Weekly Update from the NC State House - May 2014

by Nexsen Pruet, PLLC

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.

The Senate rolled out its $21 billion budget proposal S744 the Appropriations Act of 2014...

The Appropriations Act of 2014

On Wednesday night, the Senate rolled out its $21 billion budget proposal S744 the Appropriations Act of 2014.  The bill then got its first hearing at 8:30AM on Thursday in the Senate Appropriations committee, bypassing the standard subcommittee process.   It was debated, amended and throughout the day the bill moved through the Finance, and the Pensions and Retirement committees.

Finished with the committee process, the bill was placed on the calendar for second reading for Friday afternoon at 4:00.  Under the state constitution, the budget cannot be heard for second and third readings on the same day.  Often this leads to a third reading vote which occurs after 12:00AM.  Although there is no official notification, we anticipate that third reading will be in the early morning hours of Saturday.

The Governor was openly critical Thursday of the Senate proposal.  House Appropriations chairman, Rep. Dollar indicated that the House will go through the subcommittee process, beginning next week with a floor vote the following week.  The House has also been working on its own budget proposal over the last several weeks which will likely differ greatly from the Senate proposal.

The budget for the short session traditionally only modifies the second year of the state’s two year budget.  However, this budget also contains a number of major issues.  Listed below are some highlight provisions from the Senate proposal which is a 2% increase in overall spending from the previous fiscal year:


  • Provides funds for the new 21-step Professional Status Teacher Salary Schedule with an average of 11% pay increase for teachers who agree to give up their tenure.  This would bring the average teacher salary in NC to $51000, taking the state from 47th to 27th in the national average.
  • Provides additional funding necessary to restore education-based salary supplements for master’s, advanced or doctoral degrees for certain personnel
  • Funds 1000 additional pre-k slots
  • Eliminates funding for teaching assistants in the 2nd and 3rd grades
  • Does not cut UNC system
  • Directs UNC system to develop a plan to dissolve campuses with a more than 20% decline in enrollment, namely Elizabeth City State University
  • Makes cuts to the community college system but further funds programs within the system for which there is a market demand and a skills gap such as healthcare

Health and Human Services

  • Fills the gap in the Medicaid budget shortfall from the previous fiscal year
  • Takes an additional $15 million a year from hospitals as an assessment
  • Creates a statewide base-rate for all hospitals regardless of the level of care provided
  • Reduces eligibility for a number of current recipients
  • Sets aside funding to reorganize and house the Division of Medical Assistance as an independent entity, making it separate from DHHS
  • Reduces Medicaid reimbursement rates to providers by 2%
  • Fully funds the state’s Health Information Exchange

Natural and Economic Resources

  • Provides funding for coal ash management and cleanup
  • Provides funding for drilling, analysis and testing of shale gas wells and funds to market and promote the state’s shale gas resources
  • Increases funding for farmland preservation
  • Provides funding in the Department of Commerce for the Public/Private Partnership
  • Provides nonrecurring funding to the College of Agriculture and Life Sciences at NC State University to support the development of the Department's food processing initiative.

Justice and Public Safety

  • Transfers the State Bureau of Investigation, including the State Crime Lab, from the Department of Justice under the Attorney General to the Department of Public Safety which resides under the Governor.  The director would be appointed by the Governor but serve an eight year term in an effort to depoliticize the move.
  • Requires any lawsuit that alleges a law is unconstitutional on its face be heard by a three judge panel in Wake County


  • Allows for online driver’s license renewals
  • Reduces operating and grant funding for the Divisions of Aviation, Rail, Public Transportation, Ferry, and Bicycle and Pedestrian Transportation and transfers it to road building and maintenance.
  • Establishes funding for the Pavement Preservation Program

New/Increased Fees

  • Increases commercial fishing licenses
  • Increases ABC permit fees bars and restaurants
  • New fee charged for forestry management plans from the Forestry Service
  • New fees for companies handling hazardous waste materials
  • Increases highway use fee

Highlights of the NC Senate budget – Charlotte Observer

NC Senate offers big teacher raise for tenure loss – Citizen-Times

NC Senate unveils more budget provisions – Washington Times

NC Senate Republican Defend Budget Choices – N&O

NC Senate offers big teacher raise for tenure loss – WRAL

5 items getting attention in the North Carolina Senate's budget adjustment bill – The Republic

Senate budget raises fees on alcohol, hospitals, fishing licenses – WRAL

Tax Law Changes

Right after Memorial Day, the Senate began their work on the (H1050) Omnibus Tax Law Changes late in the evening on Tuesday night.  After a debate in Finance that heard concerns from both sides of the aisle over certain provisions, the bill passed with only a few dissenting votes. 

The bill received favorable floor votes on Wednesday and Thursday.  The Senate changed a few items from the House bill, namely removing the 50% sales tax exemption on modular homes and completely eliminating the privilege license tax for localities beginning in 2015.  The House version had allowed localities continue imposing the privilege license tax, but with a $100 cap.  The Senate changes were accepted by the House and immediately after the Senate passed third reading, the House added it to the calendar and voted to concur 79-37.  The provision regarding sales tax on short-term home rentals was also included and was the main argument for why the bill moved as quickly as it did.  The Governor signed the bill into law Thursday evening. 

The bill which is now law contains provisions regarding:

  • Corporate tax modifications
  • Eliminates privilege tax for cities and towns
  • Agricultural exemptions
  • University pre-paid meal plans
  • Entertainment admission taxes
  • Service contracts
  • New tax on electronic cigarettes
  • Sales tax on modular homes
  • Sales tax on short-term home rentals


The bill (S786) entitled the “Energy Modernization Act” meandered its way through the House this week, beginning on Tuesday moving through the Public Utilities committee and then through the Finance committee on Wednesday.  The House changed a piece in committee that eliminated a hard start date of July 1, 2015 and replaced it with a more fluid start date of 60 days after the state has finalized its drilling rules. 

Following its passage in Finance, the bill was brought to the House floor Wednesday afternoon, overriding the objection of Rep. Harrison.  In a divided vote, the bill passed 63-52 with all but one Democrat voting “no” along with 12 Republicans.

On Thursday the bill was calendared for third reading in the House where it was met with 18 potential amendments.  After lengthy debate the bill passed third reading in the House 64-50 and was sent to the Senate for concurrence that evening which they did 33-12.  The bill now awaits action from the Governor. 

To recap, provisions of the bill include:

  • Extends 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

Regulatory Reform

The Senate finished its work on the Regulatory Reform bill S734 on Thursday evening, passing it 35-10.  Rep. Moffitt, chairman of the House Regulatory Reform committee indicated that the House has a few items they want to change when they take up the bill next week.  The Senate version of the bill addresses a number of topics including:

  • Repeals a requirement that small businesses have an attorney present in administrative appeals
  • Eliminates a number of obsolete committees/commissions
  • Allows colleges with brewing courses to sell a limited supply of the malt beverages produced
  • Clarifies the Good Samaritan Law to protect the acting individual from liability
  • Lowers regulatory fees for telecommunications companies
  • Eliminates dated air quality reporting requirements
  • Increases fee for illegally parking in handicapped space from $250 max to $500 max
  • Requires landscaping contractors obtain a license
  • Transfers rulemaking authority for various environmental issues from the Commission for Public Health to the Environmental Management Commission

Patent Abuse

H1032 the Patent Abuse Bill which would make bad faith assertions of patent infringement a deceptive trade practice did not see action this week, but has been calendared in the House for next Tuesday.  The bill spurs from a practice known as “patent trolling” in which people or companies misuse patents as a business strategy upon infringers in an attempt to collect licensing fees.  It would authorize treble payments for targets of these practices that prevail in a case involving bad faith assertions of patent infringement.

The Possum Drop

Rep. Roger West, who represents the far western tip of the state, has been defending the annual New Year’s Eve Possum drop in Brasstown, NC in Clay County for the past several years.  The event, which slowly lowers a possum in a clear box to the ground, much like the dropping of the ball, has garnered outcry from animal rights groups.  PETA has tried to use the courts to stop what they call cruel treatment of the animal.  Rep. West brought the local legislation to the floor on Tuesday to exempt the possum in Clay County from state wildlife trapping and captivity laws between the days of Dec. 26th and Jan. 2nd each year.  The bill affectionately referred to as the “Possum Right to Work Act” passed the House overwhelmingly by voice vote.

Up Next Week

  • S729 – Governor’s Coal Ash Action Plan
  • S812 – Replace Common Core to Meet NC’s Needs
    • The Commerce and Job Development committee will meet next Thursday ahead of the U.S. Open for an informal meeting to review the historic and ongoing economic contributions golf has made to the state, along with projections of the enormous financial impact the Open will have in Pinehurst and the region.

Freshly Filed Legislation

All of the relevant deadlines for bill filing have passed.  For more information about types of legislation with no deadline, you can take a look at the bill drafting deadlines provided by the NCGA.  Below are a few bills of interest from the 85 bills filed this week:

  • H1213 – Local Governments in State Health Plan
  • H1220 – Hope 4 Haley and Friends
  • H1237 – Retirement Investment Transparency
  • S863 – Business Court Modernization

Click here for 2013 bills eligible during the 2014 Short Session – NCGA

In the News

General Assembly flexing muscles over cities – WRAL

Shortened period didn't dampen early voting – WRAL

NC lawmaker to file bill legalizing cannabis oil – WNCN

Product liability protection bill returns in NC Senate committee – N&O

Low pay limits who serves in General Assembly – WRAL

Police at NC legislature work to avoid arrests at “Moral Monday” demonstrations – N&O

Mike Huckabee to headline state GOP convention – N&O

Debatapalooza for Senate? – WRAL

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.


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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