NC Legislative Update - June 2016

by Nexsen Pruet, PLLC

This Week

While the Senate was predominantly focused on the budget this week, the House moved forward with a number of high-profile issues. By a vote of 60-49, the House approved House Bill 1080, sponsored by Rep. Bryan (R-Mecklenburg) entitled Achievement School District (ASD). The bill is a 5-year, pilot to allow up to 5 low-performing public schools to be assumed by Charter School Administrators under a statewide ASD in an attempt to improve the outcomes of the school. The proposal would give these schools the management flexibility of a charter school, allowing the operator to make decisions on school finance, human capital, and curriculum and instruction. Among other provisions, it also would allow a local Board of Education request approval from the State Board of Education to fire a school principal and hire a turnaround principal who has a proven record of success. 
Achievement School District Measure Passes House, Heads To Senate – Carolina Journal 
Proposed state takeover of 5 low-performing schools passes NC House – N&O

House Bill 954, sponsored by Rep. Jeter (R-Mecklenburg), passed the House Thursday 81-27 with a bipartisan mix of support and opposition. The bill cancels the controversial 50-year contract for the tolling of I-77 near Charlotte, with the Spanish company Cintra. It also directs that State funds in the reserve account be used to pay any damages or other monetary penalties resulting from the termination of the contract. It also removes the future authority of the Department of Transportation or Turnpike Authority to construct and operate a toll managed lane public-private partnership project on I-77 in Mecklenburg or Iredell Counties. The bill now awaits action in the Senate. 
N.C. House passes bill to cancel I-77 toll contract – Charlotte Observer

On Wednesday, Governor McCrory (R) signed the State’s Medicaid waiver request to the federal government. The waiver was presented to legislators by Department of Health & Human Services (DHHS) Secretary, Rick Brajer earlier in the day. Last year, the legislature passed a version of Medicaid reform, which moves Medicaid away from a fee-for-service model, to capitated, full-risk contracts, one year after CMS approval. The legislation allows both Managed Care Organizations (MCO’s) and Provider Led Entities (PLE’s) to bid on managing North Carolina’s Medicaid population. Sec. Brajer suspects it will take 18 months for CMS to review and take action on the waiver, and if approved, an additional 18 months to implement. 
NC sends Medicaid reform plan to feds – WRAL 
McCrory seeking waiver from feds to create Medicaid plan for NC – WNCN

Thursday evening, the panel of federal judges who overturned North Carolina’s original Congressional districts upheld the redrawn, more compact, maps passed by the General Assembly in March. That means next Tuesday’s June 7th special primary will proceed with certainty for the candidates who have filed. The ruling could also have implications regarding the fate of the State’s current legislative districts should those districts, currently under litigation, also have to be redrawn. 
Judges reject challenges to new NC congressional map – WRAL 
Federal judges uphold NC congressional maps – N&O

Legislation in the News: 
NC House debates state retirement benefits for Peace Corps volunteers – N&O 
Senate bill takes high school math back to 'traditional' course – WRAL 
NC House backs new safety rules for bikes while letting cars pass them – N&O


The Senate unveiled their budget proposal Tuesday afternoon. Like the House budget, the Senate version of House Bill 1030 spends $22.2 Billion, a 2.6% increase. That is one of the few similarities between the two budgets. While Democrats praised the proposed teacher pay increase, they also bemoaned the lack of across the board pay raises for all state employees and the lack of cost of living adjustments for retirees. Another point of contention was in regard to a proposal to lower the tuition to $500 per semester at UNC Pembroke, Elizabeth City State University, Winston-Salem State University, Fayetteville State University, and Western Carolina University. Questions were raised as to whether the State would maintain its commitment to subsidize the universities during an economic downturn. The result was the removal of three historically black colleges and universities (HBCU’s) from the proposal.

Among other provisions, the Senate budget:

  • Provides additional $583 Million to the Savings Reserve Account, or “rainy day fund”, to bring the total to $1.7 Billion, or 8% of state’s annual spending
  • Increases the average teacher pay to nearly $55,000 over the next two years
  • Fully funds enrollment growth in public schools
  • Increases funding for school voucher program
  • Reduces tuition to $500 per semester at Western Carolina University and UNC Pembroke
  • Establishes tuition reimbursement pilot program for up to 25 teacher assistants per County in, Anson, Franklin, Moore, Richmond, and Scotland Counties who pursue a full teaching degree
  • Sets aside $95 Million for permanent merit-based pay raises for state employees and another $85 million for one-time performance-based bonuses
  • Expedites the phase out of the Certificate of Public Advantage (COPA), a restriction on Mission Hospital in Asheville
  • Uses $2 Million from the sale of the Dorothea Dix campus to establish child facility-based crisis centers
  • Uses $12 million from the sale of the Dorothea Dix campus to expand inpatient behavioral health beds targeting rural areas.
  • Funds additional 200 slots for Alzheimer’s patients and their families through the Community Alternative Program for Disabled Adults
  • Provides $8 Million for residency slots at Cape Fear Valley Hospital to accommodate Campbell University’s recently opened medical school as well as other medical students
  • Provides $3 Million to create a UNC Asheville campus for the UNC School of Medicine
  • Provides $500,000 for Zika virus prevention
  • Directs DEQ to adopt new water quality rules for Falls Lake and Jordan Lake
  • Repeals the $500,000 cap on light rail funding
  • Does not eliminate ferry tolls, but reinstates ability to purchase $150 annual pass to go to the front of the line to board the ferry

Finance Package:

  • Increases the standard deduction on personal income, or the “zero tax bracket” for married filing jointly, from $15,500 to $17,500, over 2 years in $1,000 increments. Provides that banks and broadcasters use reasonable approximation to calculate the sales factor, based on the percentage of income attributed to consumption of products and services in the North Carolina marketplace, not based on production costs in North Carolina. According to the broadcasting industry, this change could impose up to $30 Million in tax on broadcasting and streaming services.
  • Modifies the sales tax expansion from last year in an effort to treat similar transactions the same. Current law does not require the collection of sales tax unless the vendor is also a retailer of tangible personal property. This provision generally requires sales tax on those services that were added last year, regardless of whether the vendor also sold tangible personal property. Some services were specifically exempt, including: landscaping services; cleaning and janitorial services; service on roads, parking lots, and sidewalks; removal of waste, trash and grease from real property; home inspections, and towing services.
  • Provides a grace period for retailers who provide repair, maintenance, and installation services.
  • Expands the 1%/$80 excise tax to include parts and accessories of specialized equipment used to unload and process bulk cargo at a ports facility.
  • Provides an effective cap on the amount of sales and use tax payable on a RMI service provided for a boat or aircraft.
  • Repeals the $17.6 million State contribution that is allocated to all 100 counties, which was established as a fallback for the 2% local option sales tax revenue, should revenues have come in lower than projected.

Teacher raises, tax cuts among 'highlights' of Senate budget plan – WRAL
Senate budget makes big environmental changes – WRAL
Democrats blast Senate budget’s employee pay, school vouchers before 33-15 vote – N&O
Senate budget includes tax breaks, clarifications – WRAL

Coal Ash

After sending the bill to a Conference Committee last week, Senate Bill 71 has been passed and now awaits action from the Governor. The bill, sponsored by Rep. McGrady (R-Henderson), is an attempt to revive the now defunct Coal Ash Commission. The McCrory Administration opposes the bill, citing the recent NC Supreme Court decision in McCrory v. Berger regarding separation of powers, and challenges the legislation's constitutionality. Governor McCrory has said that he will veto the proposal. However, the bill passed both chambers with a veto-proof majority, 84-25 in the House and 46-1 in the Senate. Should it become law, the legislation would:

• Require Duke Energy to provide permanent alternative water supplies for residents in areas surrounding coal ash ponds
• Extend the period for public comment and review of proposed risk classifications for coal ash ponds
• Modify appointments to the Coal Ash Management Commission, the Mining Commission, and the Oil and Gas Commission, in accord with the legislature’s view of the holding of McCrory v. Berger, giving the Governor the majority of the appointments

Coal ash bill gets the OK from state legislature, moves to governor – CBJ
NC lawmakers OK reviving Coal Ash Management Commission; McCrory threatens veto – WNCN

In Other News

Prior to Tuesday’s Congressional primary, some have questioned Congresswoman Alma Adams’ (D-12) claims that she moved to Charlotte. After the NCGA was forced to redraw the State’s Congressional districts, the 12th District, which originally stretched from Greensboro to Charlotte, is now wholly contained within Mecklenburg County. In an effort to retain her seat in a contested primary, Rep. Adams said that she had moved to Charlotte, but an investigation from WBTV suggests otherwise.  There are 7 people seeking the Democratic nomination in the 12th District, which strongly favors a Democrat in November. The person with the highest vote total Tuesday will win the nomination.
Questions raised over Alma Adams' claim she moved to Charlotte – WBTV

In the News

Blue Cross incurs $280M loss on ACA customers, files for 19% premium hike – TBJ

Cooper’s filing in HB2 lawsuit turns political – N&O

McCrory, Cooper want sales tax changes for small business – WRAL

Lively Battle For GOP Nomination In 2nd Congressional District – Carolina Journal

Why Sue Myrick dumped Robert Pittenger to back his opponent – Charlotte Observer

More than 27,000 N.C. moped owners required to insure vehicles by July – Virginian-Pilot

Court delays McCrory officials' testimony in records suit – WRAL

Wingate, Carolinas HealthCare collaborate on physical-therapy residency program – CBJ

State will again reverse water advisories for some well users – WRAL

Public, private sector officials push for veteran hires in North Carolina – TBJ

Former N.C. Rep. Tim Moffitt picked to take vacant District 3 seat – Citizen-Times

In Defense of NC GAP – Pope Center

Other Useful Links

Office of the Governor

North Carolina General Assembly


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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