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NC Legislative Update for March 23, 2015

March 23, 2015

Welcome to the Nexsen Pruet Weekly Legislative Update! 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 to be added to the list. 

Last Week

Session came to a sudden halt Monday evening in the Senate after a three-judge panel ruled with Gov. McCrory in a separation of powers lawsuit against the state legislature. The Governor filed the suit regarding legislative appointments to executive commissions, specifically the Coal Ash Commission, challenging the constitutionality of the appointments. Lawmakers announced that they will withhold confirmation of executive appointments pending appeal. Gubernatorial appointments for the Director of the State Bureau of Investigation, the Commissioner of Banks and the Industrial Commission, originally scheduled for this week are now postponed indefinitely. Outside counsel for the legislature has pursued an appeal to the North Carolina Supreme Court for final adjudication.

Judges rule N.C. coal ash commission set-up is unconstitutional – CBJ
NC legislature appeals ruling over appointment powers – Charlotte Observer

This week the House faces a deadline for members to request public bills to be drafted by the legislative staff. The Senate deadline was last Thursday. The bill filing deadline for the Senate is this Thursday, and by Wednesday, April 8th for the House.

Rep. Szoka (R-Cumberland) filed House Bill 245, which would allow third-party, non-utility sales of electricity directly to customers. The Energy Freedom Act would legalize this practice that is prohibited in only five states. The intention of the bill is to allow non-utility renewable energy companies to contract with consumers to install and maintain infrastructure on the property owner’s land. There is however a requirement that they not produce more than 125% of the power consumed by the buyer. The bill has received the support of numerous businesses in North Carolina as a way to provide energy savings and to insure the state’s long-term energy demand.

Bill allowing renewable-power sales direct to N.C. consumers could be a boon for solar – CBJ
Duke Energy, ElectriCities oppose N.C. bill to let independents sell power to their customers – CBJ

Rep. Elmore (R-Wilkes) received the approval of the House Education Committee on Community Colleges for his bill, House Bill 129, on Tuesday. The bill would qualify any high school student for free community college tuition that carries an overall high school grade point average of 3.5 or above. In order to maintain the scholarship, applicants that choose to accept the program would be required to carry a 3.0 GPA while attending community college. The UNC System would also be required to offer deferred admission to those students who qualify. Proponents say encouraging students to pursue their first two years of higher education in the community college system would also be a cost savings to the state. The state’s annual burden for community college is $4,401 per student and is $13,419 per student for the UNC System.

Other Legislation in the News:
Lawmakers push to eliminate tool used to fight new developments – WRAL
Bill would require that medical examiners in NC receive prison death reports – N&O
Senators target religious exemption for vaccines – WRAL
NC House members reject keeping lottery winner info private – WSOC
Sex, romance would be a conflict of interest under NC General Assembly proposal – N&O
Momentum growing to legalize medical marijuana in NC – WRAL
Bill calls for end to highway corridor development restrictions – WRAL
NC House panel backs loan program for economic development – N&O

Sales Tax

The confrontation between rural and urban was on full display last week, starting with Senate Majority Leader Sen. Brown (R-Onslow) announcing his intentions to change how sales taxes are distributed to the counties. Currently, sales tax revenues are funneled back to counties, under a formula primarily based on where the tax was collected, or point-of-sale. This method greatly benefits population dense counties such as Mecklenburg and Wake, but it also benefits counties that attract significant tourism traffic. Sen. Brown said the Senate plan intends to shift the distribution to a per-capita model that would redirect sales tax revenues based on population, significantly benefiting the 80 poorest counties.

NC Senate plan would shift sales tax money to rural areas – N&O
Standing with Harry Brown and rural North Carolina – Politics NC

Economic Incentives

Senate leadership rejected House Bill 117, the House economic incentive package and referred it to the Rules Committee. Rather than using the previously passed House bill as a vehicle for the Senate plan, as is done quite frequently, the Senate introduced its own economic development plan. The Senate plan is quite different from the House plan, which appears to have Governor McCroy’s blessing. The significance of this procedural move is that the Senate bill is publicly sponsored by most of the Senate leadership, and eliminates a conference committee on the House bill.

In Wednesday's press conference, the primary bill sponsor Senate Pro-Tem Sen. Berger (R-Rockingham) stood with a group of Senators to announce Senate Bill 338. The press conference began with the below image, a visual for the the breakdown of 2013-14 Job Development and Investment Grant (JDIG) recipients. According to the chart three counties, Wake, Durham and Mecklenburg, received 86% of the roughly $300 Million incentive monies that the state doles out to attract businesses.

Senate leader on competing jobs package - YouTube

SB 338 would limit how much these three counties could receive from the JDIG fund based on a formula tied to population. Essentially the formula would reduce the share for these counties to about half of the fund, freeing over $100+ Million to serve economic development needs in the remaining 97 counties. Sen. Berger also announced the Senate intends to use a separate bill, Senate Bill 326, as a short term solution to increase the JDIG fund.

Recently, attention has been focused on increasing incentives to make NC attractive to a large auto manufacturer. The state has recently missed out on three substantial projects and one provision in the bill would provide an exception to “high-yield” projects such as these. The bill defines "high-yield" as creating 2,500 jobs and $1 Billion in investment. Companies meeting the criteria would be eligible for a tax refund of up to 100%.

Another provision in the bill would continue the decrease in the corporate income tax rate. In the 2013 tax reform package, the rate was scheduled to automatically drop if certain revenue targets were met. Those targets were not met and this section of the bill would move forward with reducing the rates to 4% in 2016 and 3% in 2017. Another provision shifts corporate taxation to single sales factor apportionment, thereby benefitting those corporations with substantial investments in the state.

Senate economic development plan would lower corporate taxes – WRAL
NC Senate Republican economic plan would lower tax rate – N&O

Gov. McCrory immediately came out saying that it would "divide" the state and "break the bank". Speaker Moore (R-Cleveland) would not commit one way or another, but said that he felt the House version was appropriate.

McCrory vs. Berger should shape the session – N&O
McCrory bashes N.C. Senate incentives plan; Berger swings back – CBJ
House Speaker Moore reacts to Senate's economic development plan - YouTube

In the News

Drawing battle lines – Politics NC

GOP confronts rural-urban divide – N&O

Comparison of House, Senate “Economic Development” bills – NC Spin

National security expert: NC General Assembly ‘a good target for a wacko’ – N&O

Good Or Bad Government? 'Blank Bills' And The NC Senate – WFAE

Looks like this time N.C. has a chance at landing an auto plant – CBJ

Community broadband debate centered in N.C. town – BND

Falling Unemployment Rate Good News for McCrory – Politics NC

Records show big travel costs for some state agency leaders – WRAL

Wake County commissioners support teacher pay raises – N&O

NC policies on government emails hard to police, lead to delays in public access – WRAL

'Graveyard' committee part of Apodaca's power in Senate – Times-News

Skvarla: The state treasury gets no returns on film incentives – TBJ

Buncombe buys $6.8M site to entice 'large' prospect – Citizen-Times

Public records shine light on government's inner workings – WRAL

Commerce secretary takes heat from NC Senate on incentives plan – N&O

In Other News

• It has long been rumored that Sen. Buck Newton (R-Wilson) is considering a 2016 run for Attorney General. Although he has yet to officially announce, Sen. Newton has already received the endorsement of Speaker Moore (R-Cleveland). Other legislators rumored to be eyeing the open-seat race are Sen. Barringer (R-Wake) and Sen. Stein (D-Wake). Read more in the Wilson Times here.

• Governor McCrory was in Washington D.C. on Tuesday to testify before the U.S. House Transportation and Infrastructure Committee in his role as a member of the Republican Governor’s Association’s executive committee. The RGA has come out in favor of congressional action on transportation funding and McCrory’s focus was related to reauthorization. Two U.S. Congressmen from North Carolina, David Rouzer (R) and Mark Meadows (R), sit on the committee.

• Energy companies interested in hydraulic fracturing or “fracking” in the exploration of natural gas deposits in NC were able to begin applying for drilling permits on Tuesday. Environmental rules and regulations for drilling were approved late last year.

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