National Federation of the Blind
of South Carolina
Saves Blind Vendors Hundreds of Thousands of Dollars
by Donald C. Capps
From the Editor: The June/July issue of the Palmetto Blind, the publication of the National Federation of the Blind of South Carolina, carried a story describing its successful fight to protect the livelihood of the state's blind vendors. This is the way affiliate President Don Capps told the story:
In February, 1999, the NFB of South Carolina learned that a subcommittee of the Ways and Means Committee of the House of Representatives had approved a proviso which would result in blind vendors across the state paying hundreds of thousands of dollars in set-aside fees. The Federation contacted members of the subcommittee to voice its opposition to the proviso. Unfortunately, the Federation was advised by the subcommittee that the proviso had been adopted by the full Ways and Means Committee and that the provision had been included in the budget bill to be placed on the desk of House members March 15. We requested and were granted a meeting with the subcommittee on Thursday, March 4. Meanwhile the NFB of South Carolina took steps to mobilize all blind vendors immediately by sending them the following letter:
February 25, 1999
Memo to: All Blind Vendors
Interim Commissioner Michael Thompson
Important, please read carefully. At the outset it is appropriate to express appreciation to the Commission for developing a successful Business Enterprise Program which significantly benefits more than 100 blind persons and their families.
As background information, the old Division for the Blind, which was a part of the South Carolina Department of Public Welfare, had a set-aside program. However, in 1964, thirty-five years ago, the NFB of South Carolina initiated legislation when we appeared before the Senate Finance Committee headed by Senator Edgar Brown and successfully argued that blind vendors should not be required to pay set-asides. Thus for thirty-five years blind vendors have not been paying set-asides, resulting in savings of several hundreds of thousands of dollars for them and their families. This is now in jeopardy. We are enclosing a copy of the proposed legislation which would reinstate the set-aside program and drastically affect the take-home pay of blind vendors.
Wednesday morning, February 24, I talked with a legislator who serves on the subcommittee of the Ways and Means Committee which is responsible for meeting with Commission officials on their budget. This legislator verified that such legislation was being proposed and arose out of this subcommittee investigation and from meetings with Mr. Earl Gardner, who as you know, heads the Commission's BEP program. My conversation with the legislator raised a red flag, and subsequently I talked with Earl Gardner, who agreed to furnish me with a copy of the set-aside legislation.
In carefully reading the legislation, you will agree that the proposed set-aside charges are exorbitant and even punitive. While different vending locations understandably result in different net annual earnings, it is my understanding that average annual net earnings are about $24,000. Using the information appearing in the legislation, a blind vendor with a net income of some $24,000 would pay a set-aside of 17.5 percent, amounting to $4,200, which is exorbitant. In higher earnings brackets the set-aside fees become even more exorbitant with a set-aside fee of as much as 35 percent being levied. While the legislation would provide for some offset by claiming certain expenses, under no circumstances would a blind vendor not be hurt by this legislation. You are already paying federal, state, and Social Security taxes and possibly other expenses, and the set-aside charges will simply amount to another tax being levied upon you.
I have talked with several blind vendors, including at least five members of the BEP Committee mandated by the Randolph-Sheppard Act. It was apparent that the BEP Committee and blind vendors were kept in the dark about this legislation. It is now essential that everyone involved in the BEP program come together and agree upon strategy to oppose the set-aside legislation or at least significantly reduce the drastic impact upon blind vendors if the proposed legislation is adopted. Thus, in conjunction with members of the BEP Committee and other blind vendors, we are calling a meeting to be held at the Federation Center of the Blind, 119 S. Kilbourne Road, Columbia, this coming Monday, March 1, at 4:30 p.m. All blind vendors across the state are urged to attend the meeting, and we are also requesting that Michael Thompson and Earl Gardner be present.
We must have complete unity and speak with a single voice to have any chance of being successful in our opposition to this legislation. It would be catastrophic if we fail to work together and wind up being divided and fragmented. The budget, now being finalized by the Ways and Means Committee of the House of Representatives, will go to the House floor within two weeks. Therefore, since the proposed legislation will be a part of the budget bill, we need to act swiftly, which is the reason for the meeting's being called for Monday, March 1. I realize this is not much notice and undoubtedly will result in some inconvenience to many of you.
By copy of this memo, I am requesting Mr. Gardner promptly to furnish us the following: (1) the total amount of sales in 1998 for all blind vendors, (2) amount of sales tax generated by these sales, (3) if known, the amount of income taxes paid on these sales, (4) a breakdown, without disclosing any names, of the number of blind vendors in the different income brackets, i.e., $10,000; $20,000; $30,000, etc. This information and other data are needed to develop a sound argument against the proposed set-aside legislation. The March 1 meeting at the Federation Center will enable us to work together, and while the meeting will be orderly, it is important that each blind vendor be given an opportunity to give his or her input in this very important issue.
I look forward to our meeting on Monday, March 1, at 4:30 p.m. The meeting will adjourn at a time enabling out-of-town vendors to arrive home at a reasonable time.
Donald C. Capps, President
There was outstanding response as some sixty-five blind vendors from throughout the state participated in the March 1 meeting held at the Federation Center of the Blind in Columbia. Some of the vendors were members of the NFB of South Carolina, and others were not. However, it made no difference because blind vendors were very much concerned about the possibility of their having to pay exorbitant set-aside fees, diminishing their hard- earned annual income. They were very willing to rely upon the leadership of the NFB of South Carolina to counteract this distinct possibility. We invited Commission officials to the March 1 meeting, and both Dr. Joe Ray, Acting Commissioner, and Mr. Earl Gardner, Manager of the BEP Program, attended the meeting. NFB of South Carolina President Donald Capps presided over the meeting and welcomed everyone.
It was a harmonious meeting with everyone present cooperating fully. Vendors were told that this was a winnable case but that it would require everyone's cooperation and support. Demonstrating its experience and know-how, the NFB of South Carolina had done considerable preparation for the March 1 meeting although time had been very short for this purpose. President Capps had secured a letter of support from Dr. Fredric Schroeder, Commissioner of the Rehabilitation Services Administration, saying that this was a crucial issue facing South Carolina's blind vendors. The letter from Dr. Schroeder reads as follows:
United States Department of Education
Office of Special Education and
Rehabilitative Services Administration
March 1, 1999
Mr. Donald C. Capps, President
National Federation of the Blind of South Carolina
Columbia, South Carolina
Dear Mr. Capps:
This letter will respond to your correspondence of February 25, 1999, concerning proposed set-aside legislation regarding the Randolph-Sheppard Vending Facility Program in South Carolina. We appreciate your bringing to our attention this legislation and giving us an opportunity to review and comment.
In looking at the proposed set-aside legislation, we note the following items as a basis for discussion. First, in your letter you ask if the Rehabilitation Services Administration had data concerning South Carolina's BEP Program and how these data compared to the Randolph Sheppard Program nationally. Perhaps a beginning reference point for comparative analysis would be the average annual vendor earnings of vendors in South Carolina as compared to the average annual earnings of vendors nationally. In this regard, the most recent "Report of Vending Facility Program," Form RSA-15, submitted by the South Carolina BEP Program is helpful. For the period October 1, 1997, to September 30, 1998, the average annual earnings for a vendor in South Carolina was $24,652 or $3,236 less than the national average, which was $27,889.
Moreover, in looking at the proposed scale for set-aside assessment for vendors in South Carolina, it is further instructive to look at the relationship between the average annual vendor earnings of South Carolina vendors and the proposed fee to be set aside from the net proceeds of each vending facility on a yearly basis. For example, in looking at the net profit range of $20,000 to 29,000, which encompasses vendors making the annual average of $24,652, one would note that according to the proposed scale those vendors would be assessed a 17.5 percent set-aside fee. For illustration purposes, using the average vendor income in South Carolina of $24,652, vendors in that category would be assessed an annual set-aside fee of $4,314, which would reduce the average annual vendor earnings to $20,338 or $7,551 less than the national average for blind vendors.
Another issue which you may wish to consider in your assessment of the proposed legislation is its potential impact on individuals with the lowest earnings. The legislation proposes a 5 percent set-aside for individuals earning $9,999 or less annually. Today an individual earning the federal minimum wage makes $10,753 ($5.15 per hour times 2088 hours) per year. Given that most vendors work in excess of forty hours per week, vendors making $9,999 or less per year are presumably earning less than the minimum wage for their work. While 5 percent may seem like a modest set-aside, the impact on a vendor making less than $10,000 per year may be significant.
Finally, you raise a question concerning the implementation of the proposed set-aside legislation and the input of the South Carolina Committee of Blind Vendors. Regarding the setting aside of funds by a state licensing agency (SLA), I would reference the Code of Federal Regulations implementing the Randolph-Sheppard Act at 34 CFR 395-9. Specifically, 395.9(c) speaks to the question of the participation of the Committee of Blind Vendors. It states in relevant part, "...The State licensing agency shall further set out the method of determining the charge for each of the above purposes listed in paragraph (b) of this section which will be determined with the active participation of the State Committee of Blind Vendors...." We urge significant consultation with South Carolina's blind vendors to assist the legislature in assessing the full impact of its set-aside proposal.
In conclusion, all proposed set-aside fee schedules must be submitted by the SLA to RSA for review and determination of its reasonableness. If I can be of further assistance, please do not hesitate to contact me.
Fredric K. Schroeder
cc: James Stuart, Acting Interim Commissioner
South Carolina Commission for the Blind
Dr. Ralph N. Pacinelli, Regional Commissioner
Regions III and IV
Before the March 1 meeting the NFB of South Carolina did its homework by carefully evaluating the proposed legislation as well as reviewing the BEP manual and putting together a fact sheet which would outline why blind vendors should not be charged an extra tax. The fact sheet reads as follows:
Why 112 Blind Vending Facility Operators
Should Not be Charged Excise Tax
Facts about the South Carolina Commission for the Blind's Business Enterprise Program:
In 1936 Congress adopted the Randolph-Sheppard Act. The goal is to provide remunerative employment for citizens who are legally blind and to provide public and private locations with high-quality food service operations. Vending facilities present gainful employment and self-sufficiency for blind vendors, and they become taxpayers, not tax consumers.
Vending facility program contributes to state's economy: In federal fiscal year 1997-98 gross sales generated by blind vendors amounted to $7,233,843. Merchandise purchased by blind vendors amounted to $3,732,599. These purchases from suppliers such as Coca-Cola, Pepsi-Cola, Lance, Tom's, etc. are reinvested in South Carolina's economy, helping to create additional jobs for the state.
One-hundred-twelve blind vending facility operators gladly pay their share of taxes. During federal fiscal year 1997-98 blind vendors paid approximately $753,742 in federal, Social Security, state, and local taxes. During federal fiscal year 1997-98, blind vendors paid state sales taxes amounting to $300,803. Thus the amount of sales tax ($300,803) paid to the state is in excess of the cost of the administration of the vending facility program.
Blind vending facility operators earn an average of $23,822 per year: According to the Commission, the average annual earnings of blind vendors for federal fiscal year 1997-98 was $23,822. This average is comparable with the average earnings of sighted South Carolinians. The average national earnings for blind vendors is $27,889 or about $4,000 more than the earnings of South Carolina blind vendors.
Breakdown of income ranges for blind vendors: Of the 112 blind vendors seventy-seven earn less than $30,000 a year. Twenty-eight blind vendors earn less than $10,000 per year or less than the minimum wage. Twenty-seven blind vendors earn between $10,000 and $20,000 per year. Twenty-two blind vendors earn between $20,000 and $30,000 per year. Only fourteen blind vendors earn between $30,000 and $40,000 per year. Only seven blind vendors earn between $40,000 and $50,000 per year. Only six blind vendors earn between $50,000 and $60,000 per year. Only seven blind vendors earn $60,000 or more per year.
Excise tax on blind vendors is punitive: While blind vendors are already paying their fair share of taxes, the proviso in the budget bill imposes an additional excise tax on the earnings of blind vendors which is punitive, unfair, and unwarranted. It is unreasonable and unconscionable to charge blind vendors earning less than $10,000 per year an additional excise tax. Applying the sliding scale in the proviso, a blind vendor earning between $10,000 and $20,000 per year would pay an excise tax of as much as $1,550 annually. For a blind vendor earning between $20,000 and $30,000 per year, an excise tax of up to $3,500 would be imposed. Thus a majority of seventy-seven blind vendors would pay an excise tax which would seriously reduce their take-home pay and impose a burden which is entirely unnecessary and punitive.
If a blind vendor has been in the program for many years and has worked hard, he or she may earn as much as $40,000 per year but would be burdened with an excise tax of as much as $5,300, which would be in addition to all other taxes. The handful of blind vendors (seven) who earn between $40,000 and $50,000 would pay an excise tax of up to $7,800. Only six blind vendors earn between $50,000 and $60,000 per year, and they would pay an excise tax of up to $10,800. For the seven blind vendors earning $60,000 or more, the excise tax is at the rate of 35 percent. Thus, if a blind vendor earned as much as $70,000 per year, he or she would pay an excise tax of $14,800. An excise tax of $17,800 is due if there are earnings of $80,000 per year.
State-controlled entrepreneurs: For blind vending operators the South Carolina Commission for the Blind is charged with the management and supervision of the program in carrying out the Randolph-Sheppard Act. Additionally, the Commission for the Blind provides for the training and placement of blind vendors. The Commission for the Blind covers the cost of the initial stock as well as necessary equipment. In addition to providing supervision and management services, the Commission is also responsible for the maintenance of the facility, promotions for upper mobility, and disciplinary actions whenever necessary. The Commission may also discharge a blind vendor for serious infractions.
Other state employees and officers do not pay for equipment and repairs. The state of South Carolina provides the necessary equipment for other state employees and officials, including such things as desks, chairs, computers, telephones, and even automobiles. Any repairs or replacement of such equipment and items are paid for by the state since this is considered necessary for such employees and officials to carry out their responsibilities. State employees and officials are not forced to pay excise tax. Thus it is patently unfair and discriminatory for blind vending facility operators to be forced to pay excise taxes. The state appropriately provides substantial tax breaks for businesses to locate in South Carolina, which is in the best interests of its citizens. All vending facility stock and equipment are state property and consequently do not belong to the blind vendor.
Explanation of Savannah River Site vending machines: Through an agreement with the United States Department of Energy, the earnings from vending machines located on Savannah River Site property which are not serviced by blind vendors and which are in competition with blind vendors operating vending facilities on SRS property are paid to the Commission for the Blind. This program began in 1990. Between 1990 and 1993 the SRS vending machine earnings averaged about $250,000 per year. The Commission and blind vendors voted to use about one-half of these annual earnings for retirement or pension plans, for health insurance contributions, and for the provision of paid sick days and vacation time for blind vendors.
The remaining one-half of the SRS vending machines earnings was to be used by the Commission for maintenance and replacement of equipment, purchase of new equipment, management services, and assuring a fair minimum return to vendors. Beginning in 1994, SRS vending machine earnings have been placed in escrow or in reserve pending the outcome of the distribution of these earnings to all blind vendors. Presently, this escrow account or reserve fund has about $1 million which will ultimately be distributed to all blind vendors and the Commission, subject to a final ruling by the court. Thus it appears that it is only a matter of time until the Commission for the Blind will be in possession of substantial funds from this source, which will be more than adequate to cover such things as maintenance and repairs.
Other Commission clients helped by the vending-facility program: South Carolina blind vendors' payment of federal, state, and local taxes in federal fiscal year 1997-98 amounting to $753,742, including state sales taxes of $300,803 was substantially helpful in funding services for other blind clients and possibly other state employees. In some cases it may be necessary for the Commission to spend considerably more to prepare a client for a career than that spent for a blind vendor since this may include thousands of dollars for a college education, graduate school, or even law school.
Blind vendors shut out of legislative process: While all South Carolina citizens are entitled to be involved in the legislative process, especially when their interests and livelihood are negatively impacted, blind vendors were not permitted to participate in the legislative process (Ways and Means Committee hearings), resulting in a punitive proviso being adopted in the budget. The Randolph-Sheppard Act mandates a Business Enterprise Committee of blind vendors elected by all blind vendors from various districts. As mandated by federal law, the BEP manual, approved by blind vendors, the Commission and Rehabilitation Services Administration in Washington, D.C., states, "The Business Enterprise Committee shall actively participate with the agency in major administrative decisions and policy and program development decisions affecting the overall administration of the agency's vending facility program." Also the Rehabilitation Services Administration is to be consulted in such matters, and this was not done.
Excise tax would force retirement by some older vending facility operators: Many blind vending facility operators have spent much of their lives in the Commission's BEP program, only to have their success and hard work penalized by a punitive proviso and legislation which would drastically reduce their take-home pay--neither right nor fair. Already the employable blind have a 70 percent unemployment rate. Blind people like sighted people want an opportunity to enjoy the good life. Any perception which may exist that well trained blind persons cannot or should not be expected or allowed to earn an income consistent with the good life is harmful and misplaced. Blind persons pay the same prices as sighted people at the supermarket, department store, and automobile showroom. As a matter of fact, blind persons incur additional expenses because of blindness. While the offset of expense allowance listed in the proviso might be helpful in some cases, for the majority of blind vendors this will not be significantly beneficial.
Action requested: For more than sixty years the Randolph-Sheppard Act has resulted in the largest single program of employment for blind persons across the state and nation. For thirty-five years blind vendors in South Carolina have not paid an excise tax or set-aside fee. In its wisdom in 1964 the General Assembly enacted a law abolishing any excise tax or set-aside fees on blind vending operators. For reasons discussed above, blind vendors and the blind of the state request the General Assembly to delete the proviso (L24 Commission for the Blind) from the budget bill when it is debated beginning March 15.
That was the text of the fact sheet. The Federation Center staff had prepared three-by-five cards on every member of the House of Representatives showing their names, home addresses, and phone numbers, as well as their office phone numbers. These cards were distributed at the March 1 meeting to blind vendors with emphasis on contacts being made with legislators living in their areas for maximum effect. Vendors enthusiastically accepted their assignments and went to work immediately, contacting legislators all over the state.
At the March 1 meeting vendors were urged to have a good turnout at the State House, beginning immediately, to oppose this legislation. Three days after the March 1 meeting, Thursday, March 4, there was a meeting with members of the legislative subcommittee which had proposed this legislation. Attending the meeting were NFB of South Carolina President Donald Capps; Mack Nettles, Chairman of the BEP Committee; Earl Gardner, Manager of the BEP program; Commission attorney Bill Campbell; Representative Steve Lanford, Chairman of the subcommittee; and Representative Rex Rice.
Representative Rice explained the basis for the subcommittee's having made a decision to reinstate the set-aside charges, relying primarily upon his understanding that a number of blind vendors were realizing a good income from the operation of their vending facilities and should assume some of the cost of maintenance and repairs. Relying primarily upon information already supplied in the fact sheet, Mr. Capps led the discussion of why blind vendors should not be charged an extra tax, especially since they were already paying more than their fair share of federal and state tax. Mr. Nettles and Mr. Gardner gave additional information about the vending facility program. After hearing the discussion, Chairman Lanford indicated that he believed the proviso should be deleted from the budget bill when it was discussed by the entire House on March 15. At this point it was clear that the meeting with subcommittee members had been successful.
In the meantime blind vendors from across the state continued to turn out in force at the State House, contacting members of the House to be sure that they fully understood the impact of the proposed legislation. During the week of March in which the budget bill was being discussed, the proviso issue surfaced, and an overwhelming majority of the House of Representatives voted to delete the proviso.
Thus, in a matter of some fifteen days, under the leadership of the NFB of South Carolina a punitive proviso affecting well over 100 blind vendors had been removed from the budget bill. In short, this was a magnificent success. Because of this cooperative and successful effort, blind vendors will save about $250,000 in 1999 and more than $1 million in the next four years. We are proud to say that the NFB of South Carolina makes a real difference in the lives of blind South Carolinians.