This week was a major week in the General Assembly as legislative leaders announced an agreement on a total spending number. Now the hard work begins as the legislature debates how to reach that number. The budget was not the only thing discussed this week. We help to break down important bills that came out of the legislature in this week's newsletter.

As of this morning, in the state of North Carolina, there were 464 confirmed cases of the coronavirus, 548 individuals hospitalized, and sadly, 13,246 confirmed deaths. There have been 8,510,205 doses of the vaccine distributed in NC, which is about 54% of the total adult population.

As we all continue to feel the effects of the global pandemic and adjust to a new normal, we want to highlight a few ways our clients across North Carolina have worked to support residents and make this time a little easier for those throughout the state. Read more about what our clients are doing to help by clicking here.

For more information on COVID-19 in North Carolina, click here to visit the Department of Health and Human Services website, and be sure to stay up to date on the latest federal guidelines issued by the Centers for Disease Control and Prevention (CDC) by clicking here.

Spending Agreement

After weeks of negotiations, the House of Representatives and the Senate have reached an agreement on how much they want state government to spend. House Speaker Tim Moore (R-Cleveland) and Senate Leader Phil Berger (R-Rockingham) announced in a joint statement Tuesday morning that total state spending for 2021-22 would be $25.7 billion, and $26.7 billion in 2022-23.

In their statement, Moore and Berger said, “This agreement builds on the last decade of responsible Republican-led budgets resulting in a boom decade that put North Carolina on a strong trajectory to recover from the recession.”

Among their priorities, the legislative leaders listed replenishing the state’s “Rainy Day Fund,” reducing taxes, and funding the State Capital and Infrastructure Fund. However, they made clear that neither a bond nor Medicaid expansion would be part of the budget.

The agreement did not include Governor Cooper, a Democrat, who refused to sign the 2019 legislative budget because, among other reasons, it did not expand Medicaid.

In an email to the News & Observer, Cooper spokesperson Ford Porter responded to the legislative leaders’ agreement, saying they are “well aware that this opening announcement falls far short of what our state needs.”

Optimistic speculation at the General Assembly is that the Senate could roll out its budget next week, and pass it soon after, and the full legislature would adopt a budget by the end of July.

E-Sports

Often times, the impetus for a certain bill filed in the General Assembly can be based on personal experiences. That was the case this week when Rep. Jason Saine (R-Lincoln) introduced H945: Esports Incentive Program in Wednesday’s House Appropriations Committee meeting.

Saine spoke in committee and recalled a story from 2019 when his son, an avid player of the videogame Fortnite, convinced his parents to take a trip to Queens, New York to attend the Fortnite World Cup. Saine estimated that more than 25,000 people were in attendance each day. “Moms and dads, spending lots of money and injecting that money into the general area of Queens, New York,” Saine explained.

His bill would empower North Carolina to get behind the controller and capitalize on the growing gaming industry. If passed, the state would offer a 25 percent tax credit for video gaming event productions – both live and tape-delayed for broadcast – like the one Saine attended in Queens. To ensure taxpayers are not “on the hook” for events that never happen, Saine made it clear that the tax credit is only refundable after the entity spends at least $250,000 in qualifying expenses.

The bill would also give $5 million to NC State University for the planning and construction of an Esports Training and Education Center, and set aside $2.5 million for a mobile training and educational unit that could travel the state. When asked about the mobile unit, Saine likened it to the large buses at NASCAR events that demo racing simulations and offer fan experiences. Saine said the mobile unit could go from school to school and to regional tournaments to increase awareness and interest in the Esports Training and Education Center.

The program would expire on January 1, 2025, at which point Saine said the legislature could revisit its successes. The bill passed the House Appropriations Committee, and now awaits a hearing in the House Finance Committee.

K-12 COVID Provisions

The House approved a measure Wednesday to spend American Rescue Plan (ARP) funds for schools, and address the impact of COVID-19 on North Carolina public schools.

S654: K-12 COVID-19 Provisions would direct the Department of Public Instruction to spend $338 million of the Elementary and Secondary School Emergency Relief Fund (ESSER) from the ARP on a multitude of services, including grants for schools to hire additional support service staff, like school counselors and nurses, and on a program to help curb cyber bullying in schools. A majority of the funds, though, would go to teachers and families to address learning loss. The bill would allocate $100 million to a program to pay teachers for an extra month who agree to help students who fell behind academically during the pandemic. It would also allocate another $10 million to allow low-and middle-income parents to receive $1,000 grants to help address learning loss.

The most controversial aspect of the House’s amended bill is the one-year delay of social studies standards that were narrowly passed by the State Board of Education earlier this year. The presenter of the House bill, Rep. Jeffrey Elmore (R-Wilkes), said the delay was to allow more time for teachers to develop their curriculums, since teacher training is slated to start in August.

The bill passed with all Republicans and a dozen Democrats voting in favor. The bill now goes back to the Senate to concur with the House changes. The Senate previously passed their version of the bill with no additional state spending, and without the social studies standards delay.

Regulatory Reform

The House’s annual regulatory reform process is officially underway. The House Regulatory Reform Committee approved H911: Regulatory Reform 2.0 Wednesday afternoon. Here is an overview of the bill’s contents:

• Section 1 - Modifies automatic sprinkler requirements for one and two family dwellings.
• Section 2 - Clarifies the permit requirements for leasing or renting residential real property.
• Section 3 - Clarifies the requesting board for a residency license.
• Section 4 - Creates a lottery exemption for grandchildren of board members to attend a charter school.
• Section 5 – Provides an automatic extension to the deadline to begin operations at a charter school if the school notifies the State Board of Education that it is seeking land use or development approvals for its selected site. The term of the school’s charter would be tolled during the extension period.
• Section 6 – Authorizes the Utilities Commission to adopt procedures to allow the lessor of a leased residential property to equally divide the amount of a water and sewer bill for a unit among all lessees and bill each lessee accordingly.
• Section 7 - Modifies what constitutes practicing as a dispensing optician.
• Section 8 - Allows Tabor City to participate in railroad revitalization programs.
• Section 9 - Authorizes sanitary districts to create, maintain, and operate parks and recreation programs and/or facilities.
• Section 10 - Makes changes to sensitive public security information that are currently public records.
• Section 11 - Prohibits hearings for certain Title V permit modifications.

The bill is now on its way to the House Finance Committee for consideration.

Tax Reform

Republican legislative leaders have made it clear that they are pursuing significant tax cuts this session. Sen. Paul Newton (R-Cabarrus) introduced H334: JOBS Grants and Tax Relief two weeks ago, arguing that the state should not “punish taxpayers just for living in our state.” The measure includes a $1 billion “Jobs and Business Saving Grant Program” which would provide up to $18,750 to businesses and nonprofits who received either state or federal pandemic-related loans or grants.

The Senate bill would codify an earlier proposal to ease taxes on businesses and individuals. The individual income tax would be reduced from 5.25% to 4.99% and raise the standard deduction from $21,500 to $25,500. The tax policy section also expands eligibility for the child deduction and increases the maximum amount of the child deduction to $6,000, which would be added on top of the standard deduction.

The corporate income tax would be “phased out," according to the bill, beginning in 2024, and eliminated completely by 2028. Additionally, the section takes aim at the franchise tax, and eliminates the two tax bases calculated using property values, reducing the franchise tax liability on corporations possessing significant real property and investments in the state. Sen Newton said he envisioned these two parts creating a “flywheel effect” that encourages job creators to build a home in North Carolina.  

Furthermore, there are subsequent tax policy changes to renovation projects, surety bonds, cigars, peer-to-peer vehicle rentals and burial properties. The bill would:

• Extend the sunset by two years filing for tax credits for mill rehabilitation projects.
• Expand the qualifications for a tax credit for rehabilitated railroad station projects.
• Limit the gross premium tax base for premiums paid to a surety bondsman to the amount paid by the surety bondsman to the insurer of the bail bonds.
• Subject remote sales of cigars, which are currently not taxed by the State, to the excise tax, which would not exceed $0.30 cents per cigar.
• Implement a sale and use tax on short-term vehicle rentals facilitated by a peer-to-peer vehicle sharing company; a large portion of the revenue collected would be directed to the State’s Highway Fund.
• Exempt burial property owned, and vaccines held by private medical facilities, from property taxation.

The sweeping bill passed the Senate Wednesday with a veto-proof majority, as eight Democratic Senators joined all Republicans to vote in favor of the measure. The bill now returns to the House for concurrence.

Upcoming Legislative Meetings

Monday, June 14

4:00PM House: Session

4:00PM Senate: Session

Tuesday, June 15

8:30AM House: Appropriations, Justice and Public Safety

8:30AM House: Appropriations, Education

10:00AM Senate: Agriculture, Energy and Environment

1:00PM House: Local Government

Wednesday, June 16

10:00M Senate: Health Care

11:00AM House: State Government

Thursday, June 17

11:00AM House: Education - Universities