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NC Legislative Update: June 26, 2017

June 26, 2017

This Week

Lawmakers finished a busy week last Thursday, aiming to adjourn the 2017 long session before the 4th of July.  Legislative leaders began the week with a press conference to highlight the Conference Report for the budget.  The Senate proceeded with budget votes Tuesday and Wednesday, ultimately passing it with the support of four Democrats 39-11.  The House passed the budget Wednesday and Thursday with the support of five Democrats, 77-38, sending the proposal to Gov. Cooper (D) with veto-proof majorities in both chambers.  After calling the budget proposal “irresponsible”, the Governor announced this morning that he would veto the bill.  Following the Governor’s announcement, House Speaker Tim Moore (R-Cleveland) and Senate Pro-Tem Phil Berger (R-Rockingham) issued a joint statement that the NCGA will take swift action to override the Governor’s veto.
Why some Senate Democrats voted for the budget – WRAL
Using governor’s own words, legislative leaders urge Cooper to sign budget – Carolina Journal
Gov. Roy Cooper to veto state budget bill; override expected – N&O

After a week of amplified Committee activity, lawmakers are expected to move legislation at an even more rapid pace this week.  The standard policy Committees in the Senate are no longer expected to meet, although the Rules and Finance Committees will likely continue to meet throughout the week.  Speaker Moore told members of the House they should expect to be around into the weekend, signaling the NCGA could possibly finish the regular business of the 2017 long session by Saturday.

Senate Bill 656, entitled the Electoral Freedom Act of 2017, moved forward this week.  Among the provisions, the bill would reduce the number of signatures for a political party to qualify for a statewide ballot to 10,000 registered voters, and for Unaffiliated candidates to qualify for a statewide ballot to 5,000 registered voters.  The current threshold is 2% of the most recent gubernatorial election, or roughly 93,000 signatures.  It would also reduce the runoff threshold in a primary election from 40% to 30%. 
Ballot access, runoff bill moves forward – WRAL

A Proposed Committee Substitute (PCS) to Senate Bill 155, now entitled ABC Omnibus Legislation, incorporates a number of alcohol-related changes to NC law from various bills.  The most notable change would be to allow the sale of alcohol at 10:00AM on Sundays, two-hours earlier than current law, for restaurants and retail locations, subject to local government approval.  Among the numerous changes, the bill also allows the holder of a distillery permit to sell up to five bottles of spirituous liquor per year, up from one bottle, at the distillery to each consumer who takes a tour.  The bill would also establish tax compliance and reporting for breweries and distilleries.  In addition, it establishes a special event permit to allow distilleries to give free tastings, allows the sale of “crowlers” by retail permittees, and clarifies that breweries are allowed to provide free tastings on tours and are authorized to sell other alcoholic beverages in their taprooms with a proper permit.
'Brunch bill' now part of cocktail of changes to NC liquor laws – WRAL

House Bill 617 began Wednesday dealing with the sale of antique cars, but a PCS transformed it into a vehicle for Tesla to sell their vehicles directly to consumers.  The bill, which would provide a carve-out for Tesla and had the support of the NC Automobile Dealers Association, took most other manufacturers by surprise.  The PCS was unveiled for discussion only, but has yet to receive a vote.
Tesla dealership bill pops up late in session – WRAL

The House moved Senate Bill 285, sponsored by Sen. Chuck Edwards (R-Henderson), entitled Equal Representation for Asheville.  This legislation mandates that the City adopt six districts, drawn by the City for the 2019 election by November 1, 2017 or the NCGA will draw the districts.  Legislation breaking the City Council of Asheville into districts, which currently elects its council at-large, has incurred previous legal hurdles.  Asheville currently has a ballot referendum for the voters regarding the matter this election cycle, which takes place on November 1, 2017.  Rep. Brian Turner (D-Buncombe), whose district includes much of the greater Asheville area, also supports the legislation, likely due to the fact that most of Asheville’s City Council is regularly elected from a few geographically dense parts of the city. 
Asheville districts bill advances in NC House committee – Citizen-Times

Today, the House Judiciary I Committee is expected to unveil a PCS modifying district maps for District Attorneys, and Superior Court and District Court judges.  Critics argue that the new maps could benefit Republican judges, with Wake and Mecklenburg Counties undergoing the most significant changes. 
GOP wants new election maps for NC judges and prosecutors – N&O

Central Staff of the NCGA released a document showing 2017 laws that have passed so far this year, that become effective over the next 6-months.
2017 Legislation with Effective Dates of July 1, 2017 through January 1, 2018 – NCGA

A link to next week’s announced Committee calendar can be found here.  A cumulative list of House and Senate bills filed this year, with links, and their current status can be found here.

Budget Conference Report

The Conference Report for Senate Bill 257, the Appropriations Act of 2017, spends $23 Billion, $100 Million more than either chamber’s original proposal.  With a $580.5 Million surplus, lawmakers increased this year’s spending by 3.1% from the previous fiscal year, and put an additional $323 Million into the State’s reserves over the biennium, bringing that total to $1.8 Billion.  The proposed tax reductions, which are not scheduled to be in effect until 2019, would reduce overall State revenues by $530 Million.  Forecasts project that revenue growth in coming years will be sufficient to cover the proposed cuts.  It also provides across the board $1,000 salary increase for State employees, an across the board 1% cost of living adjustment (COLA) for retired state employees, and eliminates retiree lifetime health benefits for new State employees hired after January 1, 2021.

No food stamp cuts for 133,000 in final budget bill – N&O
Across-the-board tax cuts in N.C. budget compromise – TBJ

Highlights of the proposal include:

Education

  • Fully funds enrollment growth for K-12, Community Colleges, and the UNC System;
  • Increases teacher pay on average by 9.6% over the biennium;
  • Reduces targeted funding to the Department of Public Instruction (DPI) by 6.2%, or $3.2 Million;
  • Provides DPI with an additional $300,000 for legal fees;
  • Transfers the Apprenticeship program from the Division of Workforce Solutions at the Department of Commerce to the Community College System;
  • Establishes a high achieving student scholarship for up to 4 semesters of free tuition at Community College with a certain GPA;
  • Provides $1 Million for faculty recruitment and retention for the UNC System;
  • Establishes a revamped teaching fellows, forgivable loan program for STEM and special education teachers of $8,250 per-year for 4 years, with one-year of the loan amount forgiven for every year taught in a low-performing school, or one-year of the loan amount forgiven for every two-years taught at schools that have not been identified as low-performing;
  • Reduces funding for the UNC Law School by $500,000;
  • Provides $1 million in funds for advanced planning of a new business school building at UNC-Chapel Hill

Health & Human Services

  • Provides funding over the biennium to reduce the Pre-K waitlist, serving an additional 3,525 children, or 75% of the waitlist;
  • Reduces single stream funding for the LME/MCO’s by $31.5 Million in recurring funds and $55.4 Million in non-recurring funds;
  • Adjusts the budget to reflect LME/MCO intergovernmental transfers on a recurring basis in each year of the biennium to fund a portion of the State's Medicaid spending for behavioral health services;
  • Provides additional funding to address drug overdoses and substance abuse;
  • Earmarks $17 Million from the sale of the Dorothea Dix campus to designated hospitals across the State for behavioral health services and construction of new beds;
  • Funds graduate medical education (GME) $30 Million in each year;
  • Eliminates funding provided to establish a residency program at Cape Fear Valley Medical Center;
  • Does not make deep cuts to the SNAP program as the Senate proposal did, does not eliminate Certificate of Need (CON), and does not contain the balanced billing language from the Senate proposal.

Agriculture and Natural and Economic Resources

  • Allocates $2.3 Million in nonrecurring funds to the Department of Agriculture and Consumer Services (DACS) for the purchase of an airplane for “firefighting and readiness response”;
  • Provides $500,000 in funds to the Department of Agriculture to construct a warehouse for storing foam sprayers in response to a potential avian flu outbreak;
  • Increases funding for both the International Marketing Program and the Domestic Marketing Program for the enhancement of marketing opportunities of North Carolina agricultural products;
  • Provides additional $900,000 to the Tobacco Trust Fund;
  • Provides an additional $2 Million will be given to the Agricultural Development and Farmland Preservation Trust Fund;
  • Reduces the net appropriations for the department of Environmental Quality (DEQ), making the revised net appropriations $77.0 million for fiscal year 2017-18, and $76.8 million in the following fiscal year;
  • Reduces funding for DEQ to use for the university energy centers to $400,000;
  • Eliminates various positions both vacant, and not vacant within DEQ;
  • Provides $1 Million to implement a required algaecide trial in Jordan Lake, despite DEQ deciding not to pursue the trial;
  • Provides funding for the Clean Water Management Trust Fund (CWMTF) for funding water pollution issues, $18.3 Million in FY 2017-18, and $14.3 Million in FY 2018-19;
  • Reduces funding for the Wildlife Resource Commission by 4.4% in FY 2017-18 and 8.4% in FY 2018-19, based in part on positions that have been vacant for more than 12 months.

Commerce

  • Provides revised net appropriations for the Job Maintenance and Capital (JMAC) Development Fund is $8.8 million in funding for the following companies: Bridgestone, Domtar, Evergreen, and Goodyear;
  • The budget provides additional funds to the Economic Development Partnership of North Carolina (EDPNC) for both tourism and marketing;
  • Transfers the North Carolina Industrial Commission (NCIC), which hears disputes hired by injured workers, from the Department of Commerce to the Department of Insurance;
  • Allocates $300,000 in funds to the Industrial Commission for hiring private legal counsel for litigation related to the merger of the state elections and ethics board;
  • Reduces funding for the Job Development Investment Grants (JDIG) based on the estimation of their needs for the following year;
  • Decreases funds for the One North Carolina Fund based on the Department’s assessment of their needs, and as a result, the change will not impact the operation of the project;
  • Provides $1 Million for local governments to aid planning agencies and small businesses with the revitalization of downtown areas.

Justice and Public Safety

  • 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, effective in December of 2019;
  • Reduces the budget for the NC Department of Justice (DOJ), headed by Attorney General Josh Stein (D), by $10 Million or approximately 11% of the overall DOJ budget which Stein predicts will require him to lay off 123 full-time employees;
  • Provides $250,000 for each year of the biennium for an opioid pilot program in Wilmington in order to establish a Quick Response Team;
  • Eliminates 69 positions in the Department of Corrections that have been vacant for more than 12 months;
  • Requires the Division of Adult Corrections to report to lawmakers on the number of prison personnel charged with crimes on the job in the past five years, the number of employees disciplined, the agency’s hiring process and background checks and the effectiveness of efforts to prevent contraband;
  • Reduces funding for emergency judges;
  • Provides for the creation of various deputy clerk positions in districts throughout the state.

General Government

  • Reduces funding for the Governor’s office by nearly $1 million;
  • Requires state government agencies to get authorization from the General Assembly in order to hire private counsel;
  • Establishes prohibitions against the use of lapsed salary proceeds in order to pay private attorneys;
  • Allows the Senate Pro-Tem and the Speaker of the House to request Highway Patrol security 48 hours in advance of travelling within the State on State business;
  • Authorizes the Lieutenant Governor to select three State troopers for his security detail;
  • Authorizes the General Assembly to decide whether or not to defend actions against them, in addition to hiring private counsel;
  • Transfers the Education and Workforce Innovation Commission from the Office of the Governor to the Department of Public Instruction.

Transportation

  • Provides an additional $320 Million for the Strategic Transportation Initiative highway-building program over the biennium to fund 100 more highway projects over the next 10 years;
  • Provides $241 Million to improve bridges throughout the state;
  • Provides $143 Million for the improvement of existing road conditions;
  • Provides $40 Million for infrastructure projects at various commercial airports.

Tax Plan

  • Reduces the personal income tax rate from 5.499% to 5.25% in 2019;
  • Increases the standard deduction for married couples to $20,000, and it will increase to $10,000 for individuals starting in 2019;
  • Reduces the corporate income tax rate from 3% to 2.5 %;
  • Repeals the privilege tax for mill machinery and other manufacturing or industrial equipment;
  • Sets the franchise tax rate for a C Corporation at $1.50 per $1,000, applicable to the highest of the three tax bases: net worth apportioned to the State, book value of property in the State, and 55% of appraised value of property in the state;

Sets the franchise tax for an S Corporation to a $200 tax on the first $1 million of a business’s net worth and $1.50 per $1,000 of its tax base that exceeds $1 Million.

In Other News

The U.S. Supreme Court has agreed to hear a Wisconsin case on the constitutionality of drawing legislative districts for partisan advantage.  A ruling against Wisconsin would affect the way every state draws its legislative and congressional districts moving forward. 
Justices could take up high-stakes fight over electoral maps​– AP

Former Gov. Pat McCrory (R) has been openly testing the waters for a fourth consecutive run for Governor.  McCrory first ran in 2008 and lost to then Lt. Governor, Beverly Perdue (D).  He ran again in 2012 and defeated Lt. Governor Walter Dalton (D), and lost this past election to now sitting Gov. Roy Cooper (D).  If McCrory does in fact choose to run again, he will likely face stiff competition in a primary, which he has not faced since his first run.  Lt. Governor Dan Forest (R) has also been vocal about a run for Governor in 2020, and there have been rumors that U.S. Sen. Thom Tillis (R) could make a bid as well.
McCrory reflects on future, tenure as governor​– WRAL

Rev. William Barber, President of the NAACP and 31 protesters that were arrested last week in the NCGA have been banned from the Legislative Building and Legislative Office Building.  The ban was a term of their release from jail and was not a request of NCGA Police.  However, NCGA Police Chief Martin Brock said that he intends to make that request for arrested protesters moving forward.  Over the weekend, Rev. Barber announced he will remain President of the organization until October when a new President is selected.
NAACP’s Rev. William Barber among those banned from NC Legislative Building

The North Carolina Business Court has upgraded its e-filing system.  A press release with further details can be found​ here.

In the News

8,000 jobs? NC ‘on the cusp’ of landing major project, House speaker says – N&O
State jobless rate reaches 10-year low of 4.5 percent in May – Winston-Salem Journal
Chief justice: Ask voters if judges should be appointed – Charlotte Observer
Last-ditch move for impartial redistricting knocked down – N&O
Supreme Court strikes down sex offender social media ban – WRAL
Bill Would Speed Another Overhaul of NC’s Mental Health System – NC Health News
Get paid to shoot ‘Powerball’ coyotes under new NC law – N&O
Governor joins the chorus praising Megan Faircloth, a true NC inspiration – N&O
Troxler fires back after state audit criticizes milk inspections – NSJ
Bill passes to foster N.C. military bases – Fayetteville Observer
Domestic violence homicide measure heads to Cooper – WRAL
Orange County weighs its options after losing schools impact fee – Herald-Sun
STOP Act, which aims to curb opioid addiction, heads to full NC Senate – Winston-Salem Journal
Lawmaker wants to know how much money agencies are squirreling away – Carolina Journal
Anglers, boats and kayaks in tow, circle NC legislature – WNCN
State says GenX water testing underway – Star News
New complaints contend Duke Energy is stalling grid connections for solar projects – CBJ
Governor Signs Legislation Named After Moore County Toddler Into Law – Southern Pines Pilot
For first time, secret money set to flow into Charlotte mayor’s race – with no limits – Charlotte Observer
BAT: Purchase price for Reynolds rises to $54.5B – TBJ
N.C. governor warns Obamacare repeal will hurt battle against opioid addiction – Charlotte Observer
McHenry steps up as Scalise recovers – Politico
‘Free fishing Day’ in N.C. is July 4 – Bladen Journal


The Nexsen Pruet Public Policy team provides attorneys and clients with a newsletter summarizing the week's activities and conveying the inner workings of the legislative process and state government in Raleigh. Please feel free to pass this along to your clients or other interested parties, email Kdjones@nexsenpruet.com to be added to the list.

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