NASBP Focal Point – May 25, 2023

Federal Report

Down to the wire: Only days left to raise the debt limit As we go to press, less than a week remains before the U.S. Treasury projects the federal government defaults on its debt obligations. House negotiators Garret Graves (R-LA) and Patrick McHenry (R-NC) indicate there is still a significant gap between what House Republicans are willing to accept for federal spending before the party can agree to raise the debt limit. To date, negotiations have been focused on finding compromise over a 2024 budget year cap that might be essential to resolving the standoff. Republicans have insisted next year’s spending be less than it is now, but the White House has offered to hold spending flat at 2023 budget numbers. While Republicans initially sought to roll back next year’s spending to 2022 levels and impose a 1% limit on spending growth for 10 years, the GOP has narrowed that proposal to six years. The underlying question is whether enough votes exist (222 needed) in the House to raise the debt limit if House Republicans are not satisfied with the budget spending cuts. The White House estimates that roughly 100 Democratic votes are needed to ensure the passage of a debt limit deal. There is speculation on Capitol Hill that Speaker Kevin McCarthy may not be able to secure the necessary votes from House GOP members because of the dozen or so members of the Freedom Caucus who are poised to oppose compromise with the White House without the necessary spending cuts. On Thursday afternoon, the House adjourned for the Memorial Day weekend. House Leadership committed to giving members 24 hours advanced notice before they need to be back in Washington for floor votes. Rumors have it that House votes could come as soon as next Tuesday night after the financial markets have closed.

State Report

IL HB2878 (amendment no.2) As originally introduced, SB157/HB2482, would have amended Illinois’ Little Miller Act by raising the bond threshold from $50,000 to $5,000,000. Recently, stakeholders agreed to compromise language (Amendment 2/HB 2878) which raises the bond threshold for ILDOT and IL Toll Authority contracts to $500,000. For all other public works contracts, the bond threshold is $150,000. Both provisions sunset on January 1, 2029 when the bond threshold reverts back to $50,000. HB 2878 Amendment 2 also requires the ILDOT and the Toll Authority display on their respective websites or annually report information to interested parties, such as a list of defaulted contracts, the number and aggregate amount of payment claims made under the Mechanics Lien Act, the aggregate annual revenue of the contractor derived from contracts with the State for each of its public works contracts, regardless of contract value, and the identity of the surety providing the contract bond. HB2878 as amended passed the Senate and was sent back to the House for concurrence. On May 24, the House Committee on Rules referred HB2878 to the House Committee on Executive Motion to concur with Amendment 2.

TX HB2518 (Bell) amends Sections 2253.001(3),(4) to expand the scope of the Texas Little Miller Act to require performance and payment bonds for public work contracts on public property leased to a nongovernmental entity. HB2518 pass the Texas’ legislature and was sent to the governor. Similar legislation passed the TX legislature in 2021 but was vetoed by the governor. The Texas Construction Association (TCA) asked their members to send letters in support of HB2518 to their TX legislators, and TCA also requested that NASBP make the same request to its TX members as well.

MT SB 314 Amends Montana’s Construction lien statute (71-3-551) to permit a contracting owner of any interest in the property, the original contractor as defined in 71-3-522; or any subcontractor to provide a bond to discharge potential mechanic’s liens. SB314 passed the legislature and was signed into law by the governor at Chapter No. 407. NASBP MT members and staff played an active role with providing suggested language to attorney’s representing the Montana Contractors Association which spearheaded this legislative effort. SB314 was in response to a Montana Supreme Court decision in Skyline Consulting Group v. Mortensen Woodwork, Inc, which permitted only owners to substitute bonds for mechanic liens.

MI SB329 Amends the MI Insurance Code, MCL 500.100 to 500.8302, by adding chapter 30B, “Insurance Policyholder Bill of Rights,” to establish a bad faith provision. According to SB329, bad faith applies to an insurance policy or contract which includes suretyship. SB 329 defines bad faith as, “an insurer’s failure to settle a claim when, considering all of the circumstances, the insurer could and should have done so had it acted fairly and reasonably toward its insured and with due regard for the insured’s interests.” SB329 was referred to the Senate Committee on Finance, Insurance, and Consumer Protection.

If you are aware of any bills impacting the industry, please reach out to Larry LeClair, NASBP’s Director of Government Relations, and let us know.