This Week

It was an eventful week at the General Assembly and perhaps the most noteworthy news on Jones Street took place on Wednesday. Senate leadership held a press conference announcing that they were willing to remove contentious policy items, such as Medicaid reform, economic incentives and sales tax redistribution from the budget. They acknowledged that the major policy provisions they included in their budget proposal were stalling negotiations and instead chose to put them in stand-alone bills which they unveiled on Thursday. Sen. Berger (R-Rockingham) however did take the opportunity to single out House Appropriations Chairman Rep. Dollar (R-Wake) for not meeting with Senate budget writers. He also noted that the Senate would not agree to a spending plan totaling more than $21.65 Billion, roughly $180 Million more than the Senate’s original proposal. These proposals were presented as compromises, but the House has not signaled agreement yet. The likelihood that the State will need another Continuing Resolution (CR) seems certain as the current CR expires next Friday, August 14th.

Senate offers slimmed-down budget deal – WRAL
NC lawmakers race to beat budget deadline – WNCN
NC senator says House canceled six budget meetings – N&O

The House was busy all week pushing through a renewed infrastructure and transportation bond proposal. House Bill 943 is a $4.1 Billion combination of cash and borrowing with modified provisions from both the Governor’s and the Senate’s proposals. The first part of the bill would ask the voters on the 2016 primary ballot for their approval to borrow $2.85 Billion. The Governor’s proposal called for $2.85 Billion bond that would be used for both infrastructure and transportation. The House version however uses the entirety of the $2.85 Billion bond for infrastructure improvements including State buildings, parks, news school construction, community colleges and the UNC system. The transportation portion of the bill embraces the Senate’s proposal to end the transfer of money from the highway trust fund to the general fund into the bill, making $1.3 Billion available over the next six years for road construction. It ultimately passed the House 76-29 in a bipartisan vote and will now go to the Senate.

House proposes spending $4.1B to improve infrastructure – WRAL
NC House panel backs $2.8 billion bond vote for roads and infrastructure – N&O
House moves NC bond referendum date against McCrory’s wishes – WWAY

On Thursday, the Senate Finance Committee approved a proposed amendment to the State’s Constitution in Senate Bill 607, the Taxpayer Bill of Rights, also known as TABOR. The amendment is designed to limit government spending while pushing the State away from income taxes towards a consumption based tax. The proposal would do three things: 1) tie State spending increases to inflation and population growth; 2) establish an emergency reserve fund for times of economic hardship that could be made available to lawmakers with a two-thirds vote of each chamber; 3) cap the personal income tax at 5% (currently 5.75%). Constitutional Amendments must be approved by the voters and can only be placed on the ballot by a two-thirds majority vote of each chamber. If passed by the General Assembly, the question would be put to the voters in the 2016 primary election. In North Carolina, the Governor does not have the power to veto proposed Constitutional Amendments.
NC Senate looks to amend constitution to cap taxes, spending – N&O

The House Judiciary I Committee Wednesday passed House Bill 366, sponsored by Rep. Millis (R-Pender), which calls for a convention of the states to amend the U.S. Constitution. If the bill becomes law, North Carolina would join four other states in calling for a balanced budget amendment to be imposed on the federal government. Article V of the U.S. Constitution allows for a convention of the states to be called, upon the ratification of a proposed amendment by the state legislatures of two-thirds, or 34 of the 50 states. However, this bill calls for 38 states to pass the compact by April of 2021. Opponents of the bill warned against calling such a convention because there is question as to whether the convention can be restricted in what amendments it can make to the Constitution once it convenes.
Balanced budget amendment gets initial push in NC – WRAL

Governor McCrory signed two controversial bills into law Thursday. House Bill 562, Amend Firearms Laws, makes various changes to gun laws in North Carolina. House Bill 774, the Restoring Proper Justice Act, allows executions to resume in the State without a medical doctor present, while maintaining the secrecy of the drugs used. Both bills drew sharp criticisms from left leaning advocacy groups and praise from several groups on the right.
McCrory signs executions, gun bills – N&O

Legislation in the News:
NC Senate vote sets up showdown with EPA on air quality rules – N&O
Senate OKs terror claims, armed Guard members – WRAL
Agreement reached over appointments to unemployment appeals board – N&O
Energy deal sealed via N.C. General Assembly bill – Rocky Mount Telegram
NC Senate votes to make ‘revenge porn’ a felony – N&O
Panel rules Soucek ETJ law unconstitutional – Watauga Democrat
Protections for identity theft and mistaken identity signed by governor – Jones & Blount
Bill approved by Senate would reduce stream mitigation in NC – N&O
NC House doesn’t back change to charter school oversight – N&O
State considering bill to eliminate recycling charges for TV manufacturers – WRAL

NC Competes Act

Thursday, the Senate Finance Committee unveiled a PCS to House Bill 117, the NC Competes Act. The bill makes various tax changes and modifies the requirements for how the State allocates economic incentive funds. Provisions in the bill include:
Job Development & Investment Grant (JDIG) modifications that would:

• Increase the available funds in JDIG to $20 Million per calendar year with no high yield project
• Add $15 Million in flexibility to attract high yield projects ($750+ Million in investment/2,000 jobs) bringing maximum JDIG availability per calendar year to $35 Million
• Extend program three years to January 1, 2019
• Require tier three counties to have local government participation in recruitment of the project and to have offered additional incentives to be eligible for JDIG funds
• Require local match for One NC fund on a tiered requirement: 3 State dollars:1 local dollar for tier 1 counties, 2:1 for tier 2 counties, and 1:1 for tier 3 counties
• Move County allocation of sales tax revenues from 75% point of sale/25% per capita distribution to a 50%/50% distribution
• Phase in single sales factor taxation over a three year period
• Make various tax changes for data centers and aviation
• It is important to note that the bill did not contain a number of previously proposed changes including a reduction of the cap on sales tax refunds for nonprofits or expansion of the sales tax to include advertising, veterinary services, or maintenance services.

Key N.C. incentive gets new life, moving quickly through legislature – CBJ
NC Senate unveils compromise on sales tax distribution, jobs incentives – N&O
Senate offers compromises on sales tax, economic development – WRAL

Medicaid Reform

The Senate unveiled a Proposed Committee Substitute (PCS) to House Bill 372 this week, which the House sent over as a strictly Provider-Led Entity (PLE) solution to Medicaid reform. The House and Senate agree that Medicaid needs to be reformed to give the State budget predictability, but disagree on the approach. Senate leadership favors commercial insurers to manage the State’s Medicaid population, although their proposal in the budget would allow both to compete. The latest Senate proposal would: 

• Create a new cabinet level Department of Medicaid (DOM) to administer Medicaid, removing it from the Department of Health & Human Services (DHHS) by January 1, 2016
• Give the new DOM the power to submit waivers and State Plan amendments (SPA) to the Center for Medicare & Medicaid Services (CMS)
• Give DOM full budgetary authority to spend funds appropriated by the NCGA
• Move the state to capitated, full-risk contracts one year after CMS approval
• Allow both Managed Care Organizations (MCO) and PLE’s to operate in managing the State’s Medicaid population, three statewide contracts which can be either MCO or PLE and twelve regional PLE contracts
• Establish Medicaid reserve account to cover budgetary shortfalls with minimum of 5% of fiscal year appropriations and a maximum of 12%
• Establish Joint Legislative Oversight Committee on Medicaid to oversee budgetary, financial, administrative and operational aspects of DOM
• Appropriate $8 Million to administer the State’s Health Information Exchange (HIE)
• Terminate the State’s contract with Community Care of North Carolina (CCNC)

NC Senate proposal would reshape Medicaid – N&O
Senate offers reworked Medicaid plan – WRAL
Wos Resignation May Open Door for Medicaid Reform – Carolina Journal

Cabinet Shuffling

On Wednesday, the Governor’s office announced another cabinet departure, this time DHHS Secretary Aldona Wos. The announcement comes less than a week after the departure of Tony Tata, now former Secretary of the Department of Transportation (DOT). Wos, one of McCrory’s most trusted advisors, has served in the role since Gov. McCrory took office. Announcing the departure in a press conference, the Governor became noticeably emotional as he presented Sec. Wos with the Order of the Longleaf Pine, the State’s most prestigious award, for her service to the State.

Wos reportedly made the Governor aware of her intentions a month ago, giving him time to select a successor in Rick Brajer, a former biotech executive who stood with them at the press conference. Wos will officially depart from the cabinet in two weeks after which Brajer will assume the post. The Governor also filled the void left by Tata at DOT, tapping interim Secretary Nick Tennyson to officially to head the department.
Wos' tenure at DHHS filled with more criticisms than praise – TBJ
NC lawmaker says health secretary's resignation comes at a bad time – WECT
Former LipoScience and BD exec Rick Brajer to lead NC DHHS – TBJ
Former Durham mayor Nick Tennyson is new NCDOT secretary – N&O

In Other News

• Francis De Luca of the Civitas Institute, a conservative think tank based in North Carolina, wrote a scathing piece over the weekend accusing Former Secretary of Transportation, Tony Tata of using the resources of his office inappropriately. Read the full post here.
• Former North Carolina Congressman Heath Shuler (D) is exploring a run against two-term incumbent Sen. Richard Burr (R). Read more here from the National Journal.
• For a full recap of the week, listen here to this week’s Domecast from the N&O.

In the News

Forecast: NC economic growth poised to accelerate over remainder of 2015 – N&O

North Carolina Medicaid: $131M in available end-of-year cash – N&O

NC government leaders back registration drive at legislature – ABC 11

Slim turnout expected in next month’s NC primaries – Charlotte Observer

Legislators tinkering under state’s economic hood – N&O

Grand jury indicts former SEANC director Dana Cope – WRAL

N.C. regulators OK Duke Energy plan for backup-power turbines – CBJ

Blue Cross ups rate request for ACA plans, says these customers come with higher than expected cost – TBJ