This Week

On Wednesday, lawmakers passed Senate bill 560, the second Continuing Resolution (CR) of the session which will keep State government functioning until August 31st. The legislature has yet to agree on the State’s budget for the biennium, which began on July 1st and since lawmakers have failed to pass a budget, a CR is necessary to temporarily fund government while the two chambers negotiate a compromise. The short time frame is optimistic, but possible. Sen. Brown (R-Onslow), the Senate Appropriations Chairman, indicated that budget writers were getting closer to an agreement, but were not there yet. Speaker Moore (R-Cleveland) announced on the floor Thursday that most of next week would be reserved to budget work. Now that most of the policy provisions have been removed from the budget, one of the few remaining delays to an agreement appears to be funding for teacher assistants. 

House, Senate agree to another budget extension – WRAL 

NC legislature extends longest budget impasse in 13 years – N&O 

Moore: Budget deal in sight – WRAL 

NC House Speaker Tim Moore says state budget agreement is close – N&O  A proposed amendment to the State’s Constitution, Senate Bill 607 met the two-thirds requirement in the Senate on Wednesday, by a partisan vote of 31-14. Bill sponsor, Sen. Jackson (R-Sampson), amended that bill on Monday evening to change the title from the Taxpayer Bill of Rights (TABOR), to the Taxpayer Protection Act. The proposed Constitutional Amendment, which still must be passed in the House, is designed to limit government spending while pushing the State away from income taxes and emphasizing a consumption tax. The proposal would do three things: 1) limit increases in State spending to reflect increases in inflation and population growth; 2) establish an emergency reserve fund for times of economic hardship that could be made available to lawmakers with a two-thirds vote of each chamber; 3) cap the personal income tax at 5% (currently 5.75%). The Senate also amended the bill to move the ballot initiative from the 2016 primary election, to the 2016 general election in November when turnout is higher. Constitutional Amendments require a two-thirds majority of members present and voting from each chamber to be placed on the ballot. In North Carolina, the Governor does not have the power to veto proposed Constitutional Amendments. 

Senate approves putting permanent tax, spending limits before voters – WRAL 

Constitutional amendments delayed after change – WRAL 

Problems with NC legislation to cap taxes, reduce spending – N&O

After the House passed their bond proposal, House Bill 943, last week, Sen. Apodaca (R-Henderson) immediately sent the bill to the chamber’s “graveyard”, the Ways & Means Committee (Read: Why 'Ways and Means' is funny). The proposed $4.1 Billion plan includes both cash and borrowing and is a modified combination of the Governor’s bond proposal and the Senate’s transportation proposal. The first part of the bill would ask the voters on the 2016 primary ballot for their approval to let the State to borrow $2.85 Billion for infrastructure improvements to State buildings, parks, news school construction, community colleges and the UNC system. The transportation portion of the bill uses existing dollars by ending the transfer of money from the highway trust fund to the general fund, which makes $1.3 Billion available over the next six years for road construction. 

$2.85 billion bond proposal sent to Senate’s ‘graveyard’ committee – N&O 

NC Senate sends bond plan to legislative black hole – Citizen-Times  ​ The House Rules Committee revived Senate Bill 15, which is being touted as a compromise between the two chambers and the Governor to make further changes to the State’s unemployment insurance laws. Governor McCrory (R) vetoed similar legislation last year over a dispute with legislators shortening the terms of his appointees. One notable provision in the bill would suspend the 20% surtax once the Unemployment Trust Fund balance reaches $1 Billion. It would also begin charging benefits to employer’s accounts quarterly rather than annually. Another provision would require claimants of unemployment insurance to show a valid photo identification to receive their benefits. The section that has received the most attention would increase the number of required weekly job contacts from three to five for recipients of unemployment insurance. It would also confirm the Governor’s appointments to the Board of Review which oversees decisions made by the Division of Employment Security and staggers their terms. The bill passed its second reading in the House 82-27 on Thursday and is scheduled for third reading next Tuesday. 

Job contacts for unemployment insurance would increase under bill – N&O  The Governor held a press conference Wednesday calling on lawmakers to reinstate the historic preservation tax credit. The House passed House Bill 152 , sponsored by Rep. Ross (R-Alamance) in March with a strong bipartisan vote of 98-15. The bill has been held in the Ways & Means Committee since it arrived in the Senate. 

McCrory rallies support for historic tax credits – N&O  Legislation in the News: 

Governor McCrory Signs 10 Bills into Law – NC Political News 

NC Senate moves to protect high earners’ pensions – N&O 

Uber regulations clear NC House committee – N&O 

House gives initial nod to employment fraud reform – WRAL 

North Carolina moves on law to launch drones – N&O

NC Competes Act

The Senate passed House Bill 117, the NC Competes Act 34-12 in a bipartisan vote. The proposal makes various tax changes and modifies the requirements for how the State allocates economic incentive funds. The bill now awaits a concurrence vote in the House. Provisions in the bill include:

  • Job Development & Investment Grant (JDIG) modifications that would:
    • Increase the available funds in JDIG to $20 Million per calendar year with no high yield project
    • Provide additional $15 Million in flexibility to attract high yield projects ($750+ Million in investment/2,000 jobs) bringing maximum JDIG availability per calendar year to $35 Million
    • Extend program three years to January 1, 2019
    • Require tier three counties to have local government participation in recruitment of the project and to have offered additional incentives to be eligible for JDIG funds
  • Require local match for One NC fund on a tiered requirement: 3 State dollars for 1 local dollar for tier 1, 2 State dollars for 1 local dollar for tier 2, and an even local match for tier 3
  • Adjust County allocation of sales tax revenues from 75% point of sale/25% per capita distribution back to a 50%/50% distribution formula that was in place prior to 2007
  • Phase in single sales factor taxation over a three year period
  • Make various tax changes for data centers and aviation

The bulk of the bill is noncontroversial however the sales tax redistribution has highlighted the rural-urban divide in North Carolina. While populous and tourist-heavy Counties have coalesced to defeat the bill, Senate leaders held a rally Wednesday with local leaders from the State’s rural areas advocating in favor of the legislation. Governor McCrory has previously stated that he will veto any legislation that includes a change in the redistribution of sales taxes.

Rural officials rally, but controversial sales tax bill may die in NC House – Charlotte Observer

N.C. Senate passes JDIG increase but House passage still uncertain – TBJ

Senate sends incentives, tax shift to House – WRAL

Rally at legislature backs sales tax shift – N&O

Medicaid Reform

The Senate passed House Bill 372, legislation to transform Medicaid in North Carolina, in a bipartisan 34-10 vote on Tuesday. The House and Senate agree that Medicaid needs to be reformed to give the State budget predictability, but disagree on the approach. Senate leadership favors commercial insurers to manage the State’s Medicaid population while the House favors a provider led approach. This legislation allows both to compete and awaits a concurrence vote in the House. If passed, the bill would:

  • Allow both Managed Care Organizations (MCO) and PLE’s to operate in managing the States Medicaid population, three statewide contracts which can be either MCO or PLE and twelve regional PLE contracts
  • Create a new cabinet level Department of Medicaid (DOM) to administer Medicaid, removing it from the Department of Health & Human Services (DHHS) by January 1, 2016
  • Give the new DOM the power to submit waivers and State Plan amendments (SPA) to the Center for Medicare & Medicaid Services (CMS)
  • Give DOM full budgetary authority to spend funds appropriated by the NCGA
  • Move the state to capitated, full-risk contracts one year after CMS approval
  • Establish Medicaid reserve account to cover budgetary shortfalls with minimum of 5% of fiscal year appropriations and a maximum of 12%
  • Establish Joint Legislative Oversight Committee on Medicaid to oversee budgetary, financial, administrative and operational aspects of DOM
  • Appropriate $8 Million to administer the State’s Health Information Exchange (HIE)
  • Terminate the State’s contract with Community Care of North Carolina (CCNC)

Senate approves Medicaid changes, rejects expansion – WRAL

In Other News

Another potential challenger to incumbent U.S. Senator Richard Burr (R) emerged on Tuesday in former State Rep. Deborah Ross (D-Wake). Ross served in the NC House for 10 years until resigning in 2013 to become general counsel to the Triangle Transit Authority, where she is currently employed. Although she confirmed that she had been approached about a potential bid and that she is considering it, she did not officially announce her candidacy. Other potential challengers include State Rep. Duane Hall (D-Wake) and former Congressman Heath Shuler (D), although Shuler sounds less likely to run than he did a week ago.