Aug 7, 2015

North Carolina General Assembly Week in Review

House passes infrastructure bond proposal

On Monday the House introduced House Bill 943, Connect NC Bond Act of 2015, outlining a bond referendum to cover N.C. infrastructure spending. By Thursday, the proposal passed the House floor.

The proposal asks for $2.8 billion in bonds: $2.46 billion for infrastructure and $400 million for transportation. The bond also funds $900 million toward the UNC system campuses, including a new western campus of the N.C. School of Science and Math. Additionally, the bond puts $500 million in a “public schools capital assistance program.” The House’s bond proposal takes into account appropriations for N.C. transportation needs in the House’s budget proposal.

While being presented during the House Finance Committee meeting on Tuesday, Rep. Dan Bishop (R-Mecklenburg), asked bill sponsor Rep. Dean Arp (R-Union) whether he believe transportation was getting the “short end of the stick” under this proposal. Rep. Arp responded the proposal takes into account cash appropriated to transportation needs in the budget bill. He believes that cash infusion will meet N.C. transportation needs without taking on any further debt. The House and Senate still have not agreed on a budget.

The bill was heard on the House floor Thursday. Rep. Jimmy Dixon (R-Duplin) proposed an amendment to change the date of the referendum from this November to the date of the Presidential Primary in 2016. The amendment passed 89-11. During Tuesday’s committee meeting, Rep. John Blust (R-Guilford) expressed concern about the referendum being on the ballot in November.

The proposal will now to go the Senate. The Senate proposed their own transportation and infrastructure plan last week. The Senate’s plan did not include a bond referendum.

See HB 943 here.

Senate committee passes Medicaid Reform bill

Yesterday the Senate Committee on Health Care passed a new version of the Medicaid reform bill in a Senate committee substitute (SCS) to HB 372, 2015 Medicaid Modernization.

The SCS, now titled Medicaid Transformation/HIE/Primary Care/Finds, combines the Senate’s Medicaid reform proposal, the establishment of a Health Information Exchange (HIE) Network Authority, and raising the rates of primary care physicians, which were all included in the Senate’s proposed budget this year. The SCS does differ from the Medicaid reform proposal that they included in the budget. Senate leaders said that the SCS was an attempt to make compromises in order to find more common ground with the governor and House. Medicaid reform has been a major sticking point between the chambers this year.

The SCS creates a new department, the Department of Medicaid (DOM). The DOM will have full budget and regulatory authority, but the General Assembly would determine eligibility categories and income thresholds. The bill requires DOM to submit requests for waivers and state plan amendments to the Centers for Medicare and Medicaid Services (CMS), and report recommended statutory changes to the newly created Joint Legislative Oversight Committee on Medicaid by May 1, 2016. Twelve months after CMS approval, capitated full-risk contracts will begin.

This proposed version of the bill creates roles for both managed care organizations (MCOs) and provider-led entities (PLEs). MCOs would compete for three statewide contracts, and PLEs would compete for up to 12 regional contracts. The DOM has the ability to create anywhere from five to eight regions in the state.

The second section of the SCS establishes the Statewide Health Information Exchange Authority, which will be responsible for overseeing and administering the HIE network. The proposal provides for $8 million in funds in order to “allow a seamless transfer of patient records between every provider in the state.” Additionally, the N.C. HIE Advisory board is created in the proposal, which will advise the Authority on HIE matters.

Finally, the proposed legislation will end the state’s contract with Community Care of N.C. (CCNC), a nonprofit that provides Medicaid case management services in order to help contain costs. Beginning May 1, 2016, the money that would have been spent on that contract will instead be used to raise the rates paid to primary care physicians and OB/GYNs to 100 percent of Medicare rates.

The SCS will be heard in the Senate Appropriations Committee Monday, August 10, at 3 pm.

See the SCS here.

Senate proposes compromise to tax reform and economic development

The current Continuing Resolution, (CR) is set to expire at midnight on August 14, 2015, next Friday. With no agreement on the budget bill, and negotiations moving slowly on big picture issues like economic development and tax reform, it looks as though a CR will need to be passed before midnight next Friday. The adjournment date remains uncertain.

Thursday in the Senate Finance committee, President Pro Tempore of the Senate, Sen. Phil Berger (R-Guilford), and Senate Majority Leader, Sen. Harry Brown (R-Onslow) presented HB 117, NC Competes Act, for compromise on several economic development measures and a redistribution of the local option sales tax (LOST).

HB 117 passed the House chamber several months ago. The House’s version (i) did not include changes to the LOST distribution formulas, (ii) “increased the amount Commerce could commit in JDIG awards, (iii) modified and extended the JDIG program, (iv) renamed the JDIG, One NC, One NC Small Business, and Site Infrastructure Development programs, (v) modified the Utility Account, (vi) modified qualification for single sales factor apportionment of income by qualified capital intensive corporations, (vii) recaptured funds previously allocated for the Job Catalyst Fund (included in H1224 that was not enacted last year) and reallocated those funds for the Site Infrastructure Development Fund, (viii) extended the sales tax refund for sales tax paid on fuel by an interstate passenger air carrier in excess of $2.5M; and (ix) enacted a sales tax exemption on sales of datacenter equipment and electricity located and used at the datacenter for datacenters investing at least $75M within a 5-year period.” See full summary from fiscal research here.

In the Senate Finance committee on Tuesday, Sen. Berger opened his remarks by stating this proposal was an effort to move the budget negotiations forward by addressing several provisions separate from the budget bill. The economic development portion of the bill included changes to the JDIG program, One NC program, a three year transition to single sales factor, and tax exemptions for data centers and aviation fuel. Sen. Berger further stated other economic development and tax issues were still being debated. Items such as the corporate income tax reduction and credits such as the Research and Development credit, were not included in the SCS.

Concern in the committee also focused on the redistribution formula for LOST. Senators from Mecklenburg and Buncombe counties spoke out adamantly in opposition to the change. Sen. Jeff Tarte (R-Mecklenburg), Sen. Joel Ford (D-Mecklenburg), Sen. Terry Van Duyn (D-Buncombe) and Sen. Floyd McKissick (D-Durham) are among those who spoke in opposition.

HB 117 will be heard in the Senate Appropriations Committee Monday afternoon, August 10, at 3:00 pm.

See HB 117 here. See the summary for the SCS of HB 117 here.

New Cabinet Secretaries

Last week N.C. Department of Transportation (NCDOT) Secretary Tony Tata resigned. Yesterday, Governor Pat McCrory named Nick Tennyson the new NCDOT Secretary. Tennyson has previously served as the mayor of Durham and has been chief deputy secretary at NCDOT since 2013.

This week N.C. Department of Health and Human Services (DHHS) Secretary, Dr. Aldona Wos, announced her resignation. Rick Brajer, a Raleigh businessman, was appointed to fill her position. Brajer has a MBA from Stanford University Graduate School of Business, and most recently worked for ProNerve, LLC. He told reporters after the press conference announcing his appointment that he believed containing Medicaid program costs would be a core priority for his administration and continues to emphasize Secretary Wos’ Medicaid reform philosophy.

Secretary Wos will remain as DHSS Secretary for two weeks.

Charter School Oversight

On Tuesday, the House voted not to concur with HB 334, Transfer Office of Charter Schools. When the House passed HB 334 in April, the bill dealt with modifications to the charter school application process and authorizing the ability for charter schools to charge fees for extracurricular activities.

When the Senate took up the bill in late July, they modified the House’s version to instead establish the Office of Charter Schools and modify the charter school advisory board. The newly formed Office of Charter Schools would be subject to the oversight of the State Board of Education, not the Department of Public Instruction (DPI). Currently DPI has oversight over charter schools.

The bill now goes to a conference committee.

Read HB 334 here. See conference committee members here.

Changes to Employee Misclassification bill

On Tuesday, the House Judiciary II committee voted to remove exemptions for courier services included in House Bill 482, Employee Misclassification Reform. The bill was reported favorable out of the House Appropriations Committee on Wednesday. The bill was referred to the House Committee on Rules, but was later withdrawn and placed on the House calendar for Monday’s evening session.

Read HB 482 here.

Senate gives final approval of revenge postings bill

On Wednesday, the Senate gave final approval to the revenge postings bill, HB 792, Privacy/Protection From Revenge Postings. Two amendments passed before the Senate passed the bill on third reading, 43-0.

The first amendment, proposed by Sen. Brent Jackson (R-Sampson), added a provision to the bill that makes persons, located in a private place, who willfully expose their private parts with knowing intent to be seen by a person in public guilty of a Class 2 misdemeanor. This provision has been nicknamed the “naked neighbor” provision and derives from an incident that occurred in Charlotte earlier this year. (See the Time Warner Cable News article reporting on the amendment.)

The second amendment, proposed by Sen. Gladys Robinson (D-Guilford), creates a tiered punishment system, based on the persons age. For all those over 18 years old, all offenses are a violation of a Class H felony. For those under 18 years, the first offense is a Class 1 misdemeanor, and second and subsequent offenses are a Class H felony. The amendment passed 28-15.

The bill now goes to the House for concurrence.

Read HB 792 here.

Constitutional amendments

Thursday, the Senate Finance Committee passed SB 607, Taxpayer Bill of Rights (TABOR). The bill proposes three constitutional amendments to limit state spending and increase state savings.

The first part modifies Section 2 of Article V of the N.C. Constitution to cap the tax on income at 5 percent. The current cap on income tax is 10 percent. The second part creates a new constitutionally required Emergency Savings Reserve Fund. The third and final part creates a new limit on the growth of State spending, capping at the percentage of inflation plus population growth. Under this bill the N.C. General Assembly could increase the spending limit only if approved by a two-thirds vote of both chambers.

Because these are proposed amendments to the N.C. State Constitution, the bill must pass by a vote of three-fifths of each chamber and then must be approved by a majority of the voters of the State. The bill puts the three proposed amendments on the Presidential Primary ballot in 2016.

Read SB 607 here. Read SB 607 Summary here.

Implementing a clean power plan

On the Senate floor Wednesday, Sen. Trudy Wade (R-Guilford) amended the 1-page HB 571, previously titled “Judicial Review of EPA Clean Power Plan,” and replaced it with the now 4-page “Implement Clean Power Plan.”

The bill requires state agencies, boards, and commissions to implement a clean power plan consistent with the Federal Clean Air Act. The previous version prohibited state agencies, boards, and commissions from implementing the EPA clean power plan until judicial review of the plan is resolved or July 1, 2016, whichever is later.

The current proposal requires the State to reduce carbon dioxide emissions only if the improvements are “technically achievable and cost-effective considering any additional Clean Air Act requirements that may be triggered by such … improvements.”

The vote was along party lines, 31-12, to pass both Sen. Wade’s amendment and the newly worded bill.

Read HB 571 here.


Harry Kaplan
Senior Vice President

Jeff Barnhart
Senior Vice President

Franklin Freeman
Senior Vice President

Bo Heath
Senior Vice President

John Merritt
Senior Vice President

Johnny Tillett
Senior Vice President

Kerri Burke
Vice President

Jillian Totman
Assistant Vice President

Sarah Wolfe
Assistant Vice President