Pardon Our Dust
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On Monday morning, Republican Senators lined up in the newly renovated Legislative Building auditorium for a press conference. Flanking Senate leader Phil Berger (R-Rockingham) on both sides, Republicans appeared unified as they unveiled their long-awaited budget proposal. The budget dominated most Senate committee meetings this week, and will now dictate the conversations in the House for several weeks to come. We break down the important updates from the General Assembly in this week’s newsletter.
As of this morning, in the state of North Carolina, there were 394 confirmed cases of the coronavirus, 429 individuals hospitalized, and sadly, 13,408 confirmed deaths. There have been 8,794,757 doses of the vaccine distributed in NC, which is about 55% of the total adult population.
As we all continue to feel the effects of the global pandemic and adjust to a new normal, we want to highlight a few ways our clients across North Carolina have worked to support residents and make this time a little easier for those throughout the state. Read more about what our clients are doing to help by clicking here.
For more information on COVID-19 in North Carolina, click here to visit the Department of Health and Human Services website, and be sure to stay up to date on the latest federal guidelines issued by the Centers for Disease Control and Prevention (CDC) by clicking here.
Senate Budget
Four days after releasing their state budget, the Senate passed the annual spending bill, S105: 2021 Appropriations Act, with enough support from Democrats to override a potential veto from Democratic Governor Roy Cooper. The Senate held multiple committee hearings this week to discuss the 427-page bill, and approved amendments by both Republican and Democratic lawmakers. The measure would spend $25.7 billion in FY2021-22, and $26.6 billion in FY2022-23. If passed, this budget would be 3.45% larger than the base budget under which the state is currently operating.
The proposed budget would also issue significant tax relief. The personal income tax rate would be cut to 3.99% by 2026, down from 5.25%. The franchise tax would be reduced, and the corporate income tax rate would be phased to zero by 2028. Additionally, the standard deduction would be raised to $25,500.
Thursday’s Senate session was contentious at times. Democrats introduced nine amendments, all of which failed except one. Senate President Pro Tempore Phil Berger responded at the end of session, arguing that amendments like these were the reason the state fell into $3 billion in debt to the federal government when Democrats controlled the General Assembly. Berger said you “can’t just keep spending and write the check because you have the checkbook.”
The budget would give an average of 1.5% raises to teachers and most state employees in each of the next two years, and a $1,500 bonus to state employees with an annual salary less than $75,000. It would also provide a $13/hour minimum wage for noncertified employees in schools, community colleges and universities. It also allocates $5.4 billion of federal American Rescue Plan Act funds to various grants and programs to respond to the pandemic.
After its passage of third reading in the Senate this morning, the budget is now officially in the hands of the House of Representatives. Speaker Tim Moore (R-Cleveland) said on the House floor yesterday that he anticipates taking “several weeks” to completely pass their counterproposal, with House Appropriations meetings to review the Senate budget beginning next week.
The budget is typically categorized in a committee report broken down by a state agency’s oversight. Here are the toplines:
Education
- Net appropriation: $15.2 billion in FY 2021-22, a 2.5% increase from FY2018-19, and $15.3 billion in FY2022-23, a 6.3% increase.
- $40.9 million in each year of the biennium to hire an additional 115 school psychologists.
- $137 million across the biennium to fund the NC Promise Program.
- Establishes the NC Need-Based Scholarship Program for Public Colleges and Universities and appropriates $179.9 million in 2022-23.
- Increases the Opportunity Scholarship Grant Fund Reserve to a total $146.6 million in FY2021-22 and $109.8 million in FY2022-23.
Health and Human Services
- Net appropriation: $5.8 billion in FY2021-22, a 0.8% increase from FY2018-19, and $6.3 billion in FY2022-23, a 10% increase.
- $424.2 million in FY2021-22 and $374.2 million in FY2022-23 for Medicaid managed care transformation projects.
- $38.2 million in FY2021-22 and $157.1 million in FY2022-23 to extend Medicaid benefits for pregnant women from 60 days to 12 months postpartum.
Agriculture, Natural and Economic Resources
- Net appropriation: $919.5 million in FY2021-22, a 41.8% increase from FY2018-19, and $798.2 million in FY2022-23, a 28.6% increase.
- $1.2 billion of federal funds in FY2021-22 for drinking water, wastewater and storm water infrastructure grants to local governments and utilities.
Justice and Public Safety
- Net appropriation: $3.27 billion in FY2021-22, a 7.6% from FY2018-19, and 3.33 billion in FY2022-23.
- $23.8 million in FY2021-22 and $34.6 million in 2022-23 for staff and implementation of E-Courts Implementation and E-Courts Warrants and Citations.
- $2 million and 16 FTEs to establish a separate Department of Adult Corrections within the Governor’s Cabinet.
General Government
- Net appropriation: $473.4 million in FY2021-22, a 4% increase from FY2018-19, and $474.4 million in FY2022-23.
- $1.5 billion of federal funds for the Job Opportunity and Business Saving Grant Program and the Small Business Pandemic Recovery Grant Program.
Transportation
- Net appropriation to the Highway Fund: $2.63 billion in FY 2021-22, a 12.6% increase over the base budget, and $2.6 billion in FY2022-23, a .9% decrease.
- Net appropriation to the Highway Trust Fund: $1.6 billion in FY2021-22, a 26.1% increase, and $1.7 billion in FY2022-23, an 11.4% increase.
Information Technology
- Net appropriation: $86.3 million in FY2021-22, and $66.9 million in FY2022-23.
- $607 million of federal and state funds, to the GREAT program for broadband expansion.
- $90 million to targeted grants addressing local broadband infrastructure needs.
Farm Bill
The annual farm bill passed the House of Representatives Thursday and is headed back to the Senate for concurrence to approve the changes made in the House. Most of S605: North Carolina Farm Act remains the same. It allows local governments to grant agricultural advisory boards the authority to execute agreements with landowners to enroll land in an agricultural district; makes clear that fires for cooking and warmth are exempted from certain open-burn bans; increases punishments for stealing timber and clarifies overtime compensation rules for state Forest Service firefighters.
One controversial provision, however, was removed from the bill during a House Agricultural Committee Wednesday. The provision would have made it more difficult for workers to sue employers over retaliatory actions or discrimination unless the state Department of Labor issues a “right to sue” letter in their case.
The provision receiving the most discussion Thursday was a section dealing with a proposed “general permit” that the Department of Environmental Quality would issue for animal farm operations, namely pork producers, to allow the farm owner to construct and operate a farm digester system. More than a dozen House Democrats joined Republicans in backing the bill with the general permit provision. Rep. Billy Richardson (D-Cumberland) spoke on the House floor, arguing this system is fulfilling a commitment made several years ago to begin capping lagoons on farms.
Unemployment Reform
The two chambers in the General Assembly have taken turns issuing their own versions of unemployment reform bills for the state. The Senate began with a bill that would end the $300 federal supplement but provide $1500 bonuses to unemployment insurance claimants who go back to work within a given time period. Then, the House passed a bill in early June that would eliminate the federal supplement and not provide a bonus, but instead would have directed $250 million in federal funds to provide child care subsidies. On Wednesday, an agreement was reached and the House concurred with the conference report.
The final bill, S116: Putting North Carolina Back to Work Act, mirrors the previous bill passed by the House. It would end the federal supplement to unemployment claimants and would require claimants to respond to employer requests for interviews, drug testing, skills assessments, and other reemployment activities. The bill would also allocate $250 million from the child care and development block grant provided by the American Rescue Plan Act.
The bill now goes to Gov. Cooper, who has not publicly indicated if he will sign it.
Upcoming Legislative Meetings
Monday, June 21
8:30AM House: Appropriations, Education
9:30AM House: Appropriations, AgNER
10:00AM Senate: Agriculture, Energy and Environment
10:00AM House: Appropriations, Health and Human Services
1:00PM House: Local Government
Tuesday, June 22
9:00AM House: Appropriations, Justice and Public Safety
11:00AM House: State Government
12:00PM House: Insurance