Weekly Update from the NC State House - August 2014: A funny thing happened on the way to adjournment Saturday, they didn't go home...

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.

Wrapping It Up?

A funny thing happened on the way to adjournment Saturday, they didn’t go home.  The budget was the talk of the town in Raleigh last week and House and Senate budget writers spent the days leading up to its release, finalizing the details of the conference report.  Tuesday, leadership held a press conference to outline the details of the budget and the document was released to the public Wednesday night.

Senators gave their approval to the budget conference report with second reading Thursday afternoon and third reading just after midnight Friday morning.  House members passed the conference report on its second reading Friday morning and held third reading Saturday morning, sending the budget to the Governor.  In the Senate, three Democrats voted with Republicans to pass the budget and in the House, four Republicans voted with Democrats against the budget.  The Governor signed the budget into law this morning.

McCrory signs $21.1B state budget deal – WRAL

Much confusion remains over teacher salaries in the recent days since passing the budget with a new pay scale, longevity changes and a number of other issues.  Many teachers do not know how much their salary will actually increase, although there is a budget provision to ensure no teacher is paid less this year than last year.  Local school units are also scrambling to determine their budget adjustments.

New pay plan for NC teachers sows confusion – Charlotte Observer

New state budget leaves Wake County schools with $12.6 million shortfall – N&O

An Adjournment Resolution generally follows the budget and outlines the parameters to adjourn the session sine die.  The Adjournment Resolution from the Senate Rules committee Thursday morning calls for the legislature to adjourn August 2nd and reconvene August 14th.  In the case of a veto, the legislature would return August 14th for an override session.  There are now 16 bills waiting on the Governor’s desk.

The Senate Adjournment Resolution also calls for the legislature to adjourn again August 15th and reconvene November 17th, after the election, to address Medicaid reform and coal ash clean-up.  This November date means that session would not adjourn sine die until after the election, with no firm date again. 

The House however has other plans for adjournment.  House leaders amended the Resolution to broaden what could be included on the August 14th session.  They added to the list of legislation that may be considered, the major policy initiatives that passed both chambers in similar, but not identical versions that remain unresolved including:

  • Coal ash management
  • Omnibus environmental and natural resources laws
  • Confidentiality of unemployment compensation
  • Regulatory and administrative reforms which include:
    • Autism insurance coverage
    • Tanning bed age restrictions
    • Air quality measures
    • Storm water and wetland regulations
  • Technical and other changes to revenue laws which includes changes to:
    • The film tax credit
    • The historic preservation tax credit
    • Job Development Investments Grant program or JDIG
    • Job Maintenance and Capital Development Investment Fund or JMAC

The Senate adjourned the session Friday morning, expecting not to return until November.  However, as an identical Adjournment Resolution has not passed both bodies, the House and the Senate will continue to return sporadically until they can reach an agreement on the terms of adjournment.  The perennial appointments bill also remains unresolved.  The bill would fill any vacancies for the several appointments to state boards and commissions that are reserved for the House Speaker and Senate Pro-Tem.  Despite a plea from the Governor for the legislature to at least address some economic development issues in the near term, a spokeswoman for Sen. Berger (R-Rockingham) indicated that the Senate does not plan to return until November.

Lawmakers plan boomerang sessions – WRAL

Economic development measures stuck in adjournment uncertainty – WRAL

Also Last Week

The Senate gave final approval to its version of Medicaid Reform Monday evening and on Wednesday the House voted unanimously not to concur, sending the bill to a conference committee to be addressed later, perhaps August or November.  Regulatory Reform also moved through the Senate chamber, with changes that the House did not accept, sending the bill to a conference committee where it has yet to receive action.

The Senate passed its version of the technical corrections bill which primarily removed a number of the non-technical provisions that the House had included in its version.  The House initially voted not to concur but in light of the Senate’s departure, the House reconsidered and passed the Senate version in order to get a number of necessary, technical provisions enacted.  The House also voted not to concur with the Senate local sales tax cap legislation.  A conference report for that legislation emerged late Thursday night, passing the Senate that evening.  The House originally had the conference report calendared for a vote, but referred the bill to the Rules committee Friday.

The conference report for Business Court Modernization S853 passed both chambers and was sent to the Governor.  The bill would streamline the court that handles complex business litigation and would expedite the timetable for cases moving through it.  It restructures corporate laws to model those of Delaware, facilitate the process for permitting holding company reorganizations and making them more flexible by ridding of the requirements of a shareholder vote.  It also maintains that either cases where more than $5 million or the existence of a company is at stake, that those cases shall be heard by the business court. 

Other legislation that now awaits action from the Governor includes H 366, the NC Farm Act of 2014 which shields farms from disclosing unfounded complaints against them and S648, the NC Commerce Protection Act of 2014 which contains a provision to curtail patent trolling as well as asbestos protections.  The Governor also issued Executive Order 62 Friday to address coal ash management, since the coal ash legislation remains in limbo.  He stressed that he does not intend for this to substitute for the necessary comprehensive legislation.

North Carolina Attorney General Roy Cooper (D-Nash) who is considering a run for Governor in 2016, said Monday after a ruling from the 4th U.S. Circuit Court of Appeals that North Carolina would no longer defend the gay marriage ban.  Lawmakers passed legislation last year allowing the Speaker and President Pro-Tem to circumvent the AG and hire outside counsel to represent the state, but said there seems to be no intention to intervene at this point.

Two political figures resigned this week.  Sen. Thom Goolsby (R-New Hanover) who had already announced he would not seek reelection resigned his seat effective immediately.  Also, State Budget Director, Art Pope stepped down after overseeing two budgets under Governor McCrory.  He stated when he first accepted the job that he would only serve for one year, but the Governor convinced him to stay on through this year’s budget.  In a press conference Wednesday, the Governor announced that Pope will continue to serve until the first week of September and Lee Roberts of Raleigh will succeed him.

GOP leaders: No plan to intervene on marriage ban – WRAL

Goolsby resigns from state Senate; GOP moving to fill seat – Star News

N.C. Budget Director Art Pope resigns – Triangle Business Journal

What’s In The Budget?

The Appropriations Act of 2014, S744, includes:

Education

  • Average 7% pay increase for teachers with a $500 raise for other school personnel
  • Replaces 37 step pay scale with new 6 step pay scale for teachers
  • Does not fire any teaching assistants but does take away some flexibility from school districts that have been using those funds to pay for full time teachers
  • Continues masters pay for teachers who have started at least one masters course by August of 2013
  • Reduces total funding to the Department of Public Instruction by 10%

Transportation

  • Reduces total transportation budget by 1%
  • Eliminates state funding for drivers education courses in public schools
  • Maintains current ferry tolls on three routes

General Government

  • Gives rank and file state employees $1000 raise plus benefits
  • Funds three news positions at the State Board of Elections to investigate voter fraud and election law violations

Health & Human Services

  • $135 million reduction in Medicaid spending
  • Retains Medicaid eligibility for the aged, blind and disabled for those currently enrolled
  • $45 million assessment on hospitals
  • Establishes state-wide base rates

Justice & Public Safety

  • Transfers the State Bureau of Investigation from the Department of Justice under the Attorney General to the Department of Public Safety under the Governor
  • Reduces funding to Administrative Office of the Courts by $2.9 million

Special Provisions

  • Establishes 14 member lottery oversight board made up of House and Senate members to oversee the NC Education Lottery
  • Establishes three judge panel, appointed by the Chief Justice of the NC Supreme Court to hear challenges to the constitutionality of state law
  • Requires two epinephrine pens in every school
  • Studies UNC tuition changes
  • Replaces current film tax credit a grant program capped at $10 million

Budget release reveals cuts to cover teacher pay; first vote Thursday – N&O

Budget deal trims spending on social programs, boosts teacher pay – WRAL

Highlights of the NC budget – N&O

Historic preservation tax credits not in budget compromise – Port City Daily

NCAE 'misrepresenting' teacher raises in budget, McCrory says – WRAL

Teen tanning ban dropped from budget – N&O

Gov. McCrory says he will sign budget – WNCN

House passes budget, leaves session running – WRAL

Technical & Other Corrections

Largely making technical changes and corrections to various statutes among other provisions, H1133 would:

  • Authorize local confinement facilities to give or sell electronic cigarettes to inmates in smoking cessation programs
  • Delay implementation of electronic vehicle titling by one year until July 1, 2015
  • Delay drug testing for welfare recipients until July 1, 2015
  • Exclude unpublished research of State institutions of higher education from public records laws
  • Provide the same immunity to real property held by spouses in a trust that would be immune if it remained a tenancy by the entireties
  • Amend Tobacco Grower’s Assessment to make clear the assessment is applied to tobacco produced in North Carolina, rather than marketed in North Carolina
  • Require financial institutions to respond to certain subpoenas within four business days.
  • Maintain the Child Fatality Task Force

The first 17 sections of the bill are recommendations from the General Statutes Commission and are purely technical.  The bill now awaits action from the Governor.

Revenue Laws

The House gave its final approval to a bill S763, Friday that would make various changes to the state’s revenue laws.  Provisions included in the bill would:

  • Extend historic preservation tax credit that was left out of the budget
  • Extend a reduced version of the expiring film tax credit an additional year
  • Relieve manufacturers who ship vapor products to either a wholesale dealer or retail dealer from paying the imposed tax
  • Repeal renewable energy tax credit for property placed into service on or after January 1, 2016, grandfathering properties in service prior to that date
  • Curb localities ability to levy a license, franchise, or privilege tax

After an unusual floor appearance from Speaker Tillis (R-Mecklenburg) and an impassioned debate an attempt by Rep. Davis (R-New Hanover) to extend the film tax credit one more year passed 77-36.  The measure now awaits concurrence in the Senate, where it was sent to the Rules committee.

Film incentives still alive, amendment passes House vote – WECT

Film, historic district programs to scale back – WRAL

House votes to extend N.C. film incentives, but fate is uncertain in Senate – The Voter Update

Local Sales Tax

The Senate gave its approval Thursday to H1224 which would cap the sales tax that a local government may levy in North Carolina at 2.5%.  Durham and Orange counties which already levy a local sales tax of 2.75% would be grandfathered.  Four other counties, Forsyth, Guilford, Mecklenburg and Wake currently have the authority to raise their local sales tax from 2.5% to 2.75% but under the proposed bill, that authority would be taken away.  A compromise amendment offered by Sen. Hartsell (R-Cabarrus) would have capped the rate at 2.75% statewide, but the amendment was defeated in a tie vote.

Counties below the proposed 2.5% would be allowed to raise their tax in quarter percent increments subject to voter referendum, and have greater flexibility.  Senators did remove a provision that was in the bill last week that would have forced counties to choose between using an increase to fund either education or transportation but not both.

The bill was sent to the House which rejected the plan and appointed a conference committee.  The conference report surfaced late Thursday night and would allow Wake, Guilford, Forsyth and Mecklenburg counties to be grandfathered in to the 2.75% local sales if approved by voters this November.  The conference report passed the Senate, but was referred back to the House Rules committee where its fate remains in limbo.

Rural-urban divide rears its head in sales tax debate – WRAL

Senate approves sales tax cap after efforts to raise limit fail – WRAL

NC Senate approves county sales tax changes – WSOC

Local sales tax cap comes back – WRAL

In the News

Audit: NCTracks waiting on cost-saving federal approval – WRAL

Critics question what North Carolina lawmakers got done this session – ABC 11

Few NC senators meet for perfunctory floor session – WNCN

Agriculture bill likely headed to governor – Sun Journal

Patent trolling, asbestos protection legislation heading to governor – WRAL

Lieutenant governor absent from Senate sessions – WRAL

Legislature’s move will make it easier to track campaign cash in N.C. elections – Jefferson Post

Coal ash legislation faces delay – WRAL

Duke Energy takes coal ash message to public – News & Record

House OKs stream protection rules rewrite – WRAL

Time is running out: Crowdfunding measure heads back to committee – Triangle Business Journal

Bill could lead Brunswick to new economic development grants – Port City Daily

NC House committee spurns Senate bill that would curb urban sales tax authority – N&O

NC lawmaker wins top ALEC award – WRAL

Racial overtones fuel elections board controversy in Duplin – N&O

Roger Bacon owner Baker Mitchell and Paul Norcross resign from Charter School Advisory Board – Star News

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

NC GEAR

North Carolina Government Efficiency and Reform - Its goals are to improve the efficiency, effectiveness, customer service, and sustainability of our state government by obtaining idea submissions from the citizenry on how to better your state government

Topics:  Economic Development, Education Reform, Legislative Agendas, Proposed Legislation, Regulatory Reform, State Budgets, Tax Revenues

Published In: Education Updates, Elections & Politics Updates, Energy & Utilities Updates, Health Updates, Tax Updates

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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