NCGA Week in Review

Late Tuesday night, the Senate released its budget proposal for the 2017-19biennium. In apress conferenceon Tuesday, Senate President Pro Tempore Phil Berger (R-Rockingham) notedthat the budget, “delivers nearly $1 billion in tax relief to the middlesclass and our state’s job creators, ensures 99% of taxpayers pay less or nostate income tax, increases teacher pay, generously funds our publicschools and helps rebuild communities devastated by Hurricane Matthew – allwhole saving for a future rainy day.” The Senate reviewedSB 257: Appropriations Act of 2017in committee meetings today and it will be sent to the floor for votestomorrow and Friday. Once the SB 257 is approved by the Senate, it willhead to the House. This year, House and Senate budget writers have workedclosely together and expect final negotiations to be smoother than prioryears. According to House Rules Chairman Rep. David Lewis (R-Harnett), thelegislature plans to send the budget to the Governor by June 15.

Senate Budget Proposal Highlights

SB 257 proposes a 2.5% spending increase from last year, with totalspending equal to $22.9 billion. Here’s a glimpse at the Senate’spriorities:

• $150 million appropriated to disaster relief assistance to victims of Hurricane Matthew.
• Dedicates $363 million to the state’s rainy day fund – which will bring the find to its highest ever balance.
• 1.5% pay raises for most state employees and average 3.7% pay raises for teachers.
•  Implementing a tax cut plan, which was approved by the Senate in April, that would lower the personal income and corporate income tax rates, expand the standard deduction and make changes to some credits.

Education

K-12 Education:

• Increases teacher pay by an average of 3.7% in year one and 9% in year two.
• Creates a plan to for first-year teachers with certain academic qualifications to begin at a higher salary schedule.
• Expands the Advanced Placement/ International Baccalaureate and Career and Technical Education Teacher Bonuses to include educators in charter schools.
• Creates a Drivers Safety Incentive program to reimburse families up to $275 for driver’s education instruction costs when a student passes their permitting test.
• Implements a pilot program with Life Changing Experiences to educate teenagers on dangerous behaviors and encourage healthy lifestyles.
• Makes numerous changes to state laws on school performance to conform with the Every Student Succeeds Act.
• Continues to grow the reserve funds, in line with the forward funding established in last year’s budget, for the Opportunity Scholarship Program, which awards scholarships to eligible K-12 students attending certain nonpublic schools.

Community Colleges:

• Funds NC Works Career Coaches to work for local community colleges in partnering high schools.
• Transfers the Apprenticeship NC Program from the Department of Commerce to the NC Community College System.

Universities:

• Establishes a Future Teachers of North Carolina program to develop curricula and provide professional development for high school teachers to encourage their students to enter the teaching profession.
• Reestablishes NC Teaching Fellows as a loan program for students interested in entering teaching in science, technology, engineering or math.

Health & Human Services

• Continued support for NC MedAssist, TROSA, Community Health Care Centers and other programs that aim to serve local communities and at risk populations.
• Reduces the NC Pre-K waitlists by appropriating $6 million from the Temporary Assistance for Needy Families Block Grant.
• Increases the annual appropriation for Smart Start, an early literacy program.
• Appropriates $500,000 annually to the state’s smoking cessation programs – QuitlineNC and You Quit Two Quit.
• Provides a one-time appropriation of $8 million to increase impatient behavioral health beds in rural areas.
• Reduces funding for LME/ MCOS by $36.7 million.
• Repeals Certificate of Need Laws by 2025 and creates limited immediate exemptions for gastrointestinal endoscopy and ocular surgical procedures.
• Expands the NC Innovations Waiver by 250 slots beginning January 2018.

Agriculture and Natural and Economic Resources

• Provides additional funds for the state to purchase firefighting equipment, including the purchase of a new airplane.
• Invests $200,000 to increase the availability of fresh agricultural products in food deserts.
• Increases funding for the Economic Development Partnership of North Carolina for marketing and advertising tourism.
• Reduces funding for Job Development Investment Grants and the One North Carolina Fund.

Justice and Public Safety

• Establishes an opioid overdose response pilot project with the City of Wilmington.
• Creates an Alcohol Law Enforcement Division of the Department of Public Safety.
• Begins the state’s process to “raise the age” and ensures that the state will try 16 and 17 year olds as juveniles in misdemeanor offenses by 2020.
• Creates a new Department of Adult Correction and Juvenile Justice, separate from the existing Department of Public (DPS) Safety. The new department would be responsible for all duties currently carried out by the Divisions of Adult Correction and Juvenile Justice under DPS.

Military & Veterans Affairs

• Establishes a moratorium on permitting wind energy facilities and directs the General Assembly to contract with a private vendor to create a map that considers where wind energy facilities may operate without interfering with military training facilities already located in the state.
• Appropriates $125,000 for the implementation of the Military and Veterans Healing Arts Grant Program to engage current service members, veterans and military families with the arts.
• Appropriates an additional $2 million to assist communities in investment efforts to sustain and maintain the state’s military programs.

Transportation

• Directs NCDOT to further increase outsourcing of preconstruction activities to private contractors to 60%.
• Extends the moratorium on adoption of new maps under the Map Act until July 1, 2018.
• Provides an additional $3 million for capital projects in both the 2017-18 and 2018-19 fiscal years.
• Appropriates an additional $140,186,190 to the Strategic Transportation Investment Program.
• Increases funding for capital improvements at certain commercial airports by $40 million in year one and $50 million in year two and beyond, using revenue from rental car sales taxes.

Revenue Changes & Savings

• Reduces the personal income tax rate from 5.499% to 5.35%
• Increases the standard deduction to $20,000 (currently $17,500) if married, filing jointly; $15,000 (currently $14,000) for head of household; $10,000 (currently $8,750) for single; and $10,000 (currently $8,750) if married, filing separately.
• Expands the child deduction for people eligible for the federal child tax credit. Deduction ranges from $0 to $2,500.
• Reduces the income tax rate for C Corporations from 3% to 2.75% beginning 2018, and to 2.5% in 2019.
• Adopt market-based sourcing for multistate income tax apportionment.
• Creates a new general statute on market based sourcing for banks.