The Very Long, Short Session

The 2013-14 session of the North Carolina General Assembly, which began its “short session” on May 14^th, finally concluded its business on August 20^th.  The 2014 session which was originally predicted to end no later than July 4^th lasted 56 legislative days and was the longest short session in the past 10 years. 

The short session of the North Carolina General Assembly, occurring on even numbered years, is actually not a new session, but rather a continuation of the biennial session prescribed by law from the previous year.  Although the primary purpose of the short session was originally to adjust the budget, past short sessions have hardly been “short”, nor contained to appropriations.

There is speculation that the Governor may call the legislature back for a special session to address some his office’s priority issues that never made it to his desk.  In particular the JDIG (Job Development Investment Grant) program which Department of Commerce Secretary Sharon Decker has indicated is necessary for the recruitment of a few companies that are “in the pipeline”.  The Governor also has expressed his concerns over the need for a funding fix for teaching assistants in the budget as well as his desire to reform the Medicaid system. 

If the Governor does not call the legislature to return to Raleigh for a special session, they stand adjourned until January 14^th 2015 to convene the 2015-16 North Carolina General Assembly.

The Budget

The focal point of the short session is adjustments to the state’s biennial budget.  Some of the highlights of S744, the Appropriations Act of 2014 include:

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
• Additional $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
• Establishes a study for UNC tuition changes
• Replaces current film tax credit a grant program capped at $10 million

Omnibus Tax Law Changes

H1050, Omnibus Tax Law Changes among other provisions:

• Simplifies the calculation and ease the administration of the corporate loss deduction
• Eliminates privilege tax for cities and towns
• Imposes an income threshold to qualify for a sales tax agricultural exemption certificate
• Repeals the sales tax exemption on university pre-paid meal plans
• Changes the taxation of live events from a gross receipts privilege tax to a state and local sales tax
• Expands sales tax base to include the sales price of service contracts
• Imposes new tax on electronic cigarettes
• Sales tax on modular homes
• Subjects short-term home rentals to sales tax and occupancy tax

Technical & Other Corrections

H1133 largely makes technical changes and corrections to various statutes.  The law, among other provisions:

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

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

Commerce Privatization

H1031 NC Economic Development Partnership

• Permits the Department of Commerce to contract with a North Carolina nonprofit corporation for the performances of certain economic development functions currently performed by the Department
• Eliminates the Economic Development Board
• Modifies the duties and membership of the North Carolina Board of Science and Technology
• Establishes 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
• Employees of the new nonprofit are held to the standards of the State Ethics Act to prevent pay-to-play issues which have plagued other states that have attempted similar policies.
• Requires biennial audit by either OSBM, State Auditor or internal department auditors

NC Commerce Protection Act

A tort reform bill, S648 makes 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 authorizes treble payments for targets of these practices that prevail in a case involving bad faith assertions of patent infringement. 

Business Court Modernization

S853 entitled Business Court Modernization streamlines the court that handles complex business litigation and expedites 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. 

Unemployment Insurance

S42 entitled Confidentiality of Unemployment Compensation Information clarifies the confidentiality of unemployment compensation claimant records.  Under the legislation, any unemployment compensation information in the records of the Division of Employment Security is required to be kept confidential.  This includes claim information and any information that reveals the name or any identifying particular about any individual or any past or present employer or employing unit or that could foreseeably be combined with other publicly available information to reveal any such particulars. 

The Division may disclose final decisions and the records of the hearings that led to those decisions only after the expiration of the appeal rights.  The language had previously passed the General Assembly in a broadened Unemployment Insurance bill which the Governor vetoed.  This clean fix now sits on the Governor’s desk and he is expected to sign the legislation.

JMAC

One of the economic development pieces that did pass S3 was the JMAC (Job Maintenance and Capital Development Investment Fund) provision, which allocates $12 million over six years to Evergreen Packaging, a paper mill in Haywood County that employs roughly 1,000 people in Western NC.  The mill is investing $50 million to convert their boilers from coal to natural gas due to an EPA regulation.  The investment includes installing new natural gas supply lines.  The provision was one of many economic development funds requested by the Governor and the Department of Commerce, although he has yet to sign it into law.  There is speculation that the Governor may call a special session for the General Assembly to address the remaining provisions.

Regulatory Reform

S734, which still awaits the Governor’s action, among other provisions:

• Allows small businesses to represent themselves using a non-attorney in administrative appeals
• Allows community colleges with brewing, distillation, and fermentation programs to sell malt beverages produced during the course
• Exempts C&D landfills from the minimum financial responsibility requirements applicable to other solid waste management facilities
• Eliminates outdated air quality reporting requirements
• Allows mineral rights to be severed from the title to real property
• Studies the use of contaminated property
• Clarifies the Hardison Amendment to require that no state environmental regulation shall be more strict than the minimum federal regulations unless approved by the lawmakers

Fracking

S786, among other provisions:

• Extends the 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
• Establishes an Oil and Gas Commission to oversee 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

Coal Ash Clean-Up

One of the last actions each chamber took up before adjourning the session was the initial step towards cleaning up the coal ash spill that occurred in February of this year.  The Governor indicated he would sign the Coal Ash Management Act of 2014, S729 into law but has yet to do so. He expressed potential constitutional concerns over separation of powers with the appointment of commissioners.  The following provisions are included in the law:

• Temporarily bans the responsible entity from seeking rate increases to pay for the clean-up until January 15^th, 2015
• Establishes a nine member Coal Ash Management Commission, administratively located in the Division of Emergency Management under the Department of Public Safety, which will oversee clean-up.
• Prohibits construction of new coal ash impoundments after October 1, 2014
• Requires all coal combustion energy plants to convert to disposal of dry fly ash by December 31, 2018
• Requires groundwater monitoring and assessment of impoundments
• Instructs the Department of Environment & Natural Resources to classify and prioritize impoundments as high, intermediate, or low risk for the purpose of closure and remediation
• Requires closure of all “high risk” impoundments by December 31, 2019
• Requires closure of all impoundments by December 31, 2029
• Studies the use of coal combustion products as structural fill and the disposal of coal combustion residuals to combustion products landfills

NC Farm Act

H366, the NC Farm Act of 2014 disallows DENR from publically disclosing environmental complaints filed against farms until the department has investigated and concluded that the complaint was valid and a violation did occur.  It also directs DENR to develop a system for addressing environmental complaints with receipt, investigation, determination and response.  There are also provisions that limit the authority a local government has on regulating certain fertilizers.

Charlotte Airport

Last year, legislators passed a bill transferring control of the airport from City Council to a new commission.  Charlotte lawyers responded quickly asking a judge for an injunction and the legal battle has dragged on ever since.  At issue, the Federal Aviation Administration said the legislation failed to clarify who owned the airport and whether the commission was an agency of the city of Charlotte or a separate entity. 

HB 133 may potentially end the dispute surrounding who should run Charlotte Douglas International Airport.  It attempts to clarify that the airport commission is an agency of city government, but it removes the city council and city manager from direct oversight of Charlotte Douglas International Airport.  The FAA could issue a ruling on the commission and issue it an airport operating certificate, which would move the group closer to running Charlotte Douglas.  Opponents labeled the bill as a "sneak attack" to steal the city's airport and the city said it will keep fighting the commission.  The bill was passed as a local bill and did not require the Governor’s approval to become law. 

Common Core

S812 enlists a commission to write new education standards for K-12 to replace Common Core in North Carolina and craft North Carolina specific standards for education.  An early proposal prohibited the admission of any of the Common Core elements in the new standards, but a compromise let the commission keep pieces they determine beneficial along with the newly crafted elements.

Charter Schools

S793 entitled Charter School Modifications requires that charter schools follow the Public Records Law when it comes to disclosing salaries of administrators and teachers.  It does not however, require the charter school to designate who is receiving those salaries.  Upon signing the bill, Governor McCrory stated that he has directed the State Board of Education to ensure transparency in the disclosure of administrator pay.

Another section of the bill disallows charter schools from discriminating against students on the basis of ethnicity, national origin, gender, or disability.  This section raised some questions as to whether a charter school may discriminate based on sexual orientation, as it was not specifically outlined.  Proponents of the bill argued those students would receive the same protections.

Moped Registration

H1145 requires that mopeds must be registered with the state.  An earlier version of the bill also included a provision that would require them to be insured as well.  The second provision was removed and turned into a study.

Constitutional Amendment

A constitutional amendment will be on the ballot this November to allow a defendant facing felony charges, excluding capital murder charges, to waive their right to a trial by jury and instead have their case heard and decided by a judge.  The Federal Court System and the other 49 states currently have some version of the waiver.  The vote by the General Assembly to place the measure on the ballot passed overwhelmingly. 

What Was Left Undone?

A number of other high priority issues never completely made their way through the legislative process

• Reforming Medicaid
• Environmental law changes
• Revenue law changes
• Capping the local sales tax
  • Funding job catalyst and business incentive programs
  • Crowd funding
  • Funding fix for teaching assistants
  • Autism insurance coverage
  • Film incentives
  • Renewing the historic preservation tax credit

2014 Session Laws

The summaries above do not constitute a complete list of the legislation addressed during the short session.  Obviously not every action can be included, and no in depth analysis was attempted.  If there are any questions, suggestions, or observations, please contact one of the members of the North Carolina Public Policy and Government Relations Team.  Following is a complete list of 2014 session laws including links.

2^nd Quarter Campaign Finance Analysis

The North Carolina Free Enterprise Foundation released its analysis of campaign finance reports in North Carolina for U.S. Senate, U.S. Congress, NC House and Senate, NC Supreme Court and NC Court of Appeals candidates.

NCFEF Campaign Finance Tracker

In the News

Consensus growing in support of redistricting reform – The Voter Update

With legislative session done, voters now have final say – Jefferson Post

Transfer of SBI will strengthen agency, Perry says – WRAL

A look at what the NC legislature left unfinished this session – N&O

NC cities' league asks McCrory for special session – The Daily Reflector

North Carolina offered $100M for Toyota HQ, twice Texas bid – The Daily Journal

Megasite incentives possibly on agenda – News & Record

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.