The Senate budget dominated the NCGA this week. Senate leadership released their spending proposal late in the evening on Tuesday and held Committees throughout the day on Wednesday before second reading on the floor Thursday evening, and third reading early this morning. Senate Democrats waited to file their floor amendments until this morning’s session which began at 12:05AM, after not filing any during the second reading. Their amendments would have incorporated a number of initiatives from Gov. Cooper’s budget proposal and were consistently tabled. In response to this display, Rules Chairman Sen. Bill Rabon (R-Brunswick) put the Senate in recess until 2:30AM, making them wait another hour-and-a-half before Senators finally passed the budget along party lines, 32-15, just after 3:00AM.
In the midst of this, the NCGA also overrode Gov. Cooper’s veto of House Bill 467, entitled Agriculture and Forestry Nuisance Remedies, sponsored by Rep. Jimmy Dixon (R-Duplin). The House overrode the Governor’s veto 74-40 and the Senate voted 30-17 to override. The law limits the amount of compensatory damages awarded in a private nuisance action against an agricultural or forestry operation to the fair market value or fair rental value of the plaintiff's property. The law, which will likely receive a legal challenge, is opposed by environmental interests and supported by agricultural interests.
The House moved House Bill 280 through both the House Judiciary I and Appropriations Committees. The bill, entitled the Juvenile Justice Reinvestment Act or “Raise the Age”, is sponsored by Rep. Chuck McGrady (R-Henderson) and co-sponsored by more than half of the House. It would allow 16- and 17-year-olds to be charged as juveniles for non-violent crimes rather than as adults and would take effect in 2019. In April, New York passed a two-year phase in to raise the age of juveniles, leaving North Carolina as the only State that has not taken action to do so.
The House Energy & Public Utilities Committee also heard House Bill 310, entitled Wireless Communications Infrastructure Siting, sponsored by Rep. Jason Saine (R-Lincoln), for discussion only. The bill addresses the permitting of “small cell” technology, which is the wireless infrastructure that is being deployed by providers for “5G” wireless communication. The bill establishes permitting rules for the colocation of small cell technologies in the right-of-way within city limits.
Rep. Bill Brawley (R-Mecklenburg) held a press conference earlier this week to discuss House Bill 910, entitled Human Trafficking: Resistance and Rescue. The bill would direct the State Board of Education to establish a pilot program to educate 6th, 8th, and 10th graders about the dangers and signs of human trafficking. It also directs the Department of Public Safety to establish a pilot program to train law enforcement officers to identify signs of human trafficking. In addition to the two pilot programs, the bill directs, and provides funding for, the Department of Health & Human Services to provide shelter beds and mental health services to victims of human trafficking. Provisions from this bill are likely to appear in the House budget proposal.
Next week, the various House Appropriations Subcommittees will “review” the Senate’s spending proposal. Senior House Appropriations Chairman Rep. Nelson Dollar (R-Wake) indicated that he hopes the House will unveil their budget proposal the week of Memorial Day, and pass it no later than June 5th. If the House accomplishes this, that will leave 25 days for the two chambers to compromise in a Conference Committee ahead of June 30th, the end of FY 2016-17, and send a proposal to the Gov. Cooper (D). The big question for this timeline concerns the tax reductions included in the Senate plan, and whether the House will include some form of that proposal in their budget plan. Gov. Cooper is almost certain to veto the Republican led legislature’s spending proposal. Both chambers currently wield veto-proof majorities. House Speaker Tim Moore (R-Cleveland) told his caucus that the plan is to adjourn by the end of June.
The Senate began their budget week with final revenue numbers released last Friday that showed a $580.5 Million surplus, almost $30 Million higher than the previous forecast. The 358-page proposal for the 2017-19 biennium in Senate Bill 257 is a $22.9 Billion spending plan, which is a 2.5% increase over the current budget. Gov. Cooper’s proposed budget would have increased spending by 5.1%.
NC Senate takes final 32-15 vote to pass budget – and now it’s the House’s turn – N&O Senate budget includes tax cuts, more spending on education, infrastructure – WRAL Here’s how the NC Senate budget compares with Gov. Roy Cooper’s proposal – N&O Senate panels OK North Carolina budget; it now goes to floor – AP NC Senate budget benefits Southeastern NC – Star News Senate budget targets jobs of numerous agency managers – WRAL Senate continues methodical approach of previous budget cycles, analysts say – Carolina Journal
In addition to the actual fiscal implications, the Appropriations Act contains a number of policy decisions. Some of the highlights include:
- Provides additional $320 Million for Strategic Transportation Investments, allowing for 100 new highway projects over the next 10 years;
- Provides $240 Million to repair bridges deemed structurally deficient;
- Provides $130 Million to restore existing roads;
- Provides $21 Million to RDU International Airport to replace their longest runway in addition to various amounts of funding for 8 other airports.
- Overall increase of $600 Million in K-12 education spending;
- Cuts overall operating budget for the Department of Public Instruction by 25%;
- Fully funds enrollment growth for K-12, community colleges and the UNC system;
- Increases teacher pay by an average 3.7% this year and a total of 9.5% for the biennium;
- Provides $75 Million in grants to struggling Counties for school construction;
- Provides $18 Million to fund an additional 2,350 Pre-K slots for at-risk children over two years;
- Increasing Cooperative Extension funding by $3.5 Million;
- Establishes a revamped, STEM based, forgivable loan teaching fellows program for prospective K-12 educators, forgiving 1 year of scholarship for every 1 year of teaching in a low performing school and 1 year of the scholarship for every 2 years teaching in any other school.
Health & Human Services
- Eliminates Certificate of Need (CON) beginning January 1, 2025;
- Provides $66 Million for the Medicaid rebase;
- Increases Medicaid transformation reserve by $150 Million;
- Reduces funding for LME/MCO’s by $69 Million and takes an additional $101 Million from their savings reserves;
- Eliminates funding for the Wright School;
- Establishes a pilot program in Wilmington, NC for placing individuals who have had a mental health episode in a more appropriate setting than the emergency room of a hospital.
- Includes healthcare services billing transparency language
Senate Budget 2017 – First Look – NC Health News
Agriculture, Environment, & Natural & Economic Resources
- 6% reduction to overall budget for the Department of Environmental Quality (DEQ);
- Disallows the approval of new wind farms for 3 years until the completion of a study regarding their potential interference with military institutions
- Eliminates $1 Million in energy research grants to NCSU, NC A&T, and ASU;
- Provides $17 Million to the Clean Water Management Trust fund, an increase of $13.5 Million;
- Directs DEQ to study the solid waste disposal tax.
Justice & Public Safety
- Creates new Cabinet-level Department of Adult Correction & Juvenile Justice, with a Secretary appointed by the Governor, made-up of the State’s prison system and juvenile-detention facilities;
- Incorporates the “Raise the Age” language which allows 16- and 17-year-olds to be charged as juveniles for non-violent crimes rather than as adults;
- Provides funding for 37 new assistant district attorneys;
- Eliminates funding for emergency judges.
Tax Changes from Senate Bill 325 – “Billion Dollar Middle Class Tax Cut”
- Reducing the State personal income tax rate from 5.499% to 5.35%;
- Raising the standard deduction to remove approximately 94,000 people from income tax liability in the State, increasing the share of the income tax burden towards wealthier individuals, without increasing their taxes. The amount of income in the zero-tax-bracket would increase: from $17,500 to $20,000 by 2018 for married filing jointly; from $14,000 to $15,000 for head of household; and from $8,750 to $10,000 for single filings or married filing separately;
- Modifies the mortgage interest deduction which is currently capped at $20,000 to: $22,000 for married filing jointly; $16,500 for head of household; and $11,000 for single filings or married filing separately;
- Modifies the child deduction amount to coincide with adjusted growth income and filing status, scaling from $2,500 deduction for each dependent in the lowest income bracket, to zero deduction for the highest income bracket;
- Reduces the State’s corporate income tax rate from 3%, to 2.75% in 2018 and 2.5% in 2019;
- Provides a reduction to the franchise tax for S-Corporations;
- Shifts the method of tax collection on some businesses to market-based sourcing. The move benefits North Carolina based businesses by shifting to taxation on a company’s revenues from sales from the State, rather than taxing investments and employment.
- Provides an additional $363 Million to the State’s “rainy day fund” reserve account, bringing the account’s total to $1.8 Billion;
- Provides $150 Million for recovery from Hurricane Matthew;
- Eliminates retirement healthcare for new State employees hired after July 1, 2018;
- State employee raises of either 1.5% or $750, whichever is greater;
- Additional $15 Million film production grant;
- In preparation for potential Department of Defense base closures, provides $2 Million for stabilization funding.
In Other News
WRAL TechWire released the first of a 3-part guide to navigating the State’s NC PACES crowdfunding legislation that passed last year and went into effect on April 1, 2017. Exclusive: 'Crowdfunding 101' - Getting started with the NC PACES Act Investment Crowdfunding Law – WRAL TechWire
President Trump appointed NC Governor Roy Cooper to a panel to address the ongoing opioid crisis. Trump appoints Gov. Cooper to panel to combat opioid crisis – WRAL
NC House Speaker Tim Moore wrote a guest column for Forbes highlighting the impacts of reducing taxes in the State. How Tax Cuts Put More Money In The Pockets Of Middle Class North Carolinians – Forbes