NCGA Week in Review – March 18 – March 22

March 22, 2013

Pardon Our Dust

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Governor McCrory Releases Budget Proposal
Governor McCrory released his budget proposal on Wednesday. The proposal calls for the state to spend $20.6 billion in the first year of the plan starting July 1, 2013. McCrory’s proposal set aside large amounts of funding for emergencies, building repairs, and Medicaid costs. The budget includes $300 million over two years for state building renovations, $180 million to deal with potential Medicaid shortfalls and $77 million for upgrading information systems. Governor McCrory also placed $400 million in the rainy day fund, a fund for emergencies and other unexpected expenses, which is considered key in preserving the state’s top fiscal rating from bond agencies. The budget also includes $2.7 million in this coming year to rebrand and refocus the state’s economic development strategy. Governor McCrory also called for 5,000 new slots for preschool for at-risk 4-year-olds. Also included in the budget is monetary compensation to the victims of North Carolina’s former forced sterilization program, which ended in the 1970s. Governor McCrory also proposed cutting $136 million from the University of North Carolina system and increasing out-of-state tuition by 12.3% at Chapel Hill, NC State, and four other campuses. The budget did not include a tax overhaul but did call for the estate tax to be abolished, a loss of $52 million annually.
An overview of Governor McCrory’s Budget Proposal can be found here.
Senate Begins Tax Reform Discussions
Two tax reform bills were filed in the Senate this week and others are on the way. Senate Bill 363 would repeal the existing corporate franchise tax and replace it with a state “business privilege tax” to be paid by all businesses with limited liability. This tax is currently paid by C and S corporations. SB 363 would require limited-liability companies to pay the new privilege tax, as well as companies organized as corporations. The bill also eliminates state and local privilege taxes. Opponents of the legislation claim that the bill would lead to cities losing roughly $70m million in income per year. Senate Bill 394 was also filed this week. The legislation, titled “Lower Tax Rates for a Stronger NC Economy,” is revenue neutral with the current tax system. It would replace the current three personal income tax brackets with a single, 6 percent rate, while lowering the corporate income tax to 6 percent for all businesses. Under current law, the top personal income tax rate is 7.75%, and the corporate tax rate is 6.9%. The bill also lowers state sales tax rate from 4.75% to 4.5% while expanding the base to include some services not currently taxed. Nearly all corporate tax credits would be eliminated or allowed to expire.
Senate Appropriations Committee Votes to Nullify Dorothea Dix Deal
Senate Bill 334 passed through the Senate Appropriations Committee on Thursday after a heated debate. The bill would nullify the city of Raleigh’s lease on the Dorothea Dix hospital property. Supporters of the legislation argue that the state signed away the property for less than it’s worth and they want to craft a new lease with Raleigh that reserves some of the land for state offices. Meanwhile, opponents of the bill claim that it would set a bad precedent for the state to trash a three –month-old lease and called for continuity in government. The bill now heads to the Senate floor.
Berger Announces Plan for School Reform
Senate leader Phil Berger announced his plan to reform the education system in North Carolina on Tuesday. The plan would amend teacher tenure laws by proposing that tenured status be replaced with employment contracts up to four years in length. This change is a part of a second round of comprehensive public school reform that he and fellow Senate leaders introduced Tuesday. The legislation also focuses on merit pay, teacher and school evaluation, and reading instruction. This plan comes a year after the legislature approved parts of a Berger-sponsored plan that included more focus on reading in early grades and simplified a grading system for parents to judge schools. That round of reform included a provision to eliminate tenure that passed through the Senate, but never got out of the House. Supporters of the bill want to make it easier to remove poor teachers from the classroom. Opponents of the bill believe that it would make it even harder for communities to recruit and retain good teachers.
Voting Error Leads to UNC Board of Governors Appointment Fiasco
The House cancelled its Thursday calendar to address an error in tallying ballots that led to the chamber naming one person to the University of North Carolina Board of Governors who did not win the seat. Both chambers chose new members of the Board of Governors on Wednesday. The problem was with the last of eight selections for the House. The ballots were split into different piles to be counted by different members of the committee. There was a math error when the groups added up their totals. After the explanation and motion to recount, the committee recounted the votes under the supervision of the House majority and minority leaders and staff from the clerk’s office. The recount ended in James Nance of Albemarle being out of the running after seemingly winning a seat the day before. The final seat went to George Sywassink of Charlotte. The Senate selected its eight appointees without incident.
House Approves Two DWI Bills
The House unanimously approved two separate bills toughening North Carolina’s habitual drunken driving law. House Bill 31 would make a drunken driving offense a habitual DWI if the offender had previously been convicted of a habitual DWI. The House also approved House Bill 40, which would decrease the number of DWI convictions from four to three before someone can be considered a habitual drunken driver. The habitual charge is a felony and carries a prison sentence of at least a year. An initial DWI charge is a misdemeanor. The legislation if passed would put North Carolina  in line with other states that have seen a drop in drunken driving.

Please contact the Raleigh McGuireWoods Consulting team if you have any questions or comments:

Harry Kaplan, Senior Vice-President
Jeff Barnhart, Senior Vice-President
Franklin Freeman, Senior Vice-President
John Merritt, Senior Vice-President
Johnny Tillett, Senior Vice-President
Rita Harris, Vice-President
Bo Heath, Vice-President
Kerri Burke, Assistant Vice-President
Sarah Wolfe, Research Assistant
Katy Feinberg, Strategic Communications