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NC Legislative Update for June 12, 2015

June 12, 2015

This Week

Once again, the state’s budget has been stalled by Medicaid spending, or in this case lack thereof. The North Carolina Department of Health & Human Services (DHHS), responsible for managing the state’s Medicaid spending, has failed for nearly two years to properly pay providers for the State’s share of dual-eligible patients. The Senate budget proposal is expected to be released late Sunday evening or Monday morning with Senators working through next week to pass their version of the State’s 2015-16 spending plan. Appropriations Chairman, Sen. Brown (R-Onslow), has indicated that the Senate budget will begin the Committee process Monday with the goal of Wednesday and Thursday floor votes. It is anticipated that in addition to appropriations, tax and policy changes will be contained in the budget bill.
State owes medical providers for caring for poor, elderly – N&O
Another Medicaid problem. What’s new? – NC Spin

House Bill 562, a contentious bill that would amend several laws regarding firearms in North Carolina, was postponed after being calendared for Monday evening. Sponsored by Rep. Schaffer (R-Mecklenburg), the bill has a number of provisions including one to end handgun permitting by local sheriff’s departments in favor of using only the federal National Instant Criminal Background Check System. The NC Sheriff’s Association opposes the provision as well as Governor McCrory (R), who said that he cannot support the legislation in its current form. The bill was sent back to the House Rules Committee for further review.
Vote on NC House gun bill delayed – N&O

The House Finance Committee gave its approval Tuesday to House Bill 328, which would allow workers that are in the country illegally to acquire a temporary, restricted driver’s license, provided that they pass a driving test and obtain insurance coverage. The law has the potential to decrease overall auto insurance costs for consumers by having these normally uninsured drivers insured. The bill has drawn sharp criticism from anti-illegal immigration groups but passed the Committee 22-11 nonetheless.
N.C. bill to grant driver licenses to immigrants could make auto insurance cheaper – TBJ
NC driving privileges for people in US illegally clears committee – WRAL

The Senate Insurance Committee gave its approval Thursday to House Bill 148 which requires all mopeds to have liability insurance and license plates by July of 2016. The bill, sponsored by Rep. Shepard (R-Onslow), was created in response to the high number of moped crashes reported each year involving uninsured moped drivers. The cost of the insurance would range from an annual fee of $90 to $380 dollars depending on factors such as driving history. Sen. McKissick (D-Durham) voiced some concern as to the potential negative impact that requiring insurance would have on those who rely on a moped as their only method of transportation. The bill is calendared in the full Senate for Monday evening.
Moped insurance requirement clears Senate committee – WRAL

The Senate sent a revised version of House Bill 263 back to the House on Thursday. The bill that originally would have only restructured the City Council of Trinity now includes Sen. Wade’s (R-Guilford) efforts to restructure and redistrict the Greensboro City Council as well. HB 263 would decrease the number of City Council members in Greensboro from nine to seven while simultaneously redrawing the districts they are elected from. It would also make the Mayor a nonvoting member and would increase the length of a term on the Council from two to four years. House members of the Guilford delegation appear to prefer a referedum of the voters on the issue which this bill does not contain.
SB 36 coupled with less controversial bill to pass Senate committee – Burlington Times-News

Also worth noting, Governor McCrory signed into law legislation that would allow Supreme Court Justices to run in retention elections rather than in competitive and expensive primaries and general elections. The law is effective for the 2016 cycle and the only Justice on the ballot will be the Hon. Bob Edmunds.

Legislation in the News:
McCrory signs opossum, graffiti bills; 10 others – N&O
Business registration, legal notice bills too hot for Senate committee – WRAL
Senate clears elections bills, delays final vote on environmental rules – WRAL
Zoning limits headed to governor's desk – WRAL
N.C. bill on Duke Energy's Asheville natural gas plant heads to governor's desk – CBJ
Smithfield Foods executive lobbying to keep status quo on renewables – N&O 
Uber helps NC Senate craft rules for Uber – N&O

Senate Tax & Incentive Plan

House Bill 117, the NC Competes Act that has been stalled in the Senate since it passed the House on March 9th, appeared anew on Wednesday in the Senate Commerce Committee. Senate leadership revised the bill in a Proposed Committee Substitute (PCS) that merges various tax and incentive provisions into one omnibus bill. Senate leadership's attempt to “broaden the base”, applies sales tax to new services, reduces the sales tax reimbursement for nonprofits and closes loopholes. The 46 page proposal contains a number of provisions that deal with sales tax, corporate income tax, personal income tax, and economic development. Provisions of the proposed legislation include:

• Provides $15 Million per year to the Job Development Investment Grant (JDIG), the State’s primary economic development tool and increases it to $30 Million if there is a “high-yield ($750+ Million investment and 2,000+ jobs) project”
• Changes the redistribution of sales tax revenues to counties from strictly a point-of-sale model, to place more emphasis on a per capita model with 20% of revenues allocated by point-of-sale and 80% based on county population. This new method would allocate less revenues to populous and tourism based Counties and would generally benefit rural Counties.
• Allows Counties to levy a .5% sales tax by referendum not to exceed 2.5% with the exception of Durham and Orange Counties which would be able to increase theirs by .25% to 2.75%
• Reduces the personal income tax rate from 5.75% to 5.5% in 2016
• Increases the standard deduction to $18,500 for married filing jointly and $9,250 for individuals by 2020
• Restricts charitable deductions (currently unlimited deduction) so they are contained in the $20,000 total cap for itemized deductions
• Reinstates medical expense deduction but still restricts them as well to the $20,000 total cap for itemized deductions
• Has three-year phase in for a single sales factor method of taxation for corporations
• Expands sales tax to new services including installation, veterinary and pet care services, maintenance and repair services and advertising services
• Expands sales tax with a cap of $500 per article to the sale of mill machinery and parts and the sales of certain recycling companies, R&D companies, industrial machinery refurbishing companies and companies located at port facilities
• Increases the tax on manufactured homes, modular homes, aircrafts (capped at $5,000, previously $1,500) and boats (retains current $1,500 cap)
• Reduces the cap on sales tax reimbursements for nonprofits from $45 Million annually to $1 Million in 2020, aimed at hospitals and other large nonprofits

The Senate Committee did not actually vote on the bill, but presented it to Committee members and said they would address it again at a later date. It may appear in the Senate's budget bill that will be released next week.
Senate bill lowers taxes, redefines job luring programs – WRAL
NC Senate proposes income tax cut, sales tax increase – Citizen-Times
NC Senate rolls out sweeping economic development and tax bill – N&O
New tax proposed on Veterinary Services and Pet Care – John Locke Foundation

Medicaid Reform

House leaders in the Health Committee Wednesday unveiled their proposed Medicaid Reform plan which involves what bill sponsors Rep. Dollar (R-Wake) and Rep. Lambeth (R-Forsyth) are calling Provider-led Entities (PLE’s) to manage Medicaid patients. The proposal is very similar to the House plan from last year that would have used what were called, Accountable Care Organizations (ACO’s). In the proposed system, doctors and hospital networks would form these entities and would be responsible for controlling cost and assuming the risk in a capitated system. Supporters of the bill include the North Carolina Hospital Association, N.C. Medical Society, and DHHS under Gov. Pat McCrory.

The bill differs from what Senate leaders envision for reform, which would involve private Managed Care Organizations (MCO’s) in at least a competitive role if not exclusively. Rep. Burr (R-Stanley), voiced concern that not allowing competition between PLE’s and MCO’s that have experience in health care management, would be picking winners and losers. Senate leaders announced earlier in the year that they would not adjourn session sine die until a solution had been reached for controlling Medicaid costs. The bill is now in the House Appropriations Committee, which is expected to hear it next week.
House leaders try again on Medicaid reform – WRAL

Veto Overrides

On Thursday, the House followed suit with the Senate and voted to override Gov. McCrory’s veto of Senate Bill 2. The new law allows magistrates to recuse themselves from performing all marriages for a six month period, based on sincerely held religious beliefs. Speaker Moore (R-Cleveland) was able to swiftly bring the bill forward by utilizing the “veto garage”, the tactic of calendaring the bill every day until there are enough votes to override the veto. The House considered the bill first thing during Thursday morning’s session with just three minutes of debate allotted to the opposition after Rules Chairman Rep. Lewis (R-Harnett) moved the previous question.

Overriding the Governor’s veto requires a three-fifths majority of the members “present and voting” which would be 72 if all members were in the chamber. However, ten members were absent for the vote Thursday which decreased that threshold. The override in the House passed 69-41 three votes over the necessary 66. Rep. Catlin (R-New Hanover), Rep. Daughtry (R-Johnston) and Rep. Tine (U-Dare), who caucuses with Republicans, voted against the override. Three Democrats, Rep. Brisson (D-Bladen), Rep. C. Graham (D-Robeson) and Rep. Waddell (D-Columbus) voted with the Republican majority in favor of the override. The N&O conducted a brief interview with Speaker Moore after session, which can be found here.
Same-sex marriage opt out now law after veto override – WRAL
North Carolina lawmakers allow 'opt-out' over same-sex marriage – Reuters

In Other News

• Michael Tarwater, CEO of Carolinas HealthCare System, announced Tuesday that he will be retiring in June of 2016 from the Charlotte based, nonprofit hospital system. Mr. Tarwater will have served 35 years with CHS by the time he retires and has served as CEO since 2002. During his tenure, Mr. Tarwater oversaw not just an impressive expansion in the reach of the hospital system, but an even greater expansion in the exceptional healthcare the system now provides. Nexsen Pruet is proud to call CHS a partner and thanks Michael Tarwater for his service to the people of both North and South Carolina. Read more in the Charlotte Business Journal about his retirement here and read more about how the system has grown and invested in communities over the years here.
• Seven-term lawmaker Rep. Rick Glazier (D-Cumberland) is resigning his seat at the end of the legislative session to become the new executive director of the N.C. Justice Center, a left-leaning state policy think tank. Speaker Moore heaped praise on Rep. Glazier in a statement saying that he “was a key player in bipartisan negotiations.” Two individuals have already announced they will seek the seat, including former NC House member and 2014 NC Senate candidate, Billy Richardson as well as Cumberland County Commissioner, Ed Melvin.
• Secretary of the North Carolina Department of Transportation, Tony Tata, announced that he will not seek the State’s 3rd Congressional seat next fall. Sec. Tata was rumored to be considering a primary challenge to sitting Congressman Walter Jones (R) but ended any speculation with this week’s announcement. Read more in the N&O here.
• The Insider, a subscription publication of the News & Observer that focuses specifically on government policies and politics in North Carolina, released an analysis on the State’s County tier system and whether or not the system remains relevant.

In the News

Republican pledges $175 million to push party on climate – Politico

NC finds coal ash contamination in groundwater in Wilmington area, orders Duke Energy to take action – N&O

State DOT board chief questions toll critics' goals – CBJ

Hearing on voter ID rules draws crowd – Winston-Salem Journal

Cooper raising money on McCrory’s support of abortion bill – N&O

Year after request, McCrory's office produces no records – WRAL

State transportation plan includes big-ticket projects in the Triangle – TBJ

N.C. among top states with clean energy venture capital – TBJ

GOP presidential contenders leave impressions during NC convention – N&O

In Raleigh, Donald Trump all but announces presidential bid – N&O

Please reach out to TJ Bugbee for any further information or to Susan Latta to request the monitoring of any specific legislation

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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. Send an email to be added to the list.