NC Legislature End of Session Report - 2014

BY: DOUG HERON, CHARLES B. NEELY, JR., RICHARD A. "RICK" ZECHINI

The North Carolina General Assembly adjourned their legislative short session on Wednesday, August 20th.  The session, which totaled 59 legislative days with 130 bills and resolutions enacted, was highlighted by bills that made adjustments to the state budget and changes to certain provisions of last year’s tax reform effort, and prescribed clean up requirements for coal ash ponds. 

The last few weeks of the session were largely uneventful, as the Senate and House could not agree on legislation dealing with pay flexibility for teacher assistants, economic development incentives, and local option sales taxes.  The two chambers also have vastly different views of Medicaid reform, and thus those issues remained unresolved.  Legislative leaders originally intended to return to Raleigh in November for a special session to consider Medicaid reform, but those plans were scrapped.  On a related note, some policymakers and interest groups are pushing for a special session to consider various economic development matters.  However, it is unclear whether such a session will take place.

Legislators and their challengers now turn their attention to the general elections that occur in November.  All 170 General Assembly seats as well as the state’s thirteen seats in the US House of Representatives are on the ballot.  In addition, the US Senate race between incumbent Senator Kay Hagan and current North Carolina House Speaker Thom Tillis should dominate much of the election year focus. 

The General Assembly will reconvene next year on January 14^th.  In addition to Medicaid reform, a large tax reform effort will again be a central issue for the 2015 legislative session. 

Budget

The primary focus of the session was making adjustments to the two-year budget enacted last year.  After weeks of negotiations, the House and Senate passed an agreement that was signed into law by Governor McCrory on August 7^th (view budget here, committee report here).  Highlights of the final $21.25 billion state budget include:

Public Education

• An average 7% pay increase for teachers.
• Increasing pay for all teachers to at least $33,000 a year.
• Reducing Department of Public Instruction budget by 10%, or $5 million a year.

Department of Health and Human Services

• Cutting $16 million to contracts and administrative expenses across the department, except to programs that provide direct services.
• Replacing a $20 million general fund appropriation to the pre-kindergarten program with Temporary Assistance for Needy Families block grant money and TANF emergency contingency funds on a one-time basis.
• Providing a $2 million cap for one year for group home residents ineligible for Medicaid personal care services.  The funding must be used only for supervision and medication management.

Justice and Public Safety

• Transferring the State Bureau of Investigation from the Department of Justice to the State Department of Public Safety.
• Establishing a three-judge panel to hear lawsuits challenging on their face the constitutionality of laws the General Assembly passes.

Transportation

• Giving motorists the option of getting "First In Flight" or "First in Freedom" license plates.
• Incorporating a push to end state funding for driver education classes offered in public schools, starting in July 2015.

General Government

• Funding three new investigators at the State Board of Elections to investigate possible cases of voter fraud and pursue other violations of election laws.
• Paying for two new special agents in the Department of Revenue to pursue individuals and businesses with overdue tax debts.

Special Budget Provisions

• Establishing a special oversight committee on the lottery, made up of 14 House and Senate members tasked with examining lottery operations and recommending changes.
• Detailing the process through which verified eugenics victims will be compensated, with initial payments by Oct. 31.
• Prohibiting the use of drones by state and local governments until Dec. 31, 2015, without special permission. Establishes extensive regulations regarding drone use and penalties for unlawful use.
• Requiring schools to have emergency epinephrine injectors on hand to treat serious allergic reactions.
• Establishing the intent of the General Assembly to work on Medicaid reform during a special legislative session in November 2014.
• Creating a grant program for film production companies in the Department of Commerce to replace existing film tax credit legislation, and providing $10 million toward the grant program in the first half of 2015.

Coal Ash

S729 - Coal Ash Management Act of 2014 was a priority this session after a coal ash spill in the Dan River back in February.  Construction or expansion of coal ash impounds will be banned beginning on October 1^st, 2014.  By the end of 2015, Department of Environment and Natural Resources (DENR) will divide coal ash sites into high-, intermediate- and low-risk categories.  High-risk sites must be excavated and their contents placed in a lined landfill by the end of 2019, and the same must be done for intermediate-risk sites by the end of 2024.  Low-risk sites can be "capped," which is meant to keep water from carrying contaminants into groundwater or surface waters.  The newly created Coal Ash Management Commission will have final approval of the site rankings.  Although Governor McCrory disapproves of a commission that is primarily appointed by the legislature to oversee the clean-up, he will likely sign the bill.

Tort Reform

S648 - NC Commerce Protection Act of 2014 (S.L. 2014-648) limits asbestos-related liabilities for certain successor corporations, creates transparency in contracts between the Attorney General and private attorneys, and provides protections to North Carolina companies that are sued by patent trolls trying to enforce bogus intellectual property claims.

Commerce Reorganization

H1031 - NC Economic Development Partnership Modifications (S.L. 2014-18) allows the Department of Commerce to contract with the Economic Development Partnership of North Carolina, a private nonprofit, to oversee job recruiting and marketing functions for the state.  The Department of Commerce has been planning for the partnership since last year, working closely with Governor McCrory and state lawmakers.

Tax Reform

H1050 - Omnibus Tax Law Changes (S.L. 2014-3) repeals municipal authority to levy privilege license taxes on businesses beginning July 1, 2015.  Cities and counties cannot change current privilege tax rates before that date.  H1050 was one of the first bills signed into law because of a provision regarding the collection of sales and occupancy taxes on private residence rentals, which was prevalent during the U.S. Open golf tournament in Pinehurst last June.   

Fracking

S786 - Energy Modernization Act (S.L. 2014-4) changed the end date of the moratorium on the issuance of hydraulic fracturing drilling permits.  The moratorium now ends 61 days after drilling rules are approved, unless lawmakers block those rules, instead of July 2015.  The North Carolina Mining and Energy Commission, which was tasked two years ago to establish the rules, is expected to finish its work by this fall.  Permits for the practice could be issued by next May.