A NASBP Government Relations Report

Recent developments at the federal level have significantly impacted state governments on financial and social issues. The continuing effects of sequestration have had severe impacts on state finances. Automatic budget cuts that took place on March 1st reduced federal funding to a number of state-run social programs. With many states experiencing mandatory furloughs as a result of sequestration (and thus reduced revenue), balancing budgets will become increasingly difficult. Issues regarding the definition of marriage and gun control have occupied state legislators; both subjects are being considered at the federal level. What role the states play in a federalist system continues to be an important topic. The states have also been very active in the surety realm.

This year, NASBP has reviewed over 500 pieces of legislation to determine their relevance to our membership and currently is tracking fifty separate pieces of legislation affecting the surety profession. Public-Private Partnerships (P3) have been a major issue in all regions of the country. According to the National Council on Public-Private Partnerships, P3s are authorized in thirty-four states. They are mostly utilized to provide transportation projects, but may also offer an alternative project delivery method for any type of infrastructure project. NASBP is currently tracking eighteen pieces of legislation in fourteen states that would allow state or local governments to partner with a private entity to provide essential infrastructure projects. While some of the bills are silent on the bonding required for these partnerships, many require bonds and directly cite the State’s Little Miller Act, the preferred position of NASBP. For detailed summaries of the P3 bills NASBP is tracking, please see NASBP’s Focal Point e-bulletin newsletter. Additionally, NASBP is currently researching the P3 legislation enacted throughout the country to determine how bonding was addressed and will continue to advocate for this project delivery method to include statutory bonding requirements.

Individual sureties are another major issue NASBP has actively engaged on this session. New Mexico passed SB 192, which connects code references to make clear that all insurers must possess a certificate of authority to write surety bonds in the state. The most challenging legislation NASBP has encountered at the state level during this legislative season was an effort in Maryland to further expand the use of unlicensed, unregulated individual sureties. As originally introduced, this legislation, HB 585/SB 599, would have allowed individual entities to provide bonds at the subcontract level. After extensive lobbying efforts and discussions with the bill’s proponents, this provision was removed from the bill, and the bill was amended to indicate that the state must provide additional information to prime contractors on the types of securities accepted at the prime level, which include corporate bonds, bonds furnished by the Maryland Small Business Development Financing Authority (MSBDFA) and individual sureties, as permitted under existing state law. NASBP continues to take the position that any person or entity writing bonds should be licensed and regulated by the Maryland Insurance Administration. After both bills were approved in their respective chambers, the Senate adopted the amendments that were included in the House bill and returned it to the House as SB 599 for their approval. SB 599 was enrolled on April 5 and was sent to the Governor for his signature.