Welcome to the Nexsen Pruet Weekly Legislative Update! The Nexsen Pruet Public Policy team provides attorneys and clients with a newsletter summarizing the week's activities and conveying the inner workings of the legislative process and state government in Raleigh.

Conflicting Budgets

After giving its final approval to their version of the state budget just after midnight Saturday morning, the Senate took a long weekend, not returning to Raleigh until Wednesday.  The budget bill had eighteen amendments on the floor over the course of the night, ironing out a number of issues that normally would have be resolved in the subcommittees, which the Senate bypassed.  The bill was largely passed on party lines, with all but one member of the minority, Sen. Gene McLaurin (D-Richmond) breaking ranks and voting “yes” with the Republican majority.  This week, DHHS learned of a $60 million shortfall in projected revenue from Medicaid.  This was not addressed in the proposed Senate budget which now puts the Senate version of the budget out of balance, by that amount.  (See last week’s May 30^th newsletter for further details on the Senate budget)

The House began their work on the budget Tuesday morning, with subcommittees meeting to review the Senate’s budget.  Each provision was marked on members copies to indicate whether that provision was a recommendation from the Governor or the Senate.  The Speaker and Appropriations Chair Rep. Dollar (R-Wake) indicated that the subcommittee process will begin next Tuesday and continue onto the full Appropriations and Finance committees on Wednesday, although a substantial amount of the budget work is being done in advance, outside the public view.  Thursday the House will convene at 12:00 noon to begin debate on their budget with a possible midnight vote Friday morning, depending on the length of debate which lasted seven hours in the 2013 session.

Senators will continue to work on other items of priority, but ultimately they await the House version of the budget so that they can resolve their differences in conference committee.  Once those differences are settled, it is only a matter of time before lawmakers adjourn the 2013-14 session to get home and campaign either on or against the policies passed over the last several weeks.  The goal to adjourn before the U.S. Open seems to have been forgotten, with activities in Pinehurst kicking off on Monday.

This weekend, lawmakers are gathering in one of two places depending on their party.  With the exception of the House’ chief budget writers, Republican lawmakers left for Cherokee, NC in the western part of the state for their state convention, where Speaker Tillis will receive the official nomination from the party to run for U.S. Senate.  Meanwhile, Democrats are gathering in Raleigh for their annual Jefferson-Jackson dinner where they will hear from their nominee, U.S. Sen. Kay Hagan.

Also, today is the 70^th anniversary of D-Day.  The Charlotte Observer has an excellent piece this morning, D-Day: Carolinians tell the story of a day like no other, which is worth a read.

Public-Private Partnership

The Senate Appropriations committee Thursday morning introduced a PCS to S743, the plan for revamping the recruitment and marketing wing of the Department of Commerce.  They then brought it to the floor that same afternoon for second reading where it passed it 38-6 with third reading having been objected to, postponing its passage until next week.  Meanwhile, a slightly different version of the legislation, H1031 was heard on the House floor that same afternoon, where it passed second reading 73-41.  Third reading having been objected to, the House will address the bill again on Tuesday. A point of contention in the legislation is what percentage of private money should be required to move forward.

 Highlights contained in both versions:

• Permit the Department of Commerce to contract with a North Carolina nonprofit corporation for the performance of certain economic development functions currently performed by the Department
• Eliminate the Economic Development Board
• Modify the duties and membership of the North Carolina Board of Science and Technology
• Establish 8 geographic zones in the State for inter-departmental cooperation purposes
• The nonprofit would be required to raise $6 million in private money over the next five years

Differences

The House version contains a provision sponsored by Rep. Glazier (D-Cumberland) which holds employees of the new nonprofit to the standards of the State Ethics Act.  The language was inserted to help prevent pay-to-play issues which have plagued other states that have attempted similar policies.

The Senate version includes a new Film and Entertainment Grant Fund within the Department of Commerce.  This piece maintains the expiration of the current tax credit which is set to expire at the end of the year and establishes the new fund that will be used to provide grants to films, TV series, video series, and commercials produced in the State. The Department would adopt rules for the administration of the program, including:

• Grants may be given in periods up to 3 years.
•  Funds cannot be used for productions unless they meet minimum qualifying expenses of $10M for films, $1M per episode for TV/video series, and $500k for commercials. Grants cannot exceed 25% of qualifying expenses and are capped at $5M for a film and TV/video series and at $250k for a commercial.
• Funds cannot go to more than one production company for a single production.
• Funds cannot go to a production that is obscene, political advertising, fundraising, marketing (other than by commercial), news programming, live sporting events, radio productions or talk/game/awards/gala shows
• Requires a statement of the production’s filming in NC, the NC Film Office logo, and acknowledgement of any involved local film offices be included in the end credits.
• Priority for funds are based on reasonable expectations of benefit to the State using, among other factors, percentage of NC residents employed, extent the production is likely to increase tourism, extent to which the production invests money in permanent improvements, extent to which the production occurs in economically distressed areas in the State, and the duration of the production activities.

This amendment to the bill emerged following a “lobby day” Wednesday for the film industry, during which film advocates from across the state descended on the NCGA to make their case to the legislature.  This version of the bill, added by the Senate Majority Leader, Harry Brown (R-Onslow) who is also the bill sponsor, continues state support of the film industry which has been rapidly growing in the state as well as adding predictability to film subsidies, including a sunset scheduled for 2020.

Unemployment Insurance

The House took up H1069 in the Finance committee on Wednesday regarding Unemployment Insurance and brought it to the floor on Thursday for second reading.  The bill as written:

• Adds the Division of Employment Security to the list of state agencies authorized to receive social security numbers from the DMV for the purpose of verifying employer and claimant identity
• Modifies the work search requirement by increasing the number of job contacts to 5 per week and eliminating the requirement to search on 2 different days
• Clarifies DES authority to use attachment and garnishment of credit card receipts to satisfy a judgment for unpaid employment taxes
• Eliminates the variable range for the duration of UI benefits and pay all UI claimants based on the maximum number of weeks currently allowed
• Adds a new, statutory eligibility requirement to receive UI benefits that claimants must present approved photo identification, forms of which are listed in the bill
• Removes provisions from the bill as filed addressing the confidentiality of UI claim information

The bill passed second reading on Thursday 77-39 and third reading will take place next week.

Common Core

Although they have different ideas of how to go about it, both the House and the Senate seem to be united in the effort to abandon the national education standards laid out in Common Core.  The bills H1061 and S812 which both highlight the state’s constitutional authority to do so, each repeal the current standards and establish a commission to develop the new North Carolina specific standards.

On Wednesday, the House voted in favor of the bill 78-39 with three Democrats voting “aye” alongside Republicans.  The bill now awaits action in the Senate which ignored the House version and voted Thursday on its own version of the legislation, passing it 33-15.  Should a compromise be reached, North Carolina would join only one other state, Indiana, in repealing the standards thus far.  State Superintendent June Atkinson, State Board of Education Chair Bill Cobey, Governor McCrory and the NC Chamber of Commerce have all expressed concern with the move to drop the Common Core standards.

Coal Ash

A Senate committee on Thursday reviewed S729 the Governor’s coal ash cleanup plan and heard input from interested parties.  DENR Secretary John Skvarla and other department staff explained the various provisions of the plan and highlighted that it has the backing of the EPA.  Legislators also heard public comment from both environmental and industry groups.  Environmental groups encouraging legislators to ensure the most comprehensive plan in the clean-up.  Industry groups advocated allowing their purchase of the coal ash to use for concrete mix, road construction and drywall.  No vote was taken in this committee, but the Senate is expected to take action next week.

Fracking

On Wednesday, Governor McCrory signed S786 which would allow drilling for natural gas in North Carolina into law.  He did so at a signing ceremony at NC State University and cited energy independence, jobs, strict rules for environmental protections and five years of debate on the issue as his reasoning for signing legislation he deemed long overdue.  Provisions of the new law include:

• Extends rule development deadline for MEC by three months to January 1, 2015
• Allows DENR and MEC to issue permits for oil and gas exploration, development, and production activities using horizontal drilling and hydraulic fracturing treatments 60 days after the MEC finalizes industry rules
• Establishes an Oil and Gas Commission to oversee the industry
• Requires MEC and DENR retain trade secret information with the exception of first responders and medical personnel in the event of an emergency
• Amends provision on liability for water contamination to ½ mile radius around wellhead
• Invalidates local ordinances that prohibit or have the effect of prohibiting oil and gas exploration, development, and production activities
• Adjusts the tax rate for the severance of energy minerals

Patent Abuse

After the House passedH1032 on Tuesday, the Senate slowed action on the legislation, sending it to the Rules committee.  The bill would make bad faith assertions of patent infringement a deceptive trade practice.  The reason behind this bill arises from a practice known as “patent trolling” in which “Trolls” use overbroad patents, often based on dated technology, threaten litigation and bring infringement suits against other inventors, with generally unwarranted claims.  Most trolls do not produce things, but are only in the business of threatening or instituting litigation to collect licensing fees.  The bill would authorize treble payments for targets of these practices that prevail in a case involving bad faith assertions of patent infringement. 

For more information, you can watch a UNC-TV video covering the topic here.

Up Next Week

• House Budget
• Commerce reorganization
• Governor’s coal ash plan
• Common Core

In the News

School to be named for Nesbitt – Citizen Times

Gov. McCrory says NC budget compromise may prove difficult – N&O

After swift start, legislature could hit speed bumps over budget – The Voter Update

State to test for natural gas deposits in WNC – Citizen-Times

Bill could raise compensation for severely injured workers – WRAL

House and Senate give tentative nods to Commerce reorganization – WRAL

House okays unemployment changes – WRAL

New NC rules on General Assembly protests fair, legal and responsible – N&O

Bill would put more business cases on N.C. Supreme Court docket – Triangle Business Journal

Bill clarifying prayer in schools clears state House – WRAL

Bipartisan group of N.C. lawmakers calls for extending film incentives – The Voter Update

NC doctors, McCrory meet to back his Medicaid plan – Charlotte Observer

Senate hears governor's coal ash plan – WRAL

House bill start Common Core removal – N&O

NC Senate votes out Common Core. McCrory says decision ‘not a smart move’ – N&O

Drawing national GOP attention, NC Republicans to rally, define statewide platform in Cherokee - CPP

House limits camera access for Democratic political trackers – N&O

Legislators, aides partake in annual Dairy Chugging Contest in Raleigh – N&O

Governor visits new DMV, talks culture change – Huntersville Herald

Showdown in Tar Heel Country could shift Senate – News-Leader

Other Useful Links

North Carolina General Assembly

Office of the Governor

North Carolina Center for Public Policy Research
Rankings of Effectiveness, Attendance, and Roll Call Voting Participation for the North Carolina General Assembly.