Senate Passes Budget Bill (HB1030)

The State Senate passed its version of the 2016-17 spending plan this week, setting the stage for a conference committee to work out the differences between the two chambers’ proposed budgets. The bill adjusts the second year of the biennial budget passed in 2015 and meets a spending cap of $22.2B agreed with the House and Governor. Amendments that were adopted during floor debate include (a) removing Historically Black Colleges and Universities from the “NC Promise Tuition Plan” (which would have reduced in-state tuition for five UNC System schools to $500 - the plan now affects two schools: UNC-Pembroke and Western Carolina University), and (b) extending the reporting deadline for the Department of Commerce on the Broughton Hospital study.

Here are some comparisons between the House and Senate budget bills:

Teacher Pay—

  • Senate proposal: Would bring the average salary from $47,783 to $54,224 over two years.
  • House proposal: Would bring the average salary to $50,000 over two years.

State Employee Pay—

  • Senate proposal: Merit raises averaging 1 percent and performance-based bonuses averaging an additional 1 percent.
  • House proposal: 2 percent across-the-board raises.

State Retirees—

  • Senate proposal: No cost-of-living increases.
  • House proposal: 1.6 percent COLA increases.

Income Tax Cuts—

  • Senate proposal: Raises standard deduction to $17,500 for married taxpayers filing jointly, phased in over two years.
  • House proposal: Same standard deduction, phased in over four years.

Rainy-Day Fund—

  • Senate proposal: Adds $583 million.
  • House proposal: Adds $300 million.

Ferries—

  • Senate proposal: Keeps toll structure.
  • House proposal: Eliminates all tolls.

College Tuition—

  • Senate proposal: Lowers to $500 per year at certain schools (UNC-Pembroke and Western Carolina University).
  • House proposal: Keeps existing structure.

Corporate Income Taxes; Market Sourcing —

Another difference between the two versions of the budget is the Senate’s market sourcing proposal, which impacts the amount of taxes paid in North Carolina by taxpayers doing business in more than one state. The Senate sponsors assert that the proposal would help incent multistate companies to locate in North Carolina. They also claim that the proposal will help to equalize tax burdens – specifically calling out TV and movie production companies for unfairly benefitting under the existing income sourcing rules. The House plan does not contain a similar provision.

Nutrient Management —

The Senate plan also includes a provision to terminate the Solar Bee project, which was intended to improve water quality in Jordan Lake without the use of source-reduction techniques, which can be costly. The budget also redirects $500,000 from the Clean Water Management Trust Fund to UNC for a study of nutrient management strategies and redirects another $500,000 from the Trust Fund to the Wildlife Resources Commission to research whether freshwater mussels could be used to clean up impaired bodies of water such as Jordan and Falls Lakes.

Other Notable Items Considered This Week:

Coal Ash (SB71)

This legislation contains a requirement for coal ash impoundment owners to provide a permanent alternative water supply to residents living nearby coal ash impoundments; provides for additional time for risk classification and public comment deadlines; and changes the appointments to three commissions, including the Coal Ash Commission, following a court ruling earlier this year. The issue at play in Berger v. McCrory involved separation of powers (in terms of who makes the majority of the appointments to Executive Branch commissions). The recently adopted legislation would give the Governor additional appointments on the commissions, with the caveat that the appointees must be confirmed by the General Assembly. The Governor is expected to veto the bill.

Medicaid Reforms

NC DHHS this week sent its request for a Medicaid waiver to CMS in Washington on Wednesday after discussing it at the General Assembly. The proposal moves the State toward a capitated managed care system and shifts from the current fee for service system over a period of years.