Pardon Our Dust
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ADJOURNMENT RESOLUTION
The North Carolina Senate approved its adjournment resolution a little after midnight on Thursday, after passing the budget and concurring on several measures that were being negotiated out in conference committees. SJR 881, Adjournment, states that the Senate and House of Representatives will adjourn on Saturday, August 2, 2014 until Thursday, August 14, 2014 at noon.
When the legislature adjourns for the year, it gives Governor Pat McCrory 30 days to veto any legislation. With the stipulations set in SJR 881 for the House and Senate to reconvene on August 14, the Governor will only have the typical 10 days to sign or veto legislation, instead of the 30 days he would if August 2 was the legislature’s final date of adjournment. When the House and Senate reconvene on August 14, they will be allowed to reconsider any vetoes, take up bills relating to litigation that the State is involved in, and take up bills in which the General Assembly makes appointments to public offices.
The last part of the bill states that the General Assembly will adjourn on Friday, August 15, 2014 until Monday, November 17, 2014 at 6:00p.m. for a special session. During a special session, the legislature may only consider legislation that is expressly written out in the adjournment resolution. This special session will focus on two specific issues: Medicaid reform and coal ash management. Although both chambers have passed different forms of Medicaid reform, House and Senate leaders have expressed that a Medicaid reform special session will allow them time to make sure that it is done carefully and correctly for North Carolina.
BUDGET
After over a month of contentious negotiations between House and Senate leaders over the budget for fiscal year 2014-2015, which began on July 1, a compromise was met this week. The final version of the $21 billion budget was released to the public around 11:00p.m. on Wednesday night, and was voted out of the Senate chamber on Friday. Before the budget can go to Governor McCrory’s desk for final signature, it must receive final approval from the House, which is expected to happen on Saturday.
The budget received preliminary approval from the Senate on Thursday mostly along part lines, with two Democrats joining the majority party. When the final vote of the budget was completed at 12:44a.m. on Friday morning, another Democrat joined in with the Republican majority, making the final vote 33-10.
The House gave their first approval of the budget on Friday afternoon, supporting it 68-46.They will take their final vote on the budget at 10:00a.m. Saturday morning.
Appropriations Act of 2014 Highlights:
– Teachers will receive an average 7 percent pay raise. Full-time state employees will receive $1,000 salary increase plus another $236 in benefits.
– Transfers the State Bureau of Investigation from the Department of Justice to the Department of Public Safety.
– When motorists go to get a new license plate, they will have the option between “First in Flight” or “First in Freedom” license plates. Currently, there is only one standard plate, “First in Flight.”
– Requires public schools to have a stock of emergency epinephrine injectors in case of a serious allergic reaction.
– Prohibits the use of drones by state and local governments until December 31, 2015, unless they receive special permission.
COAL ASH
The legislation that would force Duke Energy to clean up their 33 coal ash sites across the state reached another stalemate during the weaning hours of session Thursday night. After announcing earlier in the week that House and Senate conferees could not come to an agreement on SB 729, Coal Ash Management Act of 2014, that momentarily changed on Thursday night when the Senate said that they would concur on the House’s version of the bill, if that meant the legislation would pass out of the legislature.
When the Senate came back after midnight on Thursday night to complete their final vote on the budget, however, Sen. Apodaca, R-Henderson, announced that the Senate was no longer in agreement. The Senate blamed the House for the failure to reach a deal, while the House has blamed the Senate. Rep. Ruth Samuelson, R-Mecklenburg, told the News & Observer that it complicated the process to come to an agreement with the Senate adjourning on Friday. Sen. Apodaca sent forth an amendment to the Adjournment Resolution stating that the legislature may take up coal ash issues at their November special session.
FILM INCENTIVES
On Thursday, Rep. Ted Davis, R-New Hanover, proposed an amendment to extend the current refundable film tax credit program for a year, while setting several limitations on the program, including reducing the rebate available to 22.5 percent, currently at 25 percent. The amendment would also direct the General Assembly’s Program Evaluation Division to study the return on investment of this program during the interim.
The amendment to SB 763, Revenue Laws Technical Changes and Other Changes, passed on a bi-partisan basis, 77-36, after taking a contentious journey through the legislature throughout the session. In a rare speech on the House floor, Speaker of the House Thom Tillis, R- Mecklenburg, threw his full support behind the amendment, advocating for the one-year extension so that there is time for more study in the next year. The GOP majority was split on the issue, some saying they have an ideological problem with incentives in general. All but two Democrats voted for the amendment.
The final future of the refundable film tax credit program is unclear right now. The Senate has tentatively adjourned without taking up HB 763, meaning that it may officially be dead for the year. The budget includes a provision to create a $10 million grant program to replace the existing program that the Rep. Davis amendment strived to save.
LOCAL SALES TAX CAP
Middle ground was finally reached on legislation initially proposed by Senate leaders that caps the maximum local sales tax for counties at 2.5 percent. While this legislation would provide most counties the capability to raise sales taxes without a referendum, it would restrict the taxing ability of four of North Carolina’s urban counties- Wake, Mecklenburg, Guilford and Forsyth. Two other urban counties, Durham and Orange, already have their local sales tax set at 2.75 percent and were grandfathered in.
The compromise version of the bill will now allow those four counties to raise their tax cap up to 2.75 percent, but only if voters agree to a quarter-cent increase by the end of 2014. While Guilford and Mecklenburg counties already planned to have that proposal for a quarter-cent increase on their November 2014 ballots, Forsyth and Wake have no such plans so far. In order for Forsyth and Wake to be able to raise local sales taxes for education, general use and transit, they must scramble to add this proposal to their November ballots.
HB 1224, Local Sales Tax Options/Economic Development Changes, came out of conference committee late Thursday night. Aside from the local sales tax provisions, the bill also includes provisions on several Department of Commerce grant programs, including the creation of the Job Catalyst Fund. The conference report also tacked on various provisions from SB 763, minus the House-approved provisions on the film tax incentive program and the extension of the historic preservation tax credit.
The Senate approved the measure shortly after midnight on Friday, 32-11. The bill will receive its final approval from the House on either Friday or Saturday.
PATENT TROLLING
After spending several weeks in a conference committee, the NC Commerce Protection Act of 2014, SB 648, was confirmed on a bi-partisan basis by both chambers yesterday. The legislation, backed by several tech companies like the SAS institute, pushed for the law after testifying that they are forced to defend themselves against non-practicing entities that are created for the sole purpose of holding a patent. SB 648 will allow local companies to hold the owners of NPEs accountable, by going after their personal assets rather than just the assets of the shell company.
The bill passed the Senate 45-0 and the House 81-30. The bill is now on the Governor’s desk for final approval.
Please contact the Raleigh McGuireWoods Consulting team if you have any questions or comments:
Harry Kaplan, Senior Vice President
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Jeff Barnhart, Senior Vice President
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Franklin Freeman, Senior Vice President
ffreeman@mwcllc.com
John Merritt, Senior Vice President
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Johnny Tillett, Senior Vice President
jtillett@mwcllc.com
Kerri Burke, Vice President
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Bo Heath, Vice President
dbheath@mwcllc.com
Sarah Wolfe, Assistant Vice President
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Katy Feinberg, Strategic Communications
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