Last Week

The House released its 150-page proposed budget adjustments for the 2016-17 half of the 2015-17 biennium on Monday evening and proceeded to work through the week in passing it. The proposal is relatively noncontroversial, with few policy changes compared to previous budgets, allowing it to pass 103-12 with the support of 30 Democrats. The Senate intends to move quickly to pass their budget by early June, with leaders eyeing an early July adjournment. 

There were rumors Thursday of a potential amendment repealing tax breaks for airline fuel, data centers, and motorsports. Some legislators are generally opposed to tax breaks and incentives anyways, but many interpreted the proposal as retribution on large companies that use these breaks, for their public opposition to House bill 2. No such amendment was brought forward during the budget debate, although the threats remain viable. 

On Wednesday, the Senate Finance Committee gave its approval to Senate Bill 818, sponsored by Sen. Rucho (R-Mecklenburg). The bill similarly would increase the standard deduction to $17,500 for married filing jointly, but would expedite the increase over a two-year period, in $1,000 increments, different from the House’s proposed four-year plan. 

Senate wants to expand income tax cut faster than House – WRAL 

Legislation in the News:

Bill Would Reallocate Bond Money For Transportation – Carolina Journal 

Bill would make it easier for retired K-9s, police horses to stay with handlers – WRAL 

Senate panel cautious on kratom ban – WRAL 

House bill could ease sentences for veterans with PTSD – WRAL 

Amendment Would Cap State Income Tax Rate – Carolina Journal 

Budget

The House passed their version of the budget last week. After unveiling the proposal Monday evening, the House moved House Bill 1030 through the Finance and Appropriations Committees on Tuesday, and briefly reviewed it in the Pensions & Retirements Committee Wednesday before second and third readings on Wednesday and Thursday. House and Senate leaders previously agreed on a spending figure of $22.225 Billion, which is a 2.26% spending increase to the budget for the 2015-16 fiscal year. With plans to give teachers raises and bonuses for State employees, as well as increase the standard deduction, the agreed to figure does not leave much room for extensive adjustments to last year’s budget. 

The largest difference between the House and Senate finances at this time is the timeframe for increasing the standard deduction. The Senate’s proposal of a two-year implementation results in a roughly $70 Million increase in spending in compared to the House's plan. The Senate may unveil the budget this week, with possible Subcommittee work, and vote on their proposal the week following Memorial Day. Sen. Apodaca (R-Henderson) said on the Senate floor Thursday of the House budget, “They’re going to send it over here so we can fix it”.

The House proposed budget, among other provisions: 

  • Increases the standard deduction on personal income, or the “zero tax bracket” over 4 years in $500 increments from $15,500 to $17,500 \
  • Provides additional $300 Million to the Savings Reserve Account, or “rainy day fund”, bring the total to $1.4 Billion in reserves for any future economic downturns 
  • Give teachers an average pay raise of 4.1% 
  • Fully funds enrollment growth in public schools 
  • Provides one-time $30 Million for the Governor’s Mental Health Task Force recommendations 
  • Provides $7.7 Million for residency slots at Cape Fear Valley Hospital to accommodate Campbell University’s recently opened medical school as well as other medical students 
  • Adjusts the Medicaid rebase roughly $318 Million 
  • Uses $25 Million from sale of Dorothea Dix campus for one-time funding to construct new mental health beds or convert existing beds to mental health beds 
  • Provides $750,000 for Zika virus prevention 
  • Eliminates tolls for coastal ferries 
  • Repeals the $500,000 cap on light rail funding 
  • Repeals the mill machinery tax and exempts that machinery and equipment from sales tax 
  • Provides an across the board 2% raise for state employees and a one-time $500 bonus 
  • Increases COLA (cost of living adjustment) for retired state employees 

House would give raises to state workers, teachers – N&O 

House proposes small raises for teachers, state workers – WRAL 

Speaker kills budget amendment to repeal House Bill 2, spend $2 million to rehab NC’s image – N&O

House approves budget; American Airlines fuel exemption intact and not debated – Charlotte Business Journal

Economic Development

Senate Bill 826, sponsored by Sen. Gunn (R-Alamance) and its companion bill, House Bill 1090, sponsored by Rep. S. Martin (R-Wilson), are broad economic development bills that include several separate provisions, generally supported by the business community and investors. Some of the provisions have been introduced in previous sessions, but have been unsuccessful. Others are new requests from economic developers and businesses. The proposed legislation: 

  • Creates an exemption for crowdfunding, exempting businesses from registering crowdfunded investments as a security that raise no more than $2 Million from small investors, with each investor contributing no more than $5,000 individually. 
  • Creates a tax credit for an entity that makes a qualified equity investment in businesses in new or developing markets, whose principal business operations are located in rural parts of North Carolina. 
  • Allows up to $100 million of the State’s Escheats Fund assets to be invested and managed by a third-party venture capital firm, selected unanimously by designees from the offices of the Governor, the Treasurer, the Speaker of the House, and the President Pro-Tem of the Senate. 
  • Repeals 1%/$80 tax on mill machinery 
  • Creates a statewide network that develops and leverages existing North Carolina entrepreneurial management talent and recruits world class investors, skilled entrepreneurs, and managers to North Carolina and connects them to university startups.
  • Establishes the University Innovation Commercialization Grant Program in order to increase the number of high-tech start-up companies and enhance job creation resulting from research conducted by North Carolina's universities and research-focused nonprofit corporations. 
  • Extends the research and development tax credit, which expired on January 1, 2016, through January 1, 2020. 
  • Allows the Department of Commerce to create a public-private partnership to administer a program, in conjunction with North Carolina State University, to devise and implement a three-year plan to assist the most distressed rural counties in North Carolina by leveraging private economic development expertise and existing State economic development entities. 

Sen. Brown (R-Onslow), the Senate Appropriations Chairman indicated that it was unlikely that the provisions would be included in the Senate’s propsed budget. 
Broad economic development bill 'on the table' – WRAL

In Other News

Rep. Jackson (D-Wake) has filed a discharge petition to try and force a vote to repeal House Bill 2. The petition needs 61 Representative’s signatures to bring the bill to the floor. There are 43 Democrats in the House, several voted for House Bill 2 when it passed, so a minimum of 18 Republicans would need to sign the petition. 

House Democrats try to force HB2 repeal to a vote – N&O

The Charlotte City Council was scheduled to meet today to consider a proposal to rescind the local nondiscrimination ordinance that initiated the debate over House Bill 2. House Bill 2 nullified much of the ordinance, so the repeal would have been largely symbolic in hopes that the legislature too would scale back parts of House Bill 2. The council pulled the proposal from the agenda earlier this afternoon. 

Charlotte Chamber takes ‘great offense’ to claim it’s an ‘anti-LGBT bully’ – WRAL