Senate and House passed legislation (SB 636) making numerous changes in the state's Inheritance Tax Law.

Among its key provisions, the legislation reduces from two to one year the period before death in which transferred estate property will be subject to the inheritance tax. The legislation also contains a provision requiring that reimbursed medical expenses in a decedent's estate be treated as assets and, therefore, subject to tax.

Additionally, the measure provides that Keough and IRA plan proceeds be exempt from inheritance taxes as would the transfer of life insurance.

An amendment added in the House provides that persons who inherit a small business be permitted to pay inheritance taxes in quarterly installments.

**Auto Sales Tax -- Legislation (HB 1656) providing for the suspension or revocation of motor vehicle sales licenses of dealers that fail to collect the state sales tax or any other fee due the commonwealth upon the sale of any vehicle passed both houses of the General Assembly.

***Unemployment Compensation Taxes -- A legislative proposal (HB 1030) that requires cooperative agricultural associations to pay unemployment compensation taxes was enacted (Act 41) .

The measure was specifically designed to address a situation whereby the Lehigh Valley Cooperative Farmers Association had won a favorable ruling from Commonwealth Court exempting them from having to make unemployment compensation payments, even though members were able to draw benefits from the fund. The legislation, designed to close the loophole, is retroactive to January, 1977.

***Delinquent State Taxes -- A legislative proposal (HB 1650) boosting the interest charged on delinquent state taxes has been signed into law (Act 78). Previously, only a six percent interest charge was applied to delinquent taxes. The new law will make the rate identical to that of the prime rate.

The legislation also provides that overpayments by taxpayers be refunded with interest set at the prime rate if the overpayment is not refunded by the state within six months.

***TMI Gross Receipts Tax "Windfall" -- A conference committee report on legislation (HB 1040) that will prevent the state from collecting "future" excess or windfall gross receipts taxes from utility customers served by Met Ed and Penelec was adopted and signed into law (Act 172).

The measure will eliminate the 4.5 percent gross receipts tax levy on costs incurred by customers for replacement power purchased by Met Ed and Penelec's parent firm General Public Utilities as a direct result of the 1979 mishap and shutdown of the company's nuclear generating
facilities at Three Mile Island.

The legislation is expected to result in a future annual savings of $6 million for GPU customers.

As noted by Senate Democrats, however, the Republican sponsored legislation doesn't go far enough because it is not retroactive. This means that approximately $10 million in excess or windfall gross receipts taxes that the state has collected - between the time of the TMI mishap and the enactment of this legislation - will not be returned to GPU customers.

Democrats contended that while this legislation was a step in the right direction, it was a "watered down" version of another bill (SB 835) that had been bottled up in committee by the Senate Republican leadership for more than a year.

In addition to the gross receipts tax provisions of the conference report on House Bill 1040, the legislation also exempts the sale of brook trout, brown trout, and rainbow trout from the state sales tax and requires the state Department of Revenue to share corporate tax information with the Department of State.

***State Employees' Retirement System -- The General Assembly passed and the governor signed into law (Act 45) a measure (SB 725) permitting the State Employees' Retirement System to institute new investment practices.

By allowing greater flexibility in the investment of funds, proponents suggested that taxpayers' contributions to the system could be reduced.

The measure provides for an annual audit of the system by an independent certified public accountant and allows the retirement board to contract for legal service.

Additionally, the legislation stipulates that any annuitant who returns to service as a state employee will resume active membership in the State Employees' Retirement System regardless of the optional membership category of the position.

***Retirement Board Makeup -- A measure (SB 918) providing for legislative representation on the State Employees' Retirement Board was enacted (Act 67).

The new law stipulates that two state senators (one Democrat; one Republican) and two state House representatives (one Democrat; one Republican) be appointed to serve on the board by the President Pro Tempore in the Senate and by the Speaker of the House.

***School Employees' Retirement Fund -- The General Assembly passed legislation (SB 1384) giving the Public School Employees' Retirement Board additional options for investment of funds. The legislation also provides for bipartisan legislative representation (two senators and two state representatives) on the board.

The bill became Act 183.

***Study Commission -- A legislative proposal (HB 229) to establish a Public Employee Retirement Study Commission to review all public employee retirement and pension systems in the state was enacted (Act 66).

The commission, comprised of nine persons - two senators, two representatives and five gubernatorial appointees - was to focus its efforts in the area of determining the actuarial soundness of the numerous pension and retirement systems.

***Treasury Department Investment -- A Senate-House conference committee report on legislation (SB 1010) to give the state Treasury Department greater flexibility in the investment of state funds was adopted and signed into law (Act 113) .

The conference committee removed previous language in the bill that would have penalized banking institutions which charge interest rates on bank card accounts above what state usury law permits.

The language providing for the penalty (a withdrawal of state deposits from those institutions) was removed because similar language had been contained in the statewide banking bill (HB 1889) already enacted.

**Capitol Bank Stock Tax -- Legislation defining the capitol stock bank shares tax paid by financial institutions as a franchise tax cleared the General Assembly. The measure (HB 1647) was necessary to close a potential loophole in the law which might have resulted in a loss of revenue to the state.

**Advisory Committee -- Legislation (HB 2046) creating a special advisory committee to the Public Employees Retirement Study Commission and appropriating $200,000 for the commission was sent to the governor.

The special committee would consist of representatives of public employee unions, the Pennsylvania Chiefs of Police Association and the Pennsylvania Firefighters Association.

***Philadelphia Prothonotary Fees -- Legislation (HB 1671; Act 206) establishing certain fees to be charged by the prothonotary of Philadelphia was enacted. The measure establishes a $10 fee for the filing of any commonwealth lien and a $25 fee for the filing of any writ of execution.


Labor and Industry

***Storage of Explosives -- Legislation limiting the authority of the Department of Environmental Resources to regulate the storage of certain explosives became Act 57 when signed into law on March 13, 1982.

The bill exempts from DER regulation the storage of black powder in amounts not exceeding 10 pounds, and the storage of other materials such as percussion caps and safety fuses. Exemptions also include the possession and storage of smokeless powder and primers used for reloading rifle and pistol cartridges. At the same time, DER is authorized to adopt regulations for the storage of black powder in quantities exceeding 1,000 pounds. Violations will be considered a
misdemeanor.

House Bill 617 passed the Senate February 22,1982; it had cleared the House on June 16, 1981.

***Jobless Law Reforms -- Reforms in Pennsylvania's unemployment compensation law are provided for in Senate Bill 1006 which became Act 106 on October 22, 1981.

The measure contains amendments that supposedly will bring the state into compliance with changes in the federal law. The state Department of Labor and Industry had claimed that failure to amend the state law could result in the commonwealth losing $135 million in federal funds, with state employers also standing to lose a 2.5 percent tax credit.

Minority Democrats in the Senate tried in vain to remove from the law a pension "ripper" provision which was a part of the 1980 unemployment law reform. The "ripper" provision deducted dollar-for dollar from jobless benefit payments an amount equal to any pension payments received by claimants.

The Senate passed the bill October 6 and House approval followed on October 21, 1981.

*Child Labor Law Reform--Legislation (Senate Bill 1079) that would have changed the hours minor persons 16 and 17 years of age can work on certain nights died in the House Labor Relations Committee which had held the bill since October, 1981, This bill, amending the Child Labor Law, would have permitted boys and girls' of those ages to work until 1 a.m. on Sundays, but only until midnight on Fridays.

At present, these persons can work until 1 a.m. on Fridays and Saturdays.

The limit is midnight on other nights.

***Fire and Panic Act -- Senate Bill 568 was signed into law on July 10, 1981, becoming Act 83.

The bill in its original form amended the Fire and Panic Act to permit regular updates in egress (exit) requirements to allow for advances in fire and safety technology. It authorized the Department of Labor and Industry to update these requirements through regulations.

The legislation was amended in the House (concurred in by the Senate) to provide for legislative review of certain rules and regulations and to exclude certain farm buildings from such regulations (those occupied by less than 10 employees which are used for the production or storage of agricultural products or used in the storage of farm equipment.)

Agriculture and Rural Affairs

***Puppy Mills Curbed -- The operation of so-called "puppy mills" in Pennsylvania will come under closer scrutiny of state investigators in legislation (House Bill 1459) signed into law Dec. 7, 1982, as Act 225. The measure, shaped in the final days of the session by a Senate-House conference committee, creates a new Dog Law. The law mandates inspections of kennels handling more than 25 dogs a year, doubles dog license fees, increases fines for abandoning dogs and
extends the time a stray animal must be kept before it is destroyed.

The $2.7 million new revenue to be generated from the license fee hike will be used for dog law enforcement, with excess funds earmarked for grants to humane organizations and to local government for the establishment of animal shelters.

***Commonwealth Farmland -- Legislation providing for the efficient and productive use of farmland owned by the commonwealth cleared both the Senate and House prior to the summer recess and was signed into law June 18, 1982, becoming Act 159.

Senate Bill 1283 establishes a nine-member advisory committee that will include five persons who are farmers. It transfers the commonwealth's extensive farmland holdings to the Department of Agriculture and authorizes the secretary of agriculture to lease the land, equipment and facilities, with preference to be given young farm families seeking to begin a career in agriculture.

***Nuisance Suit Protection -- House Bill 1823 which became law (Act 133) on June 10, 1982, offers protection to farmers from nuisance suits which, proponents of the measure claim have forced many farmers out of business in recent years.

As residential areas expand, farmers often are subjected to pressures stemming from normal agricultural operations -- such as neighbors objecting to odors and noises. The bill limits the circumstances under which farmers may be subjected to nuisance suits and local ordinances. However, it doesn't exempt farm operations that may adversely affect the public health or safety.

Proponents of this bill said farmers needed some form of protection against nuisance suits and pointed out that some three million acres of farm land have been lost since 1960.

***Milk Official Beverage -- Among its various "official" symbols, Pennsylvania has a state animal (the whitetail deer), a state bird (the ruffed grouse) and even a state insect (the firefly).

Now, there's an official beverage--milk.

Milk achieved its "official" status through House Bill 1351 which became Act 98 on April 29, 1982.

***Milk Manufacturing Standards -- Senate Bill 1350, now Act 163, extends coverage of the Milk Sanitation Act to "manufactured dairy products" and "milk for manufacturing purposes". Signed into law June 19, 1982, the measure also provides for milk cases to be maintained in a sanitary manner and prohibits their storage outside of a retail establishment. The bill passed the Senate May 3, 1982, and cleared the House on June 7.

***Abuse of Animals -- A bill (Senate Bill 633) making it a summary offense to taunt, tease, beat or strike a dog used by a municipal or state police department was signed into law July 10, 1981, becoming Act 85. The bill also adds a section to the Dog Law of 1965 to remove a quarantine requirement for such dogs when they are under the direct supervision. and care of a police agency. This bill was passed by the Senate on May 5, 1981; the House approved it June 30.

***Agricultural Areas -- House Bill 143 became Act 43 on June 30, 1981. This measure authorizes the creation of agricultural areas to protect rural farming lands from expanding metropolitan areas.

Owners of at least 500 acres of agricultural land may submit a proposal for the creation of an agricultural area. Notice then will be given by the local governing body and other landowners and municipalities in the area may propose modifications. The bill provides for a public hearing on the proposal.

***Noxious Weed Control -- Legislation enacting the Noxious Weed Control Law is contained in House Bill 1429 which became Act 74 on April 7, 1982. The bill creates the Noxious Weed Control Committee within the Department of Agriculture. It will be the panel's task to designate noxious weeds that are injurious to the public health, to agricultural land, etc.

The committee will designate weed control areas and landowners will be required to control the weeds at their own expense.

The bill appropriates $50,000 from the General Fund for a botanist and part time employees.

Law and Justice

***License Transfers -- House Bill 1268 became Act 176 on June 24, 1982.

This measure clears the way for the transfer of a liquor license held by a nonprofit nationally chartered club to another municipality within the same county, if liquor sales are legal in the other municipality. At the time such application is made, the club must hold a valid national charter and must, in fact, be functioning as a club.

House Bill 1268 also amends the Liquor Code with respect to licensing establishments located near an interstate highway. A license now can be granted to an applicant if the establishment's entrance is within 300 feet of the entrance or exit of an interstate.

Previously, a license could not be granted if the entrance of the establishment was within 300 feet of any part of an interstate ramp.

A Senate amendment to the bill corrects an oversight in Senate Bill 484 (now Act 24) which cleared the way for election day liquor sales. Senate Bill 484 provides for certain liquor licensees to serve alcoholic beverages while the polls are open. The measure, however, excluded retail dispenser licensees--those licensed to sell only beer. The amendment to House Bill 1268 enables "hotel, eating places or municipal golf course retail dispenser licensees" whose food and nonalcoholic beverage sales equal 40 percent or more of the combined gross sales of food and malt or brewed beverages to qualify for a Sunday sales permit and also sell brewed beverages on election days.

***Hotel License Renewal -- Another Liquor Code amendment is incorporated in House Bill 972, signed into law June 25, 1982, as Act 179.

The measure provides for renewal of a hotel liquor license if the structure is destroyed by fire or natural disaster and is not rebuilt because it is economically unfeasible to do so. This amendment will permit a licensee to continue in business as a hotel licensee, but without having to adhere to room requirement provisions upon which the license was granted.

***Destruction of Vehicles--House Bill 758, legislation that establishes a specific offense for the destruction of vehicles by fire or explosion, was signed into law April 29, 1982, as Act 101. The bill provides a defense if a person who plans the destruction of a vehicle by either method notifies the state police 48 hours in advance. Two other stipulations must be met: 1--the vehicle must be free of any encumbrance; 2--there is no insurance covering loss by fire or explosion,

***Railway Police Powers--Additional powers and authority are granted to street railway and railroad police officers in Senate Bill 535, signed into law Nov. 23, 1982, as Act 196. This measure permits an officer employed by a firm operating a railroad or street railway system, or a public authority, to pursue and detain a suspect off the property of the fire or public authority. The House amended the bill to provide that these officers must complete the same course of instruction required for municipal police officers.

Another amendment exonerates the commonwealth from liability in the event the officer commits a wrongful act.

***Election Day Liquor Sales -- Certain bars, hotels and restaurants are permitted to sell beer and liquor on election days as a result of Senate Bill 484 being signed into law. The measure became Act 24 on Feb. 18, 1982. The bill enables establishments qualifying for a special Sunday sales permit (those whose sale of food and non-alcoholic beverages are equal to 40 percent or more of the combined gross sales of food and alcohol) to remain open on election days. About 5,500 of the state's 20,000 licensees presently qualify for the special permit.

***Retired Police Officers -- House Bill 118 awaits the governor's signature to become law, having been passed by the Senate (Nov. 24) and the House (Nov. 29). This bill would exempt non-disability retired police officers from meeting certain requirements if they are employed as a security officer by a private firm.

Any retired municipal police officer or state policeman who served at least 20 years will not have to meet certain standards under the Lethal Weapons Training Act, including training and qualification standards and physical and psychological standards, if he becomes a privately employed agent on or before three years from the retirement date. The bill also waives the fingerprint check requirement through the FBI. The bill was amended in the Senate to include an officer of a
municipal authority as a "privately employed agent.

**Anonymous Complaints/Special License -- Two bills awaiting action by the governor provide for a variety of amendments to the state Liquor Code. Both are conference committee reports passed by the Senate and House in the waning days of the legislative session.

House Bill 178 will require the Liquor Control Board to obtain the names and addresses of complainants, except when anonymous calls are received about underage drinking. This phase of the bill has been criticized by the LCB which contends that it depends on such calls to investigate Liquor Code violations. The conference report retains the original intent of HB 178--it permits collectors to buy, sell or trade miniature bottles of liquor with other registered collectors in Pennsylvania or other states.

House Bill 178 also:
            --provides for public hearings on new liquor license applications;
            --permits a restaurant, hotel, club or municipal golf course to establish a "secondary service area" on the premises;
            --eases limits on "point of sale" advertising (from SB 786).
            --permits limited wineries to sell wine purchased from another Pennsylvania limited winery (amended into the bill from HB 2088). Senate Bill 1335 authorizes the LCB to:
            --grant a special liquor license to operators of theaters for the performing arts, if the facility is a permanent one with seating for at least 2,800 persons;
            --grant liquor licenses to specified "tourist areas" in the commonwealth;
            --permit beer sales in an Erie sports stadium that is owned by the school district, with sales limited to periods when professional events are being played.

The HB 178 conference committee report was adopted by the House Nov. 23, 1982, with Senate approval coming the next day. The Senate adopted SB 1335 on Nov. 23 and House action came the following day.

**Golf Course License -- provisions of another bill (HB 178) also are incorporated into House Bill 2088, a conference committee report that was adopted by the House on Nov. 24 and by the Senate on Nov. 30.

House Bill 2088 authorizes privately-owned public golf course restaurant licensees to sell alcoholic beverages on Sundays and on election days if their sales of food and nonalcoholic beverages are equal to 40 percent or more of the combined gross sales of food and alcoholic beverages. These special permits previously were limited to hotel and restaurant, airport restaurant, and municipal golf course restaurant licensees.

A provision in this bill for the designation of a "secondary service area" for certain licensees also is included in HB 178, as is one authorizing a Pennsylvania limited winery to sell wine purchased in bulk from another state limited winery.

House Bill 2088 also authorizes the Liquor Control Board to issue special trade show and convention liquor licenses in third class cities.

***Help for Limited Wineries -- House Bill 357 became Act 119 when signed into law Nov. 5, 1981. The legislation permits "limited" wineries in Pennsylvania to sell their own wines at locations other than the winery itself. A "limited" winery is described as one producing wines from fruits grown in the state not exceeding 100,000 gallons a year. It limits the number of off-premise retail sites to three.

***Malt Beverage Tax -- Legislation (Senate Bill 739) extending for three years (until Dec. 31, 1986) the tax credits on the malt beverage tax for breweries investing in plant, machinery or equipment was signed into law Nov. 26, 1982, as Act 202. When it first cleared the Senate, the bill exempted non-profit nationally-chartered clubs from quota restrictions of the Liquor Code. The House gutted the bill, amending it to include only the tax extension provision.

*Work Permits for Minors -- Minors 16 years of age and older would have been able to work as entertainers in places where alcoholic beverages are sold had Senate Bill 1324 become law. The measure passed the Senate in March of 1982 but failed to clear the House Labor Relations
Committee.

***Minors in Licensed Premises -- Legislation (House Bill 874) clearing the way for minors to be in certain licensed establishments without adult supervision was signed into law (Act 55) March 9, 1982. the bill requires that the establishment's food service must total 70 percent of the combined gross sale of food and alcoholic beverages.

However, alcohol cannot be served at a table where a minor is seated.

The measure primarily benefits fast food chains having liquor licenses.

Transportation

***Annual Car Inspections -- Since 1929, Pennsylvanians have been required by law to have motor vehicles inspected two times a year.

The policy has been scrapped this year in favor of annual inspections for cars, motorcycles, certain vans and small trucks.

The new plan goes into effect Aug. 1, 1982, about nine weeks after House Bill 562 was signed into law as Act 129.

Nearly seven million vehicles are affected by the new law.

Semi-annual inspections will continue for school buses, mass transit vehicles, vans used to transport students and employees, trucks with a gross weight over 17,000 pounds and trailers with a gross weight over 10,000 pounds.

House Bill 562 traveled a rocky road en route to becoming law. From start to finish, opponents claimed annual inspections would result in more "junkers" being on the road and said highway fatalities would increase. The bill's backers rebuffed that argument, saying safety standards would not suffer. They also argued that owners would save $60 million a year in inspection costs.

The bill wound up in a Republican-dominated conference committee where it was stripped of a Democratic amendment that would have banned auto emission tests which the federal government has ordered implemented in southeastern and southwestern Pennsylvania.

The annual inspection program will be implemented over a period ranging from 12 to 15 months. When finally in place, the inspection system will be tied to vehicle registrations so that
inspection and registration renewal will occur in the same month.

The bill places a $2 fee on inspection stickers, the same amount previously charged for two stickers. PennDOT said it would lose $7 million a year unless the bill fixed the fee at $2. Just a
few years ago, the fee was 25 cents. It was hiked to $1 in 1980 when the administration pleaded that PennDOT needed more money.

"V' Turnpike Extension -- On the final day for action (June 25, 1982), the governor vetoed legislation that would have the Pennsylvania Turnpike Commission conduct feasibility studies for
extension of the turnpike system primarily in western Pennsylvania.

The governor was quoted as saying he took the action after being advised that the Federal Highway Administration would withhold highway funding for the state. The FHA reportedly said the legislation would violate federal law by establishing tolls on existing highways built with federal aid.

House Bill 1394 had heavy bipartisan support, having cleared the House October 28, 1981, and the Senate on June 8, 1982. The veto of the bill was the governor's second of the legislative session.

The bill would have created the Pennsylvania Turnpike System Southwestern Extensions Act and focused primarily on projects in western Pennsylvania. Amendments to the bill added other projects--one in Bedford County and two in southeastern Pennsylvania.

House Bill 1394 authorized construction of turnpike extensions on seven routes where work has been stalled by lack of funding. These include the North Hills, East Street and Mon Valley Expressway in Allegheny County, Route 219 from the New York to Maryland state lines, Route 220 in Bedford County north to its intersection with Interstate 80, Route 60 in Lawrence and Beaver counties, and Route 40 and Route 857 in Fayette County.

In addition, the legislation authorized feasibility studies to extend the turnpike system into areas of Berks County and to further extend the system to include the Blue Route in southeastern Pennsylvania.

One Senate Democrat said the veto "condemns an entire region to continued economic decline" and recalled that the governor in his 1978 campaign supported the completion of the Route 219 project.

***Intercity Rail Service -- House Bill 1043, which became Act 32 on June 16, 1981, assures continuation of commuter rail service in regions of eastern and western Pennsylvania.

The legislation continues state financial aid to assure that rail passenger service will continue between Reading-Norristown; Bethlehem-Lansdale; Pottsville-Reading; and Beaver Falls-Pittsburgh.

Necessary state funding is provided in the bill.

***Turnpike Emergency Service -- Improved emergency medical service for Pennsylvania Turnpike travelers is the aim of Senate Bill 114. This measure was signed into law December 16, 1981, becoming Act 133.

The bill amends legislation establishing the Turnpike Commission and authorizes the commission, in conjunction with the Department of Health, to review and monitor ambulance service available to turnpike travelers.

Objectives include: achieving a 10-minute maximum response time to every location on the turnpike; assuring that every emergency vehicle is manned by at least one medical technician; assuring that such vehicles are properly equipped.

The bill also directs that emergency vehicles be granted immediate entrance or exit from the toll road and that no such vehicle be required to stop at a toll booth.

***High-Speed Rail Service -- Development of high-speed rail service to transport passengers from Pittsburgh to Philadelphia in two hours is the intent of House Bill 305, which became Act 144 on December 22, 1981.

The bill creates the High Speed Intercity Rail Passenger Commission, a nine-member panel charged with determining whether a high-speed rail line similar to systems in France and Japan is feasible for Pennsylvania. The commission is funded with an $850,000 appropriation.
Ultimate aim of the bill is to introduce a passenger train capable of operating at speeds of more than 150 miles per hour. Conventional rail service between Philadelphia and Pittsburgh now takes more than seven hours.

***Special Registration Plates -- Several amendments to the Vehicle Code are included in Senate Bill 356 which became law (Act 82) on July 10, 1981, most notable of which is a provision authorizing issuance of special registration plates to former prisoners of war.

The bill also identifies "emergency" vehicles that are permitted to be tipped with red and blue flashing lights and authorizes special license plates for so-called "street rods" (modified antique motor vehicles) .

The bill went to conference committee after the Senate non-concurred in House amendments.

***Traffic Flow Controls -- A conference committee report on Senate Bill 16 was adopted by the Senate and House and become Act 47 on March 7, 1982. The bill authorizes the secretary of the Department of Transportation to regulate the placement of traffic control devices,
and curbs, medians or other barriers to control traffic flow on state highways. Permits can be issued by the secretary, or he can delegate this authority to a municipality. An appeal procedure is provided if a municipality refuses to issue a permit.

*Smoking, Drinking Ban -- Senate Bill 730, passed by the Senate on June 7, 1982,died in the House Urban Affairs Committee.

The bill would prohibit smoking, eating or drinking on Allegheny County Port Authority buses and trolleys and establishes a $50 fine for violations. Responsibility for enforcing the law is
delegated to the Port Authority. Provisions of the bill would not apply to charter buses and trolleys or commuter rail cars which might be specifically designated to permit the activities banned on other vehicles.

***Limitations on Immunity -- Legislation (HB 1385) amending the Consolidated Statutes with respect to limitations on governmental immunity was signed into law June 10, 1982, as Act 132.

It excludes a municipality or an employee from liability for personal injury or property damage incurred by another party because of a dangerous highway condition. There is an exemption to this exclusion -- unless the municipality has contracted with the state to assume responsibility for highway maintenance or repair. A municipality can also be held liable for damage if it has actively undertaken maintenance or repair of a state highway.

***Authority Abolished -- House Bill 794 became Act 91 when signed by the governor March 30, 1982. It repeals the State Highway and Bridge Authority Act and transfers the duties, powers and functions of the authority to the Department of Transportation.

***'Beautiful' Plant -- A bill (SB 1042) adopting "Penngift Crownvetch" as the beautification and conservation plant of Pennsylvania became law (Act 150) on June 17, 1982.

The legislation recognizes the plant for its value as a livestock feed and ground cover to control erosion. It is used extensively along highways throughout the commonwealth, helping to
reduce maintenance costs for mowing and brush and weed control. Penngift Crownvetch is distinguished by a pink and lavender flower. Its name is derived from "Penn" for Pennsylvania and "Gift" for the name of the farmer on whose property it was discovered in 1935.

***Retirees Get Break -- Retired persons receiving Social Security or who are on pension will not have to pay the $24 annual vehicle registration fee as a result of House Bill 556 being signed into law (Act 171) on June 23, 1982. However, eligible senior citizens are limited to an annual income of $9,000.

PennDOT, however, won't lose any money because the bill authorizes the department to impose a $10 processing fee in lieu of the full registration fee and further directs that the money lost each year (the difference between the $24 fee and the processing charge) be appropriated from the Lottery Fund to the Motor License Fund.

Also in HB 556 are provisions defining a "street rod" (a modified antique motor vehicle), the exemption of certain vehicles from registration (such as those used for golf course maintenance), establishing a $100 permit fee for migrant farm vehicles, and a requirement that a person's Social Security number appear on every operator's license.

Before the bill was passed, Democrats were successful in stripping a Republican amendment that would have permitted oil companies to deduct the 3.5 percent oil franchise tax in calculating other taxes imposed by the state.

*Children's Safety Seats--The House failed to take action before the session ended on legislation that would have required the use of a special safety seat for children riding in an automobile or small truck. Senate Bill 592 had called for use of a chair for youngsters under four and weighing less than 40 pounds. It also would have provided a fine for violations. A House committee deleted the fine and reported the bill to the floor, but it was referred to another committee where it died.

***Vehicle Code Amendment --A bill amending the state Vehicle Code was passed by both houses and signed into law prior to the 1981 summer recess. Senate Bill 346 became Act 63 on July 1, 1981. It fixes penalties for operating a motor vehicle without a valid license.

A fine of $200 can be levied upon conviction for a summary offense.

***Abandonment of State Routes -- The secretary of PennDOT is authorized to abandon any highway route on the state highway system, or any part of a highway, under Senate Bill 153 which became Act 81 on July 10, 1981. There are restrictions, however. The bill says that a
municipality where a highway is located must approve of the secretary's action and agree to assume the expense of maintenance. In addition, the measure prohibits PennDOT from implementing any mass turn back of highway routes to municipalities.

***Evasion of Turnpike Toll -- The legislature acted this session to set stiffer penalties for persons attempting to evade payment of the full toll on the Pennsylvania Turnpike. Senate Bill 724
became Act 86 when signed on July 10, 1981. The bill is intended to crack down on persons who resort to "ticket switching" as a means of evading full payment of tolls. Penalties can be as high as $300, depending on the type of vehicle being operated. The bill was amended in the House to provide for trucks or truck tractors to have illuminated signs on the cab roof.

*Deregulation Proposed -- Legislation introduced late in the session calling for deregulation of armored vehicles and those transporting liquid and semi-liquid waste cleared the Senate but never reached the House floor before adjournment. Supporters of Senate Bill 1390 said the Public Utility Commission favored removing these carriers from regulation under the common carrier and contract carrier codes.

***Ridesharing Plan -- Awaiting action by the governor is House Bill 521, legislation that would encourage ridesharing arrangements such as carpools and vanpools. The governor has until Dec. 30 to sign it into law. The bill provides that "ridesharing" is the transportation of not more than 15 persons to and from their place of employment or the transportation of persons in a vehicle owned or operated by a public agency or nonprofit organization. It excludes employers from liability for injuries to passengers or others resulting from the operation of a ridesharing vehicle not owned or leased by the employer.

NOTE: Senate Bill 10, passed in the 1979-80 session of the General Assembly, provided for increases in truck weights and fees and also required interstate trucks to pass state inspection, either in Pennsylvania or another state. The inspection provision of the bill was challenged in court by several trucking associations. On Nov. 19, 1982, the U. S. Supreme Court let stand an appeals court ruling upholding Pennsylvania's inspection requirement. As 1982 neared an end, the
commonwealth had not yet determined when actual enforcement of the inspection provisions would begin.

Banking and Insurance

***Statewide Banking -- Legislation whose full impact may not be felt for years to come cleared the House and Senate in the spring of 1982 and was signed into law on March 4 as Act 44.

House Bill 1889 will permit banks to eventually open branch offices anywhere in the state, moves prohibited under previous law.

The -legislation had the support of several former governors, big banks in the state and the Secretary of the Department of Banking.

All contended the new law will not hurt smaller banks by opening the way for them to be gobbled up by the larger institutions.

Opponents of the bill said community banks, especially those in rural areas, will be the eventual losers, with credit for farmers and small businesses drying up.

House Bill 1889 opens the door for bank holding companies to control a total of four banks--their own and three others--anywhere in the commonwealth in the first four years after the effective date of the legislation. In the following years, banks are permitted to acquire additional banks, but the total is limited to eight.

After eight years, there is no limit on how many banks can be controlled by a single holding company.

Another provision of the bill permits banks to expand into counties not contiguous to the county in which their headquarters are located. This expansion is permitted in the first eight years
after the effective date of the legislation.

There are provisions written into the bill to prevent large banks from locating branches in certain small communities of bi-contiguous counties. This expansion is prohibited in the first eight years if the small community is the site of the principal place of business of another institution or national bank.

Previously, banks were permitted to have branch offices only in counties adjacent to counties in which the bank was headquartered. House Bill 1889 was amended to designate the Jan. 15 birthday of Martin Luther King as a legal bank holiday.

***Interest Hike for Auto Loans -- Consumers buying a new or used automobile and financing the purchase through a bank or other lending institution will be paying a higher interest rate.

Senate Bill 1284, which became Act 160 on June 18, 1982, fixes the new rate at 18 percent on new cars and used cars less than two years old. A 21 percent ceiling is placed on loans for older vehicles.

Backers of the legislation claimed the new and higher rate interest will generate car sales because it will encourage banks to issue more loans. Opponents contended that the consumer will balk at paying higher rates, resulting in fewer sales of new cars at a time when the industry is severely depressed. (Sales from January through May of 1982 were down 13 percent from the same period of 1981.)

Previously, interest rates on new and used cars varied, the amount depending on the type, value and age of the vehicle. The rate generally ranged between 15 and 16 percent.

The House amended the bill in an effort to reduce the number of automobile repossessions. The amendment gives a car owner 21 days to pay a default on the loan. During that period, no repossession can occur.

Higher interest rates on auto loans was one of the provisions of Senate Bill 409 which passed the Senate in June of 1981, but which was stalled in the House. Senate Bill 409 also provided for an increase in finance charges on retail credit purchases--a hike eventually approved in Senate Bill 306 which became law in March of 1982.

***Retail Credit Interest Up -- Senate Bill 306, which became Act 68 on March 25, 1982, increases the allowable interest rate on retail credit purchases from 15 percent to 18 percent. The legislation covers retail sales and credit card purchases.

Supporters of the legislation said retailers were losing money when limited to a finance charge or interest charge (15 percent) that was lower than the prime rate. Opponents said the increase would price consumers out of the retail credit market.

For the most part, retailers and banks have taken advantage of the bill's provisions and now are charging the 18 percent rate. Senate Bill 306 also contains installment sales contract reforms aimed at protecting the consumer. A sunset provision in the bill means that it will be revoked in three years unless reenacted by the General Assembly.

***Insurance Policy Loan Interest -- Legislation removing the 8 percent ceiling on life insurance loans was signed into law-April 8, 1982, as Act 84. The bill does not affect policies in force before- the new law became effective. The bill provides for an adjustable interest rate tied to the yield on corporate bonds. The change in the law was considered after insurance companies complained that the 8 percent cap was too low and was responsible for reduced earnings and higher
insurance costs.

***Insurance Policy Limitations -- House Bill 61 was signed into law June 19, 1981, becoming Act 33. It prohibits a mutual insurance company from writing assessable bodily injury and property damage liability policies on any automobile or motor vehicle. This type of policy is one under which an insurance firm could, at the end of a policy period, assess the policyholder an additional premium to recover a portion of the company's losses incurred for bodily injury and property loss.

*Chiropractic Care -- The House failed to take any action on Senate Bill 197 which would authorize chiropractic care as an allowable expense for auto insurance for a victim of an automobile mishap. The Senate passed the bill June 8, 1981. The measure would amend the Pennsylvania No-Fault Motor Vehicle Insurance Act.

***Savings and Loan Associations -- House Bill 210 gives state chartered savings and loan associations the authority to conduct their business on an equal basis with S & L's chartered by the federal government.

This bill was signed by the governor on June 5, 1981, becoming Act 28.

Under the Savings Associations Code, the business activities of savings and loan associations had been somewhat restricted. House Bill 210 gives the institutions the authority to issue credit cards, extend credit in connection with these cards, engage in trust and other judiciary activities, issue mutual capital certificates and charge the same rates of interest on consumer and credit loans as do other lenders.

In addition, savings and loan associations can now offer what is known as a "traveler's convenience withdrawal" option so that an account holder may, when 50 miles or more from his principal residence, make a withdrawal from a savings account at the office of any institution whose accounts are insured by the Federal Savings and Loan Insurance Corp. or the Pennsylvania Savings Association Insurance Corp. A savings and loan also is permitted to cash the check of a senior citizen.

Amended into this bill was a provision that prohibits savings and loan associations from issuing what is known as a "balloon" loan for financing an owner-occupied one or two-family dwelling. Also prohibited is a mortgage loan where payment can be accelerated at the option of the lender. The bill also provides for a uniform disclosure notice, directing a mortgage lender to provide a consumer proper notice in the event of a mortgage foreclosure.

***Second Mortgage Interest Rates -- Legislation (House  Bill 2036) increasing the maximum annual interest rate on second mortgages was signed into law April 8, 1982, as Act 83. Affected by the bill are homeowners who borrow against the equity they have in their homes.

House Bill 2036 amends the Secondary Mortgage Loan Act, allowing an increase in the interest rate of up to 1.85 percent per month.  Lenders claimed the former 17.4 percent cap on such loans was inadequate and had, in fact, prompted a number of firms to cease granting second
mortgage loans.

***Changes in Banking Code -- Extensive amendments to the Banking Code of 1965 are provided for in House Bill 1739. This measure was signed by the governor on April 8, 1982, becoming Act 79.

The bill clears the way for mutual savings banks to become stock savings banks and relieves state-chartered banks from having to maintain "double reserves"--exempting from state reserve requirements those institutions which have to maintain reserve requirements with the Federal Reserve Board. In addition, the measure permits a restricted number of trustees of a savings bank to serve as directors of trust companies.

*Interest Rate Boost -- The House Business and Commerce  Committee took no action on legislation that would enable fraternal benefit societies to increase the interest rate on policy loans from six percent to eight percent.  The Senate passed Senate Bill 1024 on March 29, 1982.

***Savings & Loan Branches -- Legislation (HB 2074) granting state-chartered savings and loan associations the right to branch out across the commonwealth became Act 94 on April 9, 1982. Aim of the bill is to stir new competition in the financial community and enable state-chartered groups to compete on a more equal basis with federally chartered savings and loan groups. Similar legislation (House Bill 1889) allowing banks to open branches anywhere in the state became law earlier in 1982.