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.
This Week
Legislative activity resumed to a normal pace at the North Carolina General Assembly after being interrupted by two weeks of winter weather. The Governor released his budget proposal and the lawmakers were addressed by the Chief Justice Martin. Speaker Moore (R-Cleveland) also announced that the House will have a week-long spring recess the week of April 6th to coincide with school spring vacation calendars. It has yet to be determined if the Senate will follow suit.
The House moved several bills including a bill funding both the Coal Ash Management Commission and the Academic Standards Review Commission as well as the economic incentives bill. The House also addressed Senate Bill 20 this week, which would set a floor on how low the gas tax may drop. Under current law the gas tax is expected to fall from 37.5 cents per gallon to around 30 cents per gallon on July 1, costing the Department of Transportation several hundred million dollars.
The Senate version had a floor in place of 35 cents per gallon and would change the way the tax is calculated, effectively raising it another 5-7 cents per gallon in coming years. Not surprisingly, the House made significant changes to the legislation. The House version sets the floor at 36 cents per gallon through the end of the year and would revert back to the current formula in 2016.
House makes big changes to gas tax bill – WRAL
Outside of some housekeeping matters, the Senate had a relatively uneventful week. Senators unanimously passed Senate Bill 19, Revenue Law Technical Changes. While largely technical as the title suggests, the bill would require utilities to pass the savings from corporate tax breaks on to the customer. It also clarifies that utilities are exempt from local license, franchise or privilege taxes. Senators also approved moving up the crossover deadline by a week to April 30th from May 7th. The reasoning for the move is an attempt to prevent chaos as the House is expected to begin working on the budget the first week in May.
The Hon. Mark Martin, Chief Justice of the NC Supreme Court addressed a joint session of the House and Senate Wednesday for a “State of the Judiciary” address. The purpose of Chief Justice Martin’s address was to highlight the currently inadequate funding of the state’s court systems. While he did not cite a specific monetary figure in his speech, the Administrative Office of the Courts had previously requested an annual $16 Million in additional funding for the court system. The last time legislators were addressed for a State of the Judiciary address was 2001 under Chief Justice I. Beverly Lake, now with Nexsen Pruet as senior counsel.
Governor McCrory's Proposed Budget
The Governor Thursday unveiled his nearly 300 page, $21.5 Billion budget proposal for the 2015-16 fiscal year. The Governor had previously been expected to release the proposal February 23rd, but it was delayed due to a number of factors including the recent weather. Below are some highlights from the proposal:
General
• Requires various agencies to reduce their overall budget by 1-2%
• Transfers the NC Zoo, state aquariums, museums and parks out of the Department of Environment and Natural Resources and into the Department of Cultural Resources
• Adds $33.5 Million to economic incentives programs such as the Job Development Investment Grant (JDIG)
• Provides $10 Million to the film grant program
• Restores the historic preservation tax credit
• Creates two new cabinet level state agencies, a Department of Information Technology and a Department of Veterans Affairs
• Adds $47 Million to the rainy day fund, bringing the total to nearly $700 Million
• Asks voters to approve a $1.4 Billion infrastructure bond to repair state buildings
• Falls about $10 Million short of Chief Justice Martin’s $16 Million request in additional operating funds for the court system
Transportation
• Asks voters to approve a $1.2 Billion in bond for road projects
• Includes the gas tax legislation that would impose a 35 cent per gallon floor
• Funds construction of a new DMV headquarters
Health and Human Services
• Adds $287 Million more to the Medicaid budget to match enrollment growth
• Sets aside $175 Million risk reserve for Medicaid overruns
Education
• Raises starting teacher pay from $33,000 to $35,000 statewide
• Gives $1,000 bonus to the most experienced teachers
• Funds hiring 1,400 new teachers to coincide with projected enrollment growth
• Creates endowment to reward teachers with improved student performance
• Increases funding for textbooks and other instructional materials
• Cuts the Department of Public Instruction budget by 10%
The full budget can be found here. The individual Appropriations committees will begin reviewing the Governor’s budget jointly over the next few weeks before the House takes on the task of “revising” it.
Complete coverage of Gov. Pat McCrory’s budget proposal – N&O
NC’s new budget director a ‘quick study’ – N&O
Commission Funding
The House passed Senate Bill 14, which takes $275,000 in unused funding for vacant positions, to cover staff costs for the Academic Standards Review Commission. It also provides adequate funding for the Coal Ash Commission to carry out its responsibilities. The House however made a few changes to the Senate version.
One provision that was removed was the transfer of $100,000 from the Department of Public Instruction’s legal fund to cover litigation costs incurred by the Rules Review Commission, which is being sued by the state Board of Education. Speaker Pro-Tem Rep. Stam (R-Wake) sponsored the amendment noting that the funds were no longer needed due to some of the charges being dropped and thus, no need to hire outside counsel. Rep. Lambeth (R-Forsyth) also amended the bill to have State Auditor Beth Wood (D) conduct a performance audit of how individual counties determine Medicaid eligibility. He cited the necessity of the provision in dealing with Medicaid Reform moving forward.
The House initially approved an amendment sponsored by House Majority Leader Rep. Hager (R-Rutherford) Monday evening, which dealt with air emission regulations caused by hydraulic fracturing or “fracking”. Tuesday however, Rep. Glazier (D-Cumberland) made a motion to reconsider the amendment, citing lack of explanation and germaneness to the bill. He argued that the provision needed to move in a separate bill and a majority of the body agreed, removing the amendment by a vote of 77-41. The Senate received the bill Thursday and failed to concur with the House changes, sending the bill to a conference committee.
Divided NC House drops fracking provision from funding bill – N&O
Economic Incentives
The House this week passed House Bill 117, the NC Competes Act, filed by Representatives Martin (R-Wilson), Jeter (R-Mecklenburg), Collins (R-Nash) and Steinburg (R-Chowan). The bill addresses a number of economic development and incentive issues that have been raised over the last several weeks and focuses on making NC more attractive to auto manufacturers.
Chiefly among the provisions, the bill would double the amount of money in what is currently called the JDIG (Job Development Investment Grant) fund, the state’s most commonly used business recruitment tool. The same section of the bill renames JDIG to the “Job Growth Reimbursement Opportunities – People Program” in an attempt to clarify that the program is not an upfront handout.
The proposal includes a single sales factor modification as well as an extension of the tax refund for airline carriers on jet fuel to 2020, which is set to expire January 1, 2016. This provision is taking some heat because of the proposed gas tax changes on motorists. The bill received support and opposition from members of both parties, passing 72-42. Fourteen Democrats voted with the Republican majority in favor of the bill and thirteen Republicans broke ranks in voting no. The Senate has indicated that it will be making several changes to the bill.
Local Intervention
The Senate Redistricting Committee Thursday heard public comment on two local bills that would change the makeup of the Greensboro City Council and the Wake County Commission. The first bill, Senate Bill 36 filed by Sen. Wade (R-Guilford) would increase the number of members on the Greensboro City Council from five to seven, while redrawing the districts. Proponents cite lack of geographic diversity, with too many members of the council residing in one part of the city.
SB 36 had previously been scheduled on the agenda, allowing time for opponents to attend and voice their concerns. The other bill, Senate Bill 181 filed by Sen. Barefoot (R-Wake) on Wednesday evening, was added to the committee calendar Thursday morning, offering little time for opponents to organize. SB 181 would increase the number of members on the Wake County Commission from seven to nine, while also drawing Commissioners into individual districts. Currently, all Wake County Commissioners must live in their districts but are elected at-large. Rather than voting in all county Commission races, the bill would change the structure so that voters would only be able to vote in two races, their individual district, and one of the two new regional districts in which they reside.
Proponents similarly cite a lack of geographical diversity on the Commission as reason for the change, with most members residing in Raleigh and few from the outlying suburbs or rural areas of the county. They also point to the high cost of running countywide, having to reach more voters than someone seaking a congressional seat. Opponents feel that such substantial changes should be done with local input rather than imposed by the legislature. Previous legislatures have set precedent in filing local bills to change how county or municipal governments are elected, and it appears this legislature intends to floow that trend. No votes were taken Thursday, both bills however are scheduled for a committee vote on Tuesday of next week.
Lawmakers Consider Greensboro City Council Bill – TWC News
Hearing on Wake redistricting bill takes opponents by surprise – WRAL
In the News
Economic incentives bill to again test NC urban-rural divide – Citizen-Times
NC legislature’s appointment power argued in landmark case – N&O
How North Carolina stacks up in property-tax comparisons – CBJ
N.C. pension fund increases, but returns take a dip from 2013 – TBJ
Lawmakers may repeal process used by property owners to fight development – Fayetteville Observer
NC medical panel says doctors should lead Medicaid reform – Charlotte Observer
Which NC teachers should be paid more? – Citizen-Times
Ready or not, gas drilling permitting could begin in March – WRAL
Audit: State Dental Board Lax in Oversight – Carolina Journal
Please reach out to TJ Bugbee for any further information or to Susan Latta to request the monitoring of any specific legislation.
