Jun 27, 2014

NCGA Week in Review - June 27, 2014


North Carolina’s Governor and House of Representatives and Senate leaders have all proposed their own versions of recommended budget adjustments to the second year of the 2013-2015 fiscal biennium. With significant differences in education and Medicaid funding on the forefront it appears a compromise may take longer than lawmakers initially anticipated.  With the current fiscal year ending on June 30th, approval of a new spending plan must happen before Tuesday July 1. If they fail to reach an agreement on the budget or pass a continuing resolution, the state’s existing two-year budget will stay in effect.


Taking an alternative approach, the Governor and House Speaker Thom Tillis endorsed a new spending measure, 2014 Budget Modifications/Pay Raises/Other Changes, SB 3.  This mini-budget separates top priorities from the broader House Budget, including teacher and state employee raises, new coal ash regulators, and more Medicaid money.  Acknowledging tensions existing between proposed House and Senate Budgets, McCrory and Tillis announced the mini-budget proposal via a press conference outside the Governor’s mansion.  Without an invite to the bill’s debut, many Senate leaders criticized the effort set forth in the without Senate involvement.


McCrory and Tillis said the new mini- budget is designed to resolve education priorities separately from the larger budget, providing some certainty to schools with students set to return in eight weeks.  Reflecting provisions in the House budget proposal, S3 provides an average 5 percent teacher raise, $1,000 salary increase for most state employees, and a 1.44 percent cost-of-living adjustment for state retirees.  The bill also maintains teacher assistant positions in lower grades, provides more money for textbooks, allows teachers to maintain their tenure and restores salary bonuses to educators with master’s degrees.

The source funding for education spending is a key difference between this proposal and the prior House budget proposal.  Lawmakers abandoned an attempt to use increased lottery funds for teacher raises, initially expected to result from doubling the NC Education Lottery’s advertising budget.  Moving away from the very controversial funding source, the House proposal now relies on $116 million in additional lottery money from past surpluses and increased projections of revenue, to pay for teacher raises and career pathways.  The House unanimously passed the mini budget 117-0 on Wednesday, sending it to the Senate by special message.

Medicaid Road Blocks

Perhaps the largest obstacle standing between lawmakers and a new budget is a disagreement about how much money is needed to fund Medicaid.  The House and Senate proposals are $248 million apart, a number that reflects different calculations used to determine this year’s cost overruns and total cost for next year.  Numbers produced by the House equate to those set forth by Governor McCrory’s office.

Defending these projections, State Budget Director Art Pope came under fire when he received an onslaught of questions and criticism from senators at a Senate Appropriations committee meeting on Thursday.  With a $300 million difference in the “worst-case scenario” in Medicaid between the Senate’s budget and the House and Governor’s budgets, Pope warned the Senate of the potential costs of using too conservative of numbers. Concerned that it will be more difficult to fix potentially unnecessary costs of the Senate’s proposal, like firing teacher assistants and knocking off several populations from Medicaid, Pope suggested the safer route is to simply fix the numbers next session if the program is underfunded.

Film Incentives

Acknowledging that film incentives are left out of the mini-budget proposal and highly debated among the larger House and Senate Budget plans, Wilmington Mayor Bill Saffo proposed a compromise.  The mayor called on lawmakers to extend the state’s film tax credit for one year, with a $40 million cap.  Suggesting his plan would give lawmakers additional time to hammer out an agreeable solution during the 2015-16 Session, he also called for a nonpartisan study of the film tax credit during the interim.  “We’re asking for a bit more time to work this out the right way,” the mayor stated.


Given recent uncertainties surrounding budget negotiations, House Republicans are taking additional steps to ensure The State Bureau of Investigation will move out of the Attorney General’s Office.  Both the House and Senate included the shift in their budget proposals. House and Senate budget proposals move the SBI into the Department of Public Safety, while also moving the Bureau of Alcohol and Law Enforcement under the auspice of SBI.  Agreeing to the same moves, the Senate proposed to also move the crime lab to DPS.  

Unsure whether a budget compromise will occur, the House put the move into a separate bill, SB 594, Omnibus Justice Amendments.  The move takes effect on September 1if the bill wins approval.  The Omnibus Justice bill also makes changes to criminal statutes.  It raises penalties for cellphone possession by prison inmates, increases punishment for graffiti and criminalizes any threats or assaults in retaliation for actions by a government official.  Under the legislation, forensic analysts from the State Crime Lab would also be able to testify at trials via video link if the defense agrees.  The bill passed its first two votes on the House floor Thursday and was sent to the Senate for further consideration. 


JMAC Development Fund Modifications, HB 1224, passed the House on Wednesday and headed to the Senate.  The legislation makes changes to the Job Maintenance and Capital Development Fund, also called the JMAC program.  It allows a western North Carolina company, Evergreen Packaging, in Haywood County, to receive $12 million in grants from the fund.  One of the largest industrial employers in western NC, Evergreen will now be eligible to apply for the JMAC grant in order to help them meet the EPA’s air quality standards. The company has already spent $60 million to meet air quality standards, by converting coal-fired burners to natural gas. The JMAC program is designed to encourage retention of high-paying jobs and promote capital investment.


Revamping a controversial and very lengthy regulatory reform bill, the House reduced the regulatory reform bill into two separate bills. Health and Safety Regulatory Reform, SB 493, includes measures such as mandating autism insurance coverage and banning tanning beds for youth under the age of 18. The bill passed its third reading in the House and headed to the Senate for debate on Thursday.  The second regulatory reform bill, Regulatory Reform Act of 2014, SB 734, focuses on business and government regulations, from zoning laws for fraternities and sororities, to building codes, to allowing an ABC permit for NC State University’s Centennial Campus.

It is more than likely that the Senate will not concur with the House’s regulatory reform bills, which will send them to conference committees to be negotiated out.