North Carolina Legislative Session Preview

by McGuireWoods Consulting
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The North Carolina General Assembly will convene for its long session on Jan. 9 2019. This will be an organizational day to elect legislative leaders, and the speaker of the House of Representatives and the president pro tempore of the Senate may appoint chairs and members of standing committees, among other household business. The General Assembly will then return Jan. 23 to begin work in earnest and take up new legislation. 

The 2019-20 session will feature a shift in the balance of power between Democrats and Republicans, and more political leverage for Gov. Roy Cooper (D). During the November 2018 election, Democrats made significant gains across the state and broke the Republican veto-proof supermajority in the House and the Senate. Before the elections, Republicans held 75 out of 120 House seats and 34 out of 50 Senate seats. In 2019, Republicans will have 65 seats; the Democrats will have 55. In the Senate, Republicans will hold a 29-21 edge over the Democrats. Without a veto-proof supermajority, for the first time since 2013, Republicans will have to work more with Democrats to avoid or sustain gubernatorial vetoes.

Looking ahead to 2019, the legislature will consider a number of major issues, which could include a battle over the state budget, adjustments to the education system, Medicaid expansion, redistricting, additional hurricane relief, Alcoholic Beverage Control reform and infrastructure needs. 

Education

Adjustments to the North Carolina School Performance Grade model, teacher pay raises and changes to the controversial Innovative School District program could be on the table during the upcoming session. 

Adjustments to the School Performance Grade model: Starting in 2013, all North Carolina public schools, including public charter schools, received A through F letter grades. Changes in federal requirements and other issues, including controversies around testing, have challenged legislators and the State Board of Education to go back and look at how schools are graded and otherwise evaluated.

Teacher pay raises: Since taking power in 2011, Republicans have increased teacher pay, but Democrats have criticized the amounts of the raises and the state’s standing in national rankings. Expect Gov. Cooper and legislative Democrats to make higher teacher pay a top priority next year.

Innovative School Districts: In accordance with a 2017 state law establishing another option to address the state’s lowest-performing schools, the State Board of Education, under that law’s requirements, picked one school to be part of an “Innovative School District.” The law setting up these districts requires that the state board establish more of them, starting with an additional school for the next school year. Continuing controversy surrounds how these schools will operate and where they will be located.

Healthcare

North Carolina’s healthcare landscape continues to change as the state’s Medicaid program transitions to managed care, hospital systems and physician practices continue to consolidate, and the affordability and accessibility of healthcare services to all citizens continue to be major issues (as they are across the nation). Given the Republican legislative leadership’s past opposition to expansion, prospects for it are still cloudy. With the passage of Medicaid referenda in several states this year, however, including in red Utah and Idaho, the chances could be better for some action in North Carolina.

Medicaid expansion: Medicaid expansion has been a high priority for Gov. Cooper since he took office in 2017. With more Democrats elected to the General Assembly, he likely will make this one of his top issues for 2019. 

Transformation of Medicaid to managed care: In February, the North Carolina Department of Health and Human Services will award four statewide contracts and up to 12 provider-led regional contracts, worth a total of $6 billion per year. The state received federal approval to make this transition after the legislature passed enabling legislation a couple of years ago. Revisions to that legislation were adopted in the 2018 short session. Expect more changes as the process advances.

Association health plans: President Trump, through an executive order, allowed states to apply for waivers from the Affordable Care Act so associations of businesses could group their membership and offer something similar to an employer-sponsored health plan. The North Carolina Restaurant and Lodging Association stepped out first to announce the creation of an association health plan, but the North Carolina Department of Insurance put the brakes on that proposed action, noting that state statutes and/or rules may need to change for these types of plans to be offered in the state.

Environment/Regulatory Reform

The state will examine various reforms in environmental and alcohol regulation. Research on contaminants in water sources across the state, the governor’s ambitious plan to cut the carbon footprint and debate surrounding alcohol privatization will be topics in 2019. 

Emerging contaminants: Bills filed during the 2018 session seek to enhance requirements for discharges of pollutants to the state’s air and water. Researchers around the state have discovered trace amounts of contaminants in water sources. 

Carbon footprint: Gov. Cooper issued an executive order to reduce the state’s carbon footprint by 20 percent. This order will inspire debate around global warming, and the use of renewable energy standards and tax credits or other incentives to expand renewable energy sources. 

Alcohol privatization: After an audit revealed that the state-run Alcoholic Beverage Control Commission overpaid a contractor $11.3 million during a 13-year period, some legislators suggested reform. The question of whether to privatize the system has long been debated in the state.

Transportation

North Carolina is looking to progress its methods of transportation to accommodate the growing population. Legislators will study the Department of Motor Vehicles through committee, funding for DOT projects, and legalizing e-scooters/bike-sharing programs in cities throughout the state. 

DMV: The REAL ID requirement by the federal government and long wait times have put pressure on the DMV, from the public and the legislature. The agency struggled to process the IDs in a timely manner due to a shortage of staff and technical problems.

DOT projects: The North Carolina Department of Transportation is looking at different ways to fund projects for the future of travel. The agency has explored tolls and public-private partnerships, and taken public input for funding of future projects. Tolls will be controversial, as incumbents in the past have lost due to their work on toll projects. 

E-scooters/bike-sharing: Transportation is changing, and cities across North Carolina have been trying to figure out how to regulate the flood of e-scooters and bike-sharing programs. Many cities outright banned this model of transportation, citing safety issues, while others kept the programs but imposed fees of up to $300 per scooter/bike. 

Taxes/Economic Development

North Carolina was ranked the best place to do business in the country, and lawmakers will try to uphold that ranking. Various economic incentive packages have been touted, and tax reform will take place in 2019. Rural lawmakers will push for more projects in their districts to level the playing field.

Rural economic development: The priorities of rural-versus-urban economic development policies have occupied the General Assembly over the past couple of years. Many lawmakers argued that all projects and funding have targeted urban areas of Wake County (Raleigh) and Mecklenburg County (Charlotte), leaving the state’s rural areas behind. 

Other 

Redistricting: At least eight lawsuits have challenged district maps in North Carolina since 2011. The lawsuits focused on partisan and racial bias by GOP mapmakers. The most recent lawsuit calls for maps drawn in 2017 to be struck down for violating the North Carolina Constitution. 

Cannabis: A new Cannabis Caucus formed in the General Assembly to help progress talks of legalization in the state. The potential system could be modeled after the state’s Alcoholic Beverage Control system, in which some counties are dry and some are wet, driven by local boards. 

Hurricane relief: Lawmakers will continue to receive updates, studies and recommendations on how to continue to help areas impacted by Hurricane Florence.

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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