June 16, 2014

Weekly Update from the NC State House - June 2014: Following the GOP state convention this past weekend, House members returned to Raleigh Tuesday to continue the budget process...

Maynard Nexsen

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House Budget

Following the GOP state convention this past weekend, House members returned to Raleigh Tuesday to continue the budget process. House leadership held a press conference Tuesday morning to unveil their proposed $21 billion spending plan. The House appropriations subcommittees then proceeded with their process later that morning, each subcommittee hearing their respective sections individually.

Many of the provisions in both the Senate and House proposals address similar policy agendas, however the blueprints on how to advance those agendas conflict. The funding for an 11% bump in teacher pay in the Senate budget came from cuts elsewhere in the education budget, such as teacher’s assistants and text books and was tied to teachers voluntarily abandoning tenure. The Senate budget also took the state to a full HMO model in Medicaid, removed it from DHHS and reduced eligibility. House funding for the 5% increase in teacher pay is derived from projected revenues from additional lottery advertising funds and is not tied to tenure. The House chose to abstain from overhauling Medicaid in the budget.

The Finance and Appropriations committees met Wednesday. Finance was relatively short, focusing solely on the revenue implications of the budget. Rep. Davis (R-New Hanover) offered an amendment which attempted to extend the film industry’s tax credit. The proposed amendment for the tax credit was lower than the current credit, which is due to expire at the end of the year. After being given the “green light” by leadership to proceed with the amendment, it failed 16-20. Appropriations started immediately following Finance that morning and continued on into the evening where committee members offered and heard 85 amendments.

The budget received its second reading Thursday after more than 7 hours of amendments and debate. There were 21 amendments passed over the course of the evening. One of which brought forward by Rep. Davis (R-New Hanover) added a film grant program in the Department of Commerce to replace the expiring tax credit, which mirrors a provision from the Senate. Another by Rep. Saine (R-Lincoln) also added a version of the puppy mill legislation from 2013. The bill passed second reading 81-36 with 8 Democrats (Brandon; Brisson; Cotham; Goodman; Graham, C.; Hanes; Tine; Waddell) voting with the Republican majority in favor of the bill and 1 Republican (Conrad) voting against the proposal.

Unlike the Senate, the House went home to sleep on it and came back at 8:30 Friday morning, entertained a few more amendments and after two more hours, the budget passed third reading and now awaits action from the Senate. The Senate will likely vote “not to concur,” sending the bill to a conference committee made up of the appropriations chairs from both chambers, which will attempt to resolve the vast differences between the two spending plans.

Below are some highlights from the House proposal and how they differ from the Senate.

Education

House proposal gives teachers 5% pay increase outright; Senate proposal gave 11% increase that is tied to teachers abandoning their tenure
House proposal makes a 1% cut to the Department of Public Instruction; Senate proposal made 30% cut
Allots for two epinephrine or “epipens” in every school
Reinstates Teaching Fellows Scholarship

Health & Human Services

House proposal does not cut Medicaid eligibility to the aged, blind, disabled and medically needy
House proposal keeps the Division of Medical Assistance within DHHS; Senate proposal made it separate entity
House proposal provides $117 million Medicaid reserve for future cost overruns; Senate added $206 million directly to Medicaid budget
House continues funding study of Medicaid reform under DHHS; Senate eliminated that funding
State Medicaid director appointed by Governor to a five-year term and is subject to approval of the legislature
Bans minors 18 and under from the use of tanning beds

Public Safety

Moves SBI from the Attorney General’s office to DPS
Keeps the State Crime lab under the office of the Attorney General; Senate proposal moved it to the Department of Public Safety (DPS)
Moves the Alcoholic Beverage Control Commission under DPS

Miscellaneous

Establishes film grant program in the Department of Commerce with a 2020 sunset
Directs the sale of Jeanette’s Pier in Nags Head, NC
Allots $42 million for renovation of the Albemarle Building which houses the NC Department of Administration
Includes language attempting to curb “puppy mills” reflecting legislation passed in the House last year but did not receive action in the Senate
Eliminates tolls on state run ferries

Both the House and the Senate proposals include:

Funding for coal ash clean-up with minor appropriated differences
Transferring the State Bureau of Investigation (SBI) and Alcohol Law Enforcement (ALE) from the Attorney General’s office to DPS
New or increased fees on items such as ABC permits and commercial fishing licenses

House hits a wicked curve and scores a P.R. coup – NC Spin

Tillis touts budget, says there’s room for compromise – N&O

Committee votes down bill to extend film tax credit program – Star News

N.C. House OKs budget amendment that keeps film incentives in play – Star News

Adjournment

Sen. Apodaca, the Senate Rules Chairman filed the Adjournment Resolution this week with a target date of June 27^th, 2014. Barring the Governor calling for a special session, the resolution would officially end the business of the 2013-14 General Assembly, not to return until January 2015 with newly elected or reelected legislators. This perceptually optimistic date is contingent upon passage of a budget that is agreed upon by both chambers and signed by the Governor. Below is a graphic illustrating the length of past short sessions provided by The Voter Update. This morning’s budget session constitutes the 19^th legislative day thus far.

Infographic

Public-Private Partnership

The Senate Monday evening passed its plan S743 for revamping the recruitment and marketing wing of the Department of Commerce 38-7. The House on Tuesday passed a different version of the legislation, H1031, was heard on the House floor that same afternoon. A point of contention between the two pieces of 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, which is now also included in the House budget. 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 version of the bill 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.

Curbing Lawsuits on Business

While the House was submerged in budget work, the Senate continued to work on other priorities for the session including S648 the NC Commerce Protection Act of 2014. At the beginning of the week, the bill would have made various changes to statutes governing commerce in the State, including provisions to:

Create transparency in contingency fee contracts between the State agencies and private attorneys
Cap fees that could be paid to private attorneys
Create transparency in claims against asbestos and silica trusts
Amend the laws governing products liability actions, limiting liability of companies that follow government guidelines in developments of their product
Prevent the abuse of patents
Enforce exclusive forum provisions assented to by shareholders in derivative actions.

In a Senate Judiciary committee on Tuesday where the bill was presented, members of the committee struck the two provisions from the bill regarding product liability and asbestos. In addition, the committee inserted a proposal from the Senate budget that would require all challenges on the constitutionality of a law to be heard by a three judge panel. The committee also included the language which the House passed Tuesday regarding Patent Abuse, making bad faith assertions of patent infringement a deceptive trade practice. That language would also authorize treble payments for targets of patent trolling practices that prevail in a case involving bad faith assertions of patent infringement.

On the floor Thursday, Sen. Barringer (R-Wake) added back liability protections for pharmaceutical drugs. Sen. Rucho (R-Mecklenburg) also added back asbestos liability protections for companies that do not use asbestos in their products, but have purchased companies which had used asbestos in products in the past. The bill now awaits action in the House.

Bill aimed at reducing lawsuits raises eyebrows – WRAL

Senate committee votes down product liability suit roadblocks – WRAL

Limited pharmaceutical, asbestos protections added back to tort bill as it clears Senate – WRAL

Up Next Week

Senate vote to concur/not concur on the budget
Rep. Dollar (R-Wake) will likely try to move the Medicaid Reform bill
The Senate Environment committee is scheduled to take up the Governor’s coal ash clean-up plan on Monday afternoon