Our thoughts and prayers go out to the families of the victims and church members of the vicious shooting in Charleston, SC.

This Week

The Senate budget writers were very active this week as lawmakers worked long days, late into the evenings to get the budget passed. The Senate budget includes a multitude of policy changes that extends the budget bill’s page length to over 500 pages compared to the House’s 329 pages. To say the two budgets are different is a drastic understatement. The House will vote next week to not concur and send the budget to a Conference Committee where lawmakers will have two weeks to reach an agreement by the end of the State’s fiscal year. Last year’s budget did not become law until August 7th and it is a near certainty that lawmakers will again fail to meet the deadline and have to pass a continuing resolution to maintain funding for the State until they do. One of the House Appropriations Chairmen, Rep. McGrady (R-Henderson), commented Thursday that lawmakers could be here until Labor Day due to all of the policy matters contained in the Senate budget. Lawmakers also intend to take a week-long recess the week after July 4th.

On Monday, the U.S. Supreme Court decided not to hear the State’s appeal to a decision from a federal appeals court that struck down a portion of a 2011 North Carolina law called the Abortion-Woman’s Right to Know Act. The law, which required doctors to display and describe, in real time, an ultrasound to the woman seeking the abortion, was deemed to violate providers’ freedom of speech by the lower court. The legislation was vetoed by then Gov. Beverly Perdue (D) and overridden by the legislature. The law also established a 24-hour waiting period for women seeking an abortion which was just extended to 72-hours this session in Session Law 2015-62.
US Supreme Court declines to take up the NC ultrasound law – N&O

After a raucous two days, the House finally obtained enough votes to pass House Bill 562, Amend Firearm Laws, but only after a series of amendments that softened or removed several of the more contentious provisions. The section that had drawn the most criticism would have detached local sheriffs from the pistol permitting process. That provision was removed from the bill after opposition surfaced from a number of groups including the Sheriffs Association and Governor McCrory (R) who said he could not support the bill if the provision remained. Several other contentious provisions were removed as well including allowing legislators and staff to carry concealed weapons in the Legislative Building and another that would have restricted the ability of healthcare providers to inquire into a patient’s firearms ownership. An amendment also preserved a lifetime ban for offenders of certain violent misdemeanors on obtaining a pistol permit. The final vote count was 78-37 with five Democrats, Representative Brisson (D-Bladen), Salmon (D-Harnett), Turner (D-Buncombe), Waddell (D-Columbus) and Wray (D-Northampton), voting with Republicans on the bill’s passage. The bill now awaits action in the Senate.
NC House agrees to remove controversial gun provisions – WRAL
Watered down bill to ease gun restrictions passes House - Citizen-Times

Legislation in the News:
Duke Skipping Carolina Solar Fight as Apple, Google Pick Sides – Bloomberg
NC legislature votes to soften voter ID requirement – N&O
Possum issue heads back to court – WRAL
Sunday hunting compromise easily clears NC House – Citizen-Times
Legislation to stop cheating companies in NC passes another hurdle – N&O
Electronic NC car registration, property tax option approved – N&O

Senate Budget Proposal

House Bill 97, the budget bill that now reflects the Senate’s spending priorities which would increase the State’s total spending by roughly 2% compared to approximately 5% in the House budget. The proposal also includes a number of policy revisions, including healthcare changes and a sweeping tax package. The Senate debated the measure for the majority of the day Wednesday and briefly on Thursday, ultimately passing the budget 30-19 with three Republicans, Senators Hartsell (R-Cabarrus), Rucho (R-Mecklenburg) and Wells (R-Catawba), voting alongside Democrats against the budget on second reading. On third reading Thursday, Sen. Rucho was the lone Republican to vote “no” with Sen. Hartsell and Sen. Wells switching their votes to bring the final tally to 32-15.
NC Senate proposes trimmed-down, $21.47 billion budget plan – N&O
NC Senate votes 30-19 for $21.47 billion budget plan – N&O
Negotiations set to begin as Senate finishes its budget – WRAL

Some of the pertinent provisions include:

Transportation

• Increases fees for drivers licenses, vehicle titles and other fees by an average of 20%
  • House budget was an average of 30%
• Does not make changes to the gas tax
  • House lowered from 35 cents per gallon to 33 cents
• Does not address the Governor’s proposed $1.4 Billion transportation bond
  • House provided $50 Million for debt service payments
• Ends transfer of money from the Highway Trust Fund to the General Fund
• DoesnotincludefundsrequestedbytheGovernortobuildanewDMV headquarters
  • Same as the House

NC Senate budget raises DMV fees 20 to 25 percent – N&O

Health & Human Services

• Includes policy change to eliminate Certificate of Need (CON) phasing it out by 2019 over a three-year period
• Includes policy change implementing the Senate plan for Medicaid Reform
• Does not renew contract with Community Care of North Carolina (CCNC)
• Funds a state-run Health Information Exchange (HIE), currently contracted
• Establishes statewide base rate for Medicaid reimbursements to hospitals
• Increases Medicaid rate for primary care doctors by 22% and by 26% for OBGYN’s
• Eliminates COPA for Mission Hospital in Asheville, NC
• Increases the eligibility age for foster care from eighteen to twenty-one
• Eliminates funding for the Wright School, a residential mental health treatment center for youth ages six to twelve with serious emotional and behavioral disorders
• Provides additional three-way psychiatric bed funding to increase capacity from 165 beds to 172 beds
  • House increased to 180 beds
• Includes $1 Million in recurring funds for the poison control center

Medicaid Reform Part of Senate Budget Plan – Carolina Journal
NC Senate considers repeal of law governing Mission – Citizen-Times

Education

• Fully funds student enrollment growth
  • Same as House
• Increases starting salary for teachers from $33,000 to $35,000
  • Same as House
• Reduces funding for Teacher Assistants by roughly half while simultaneously adding funding to reduce class size for grades K-3 with student-teacher ratios to 1-17 for kindergarten and 1-15 for 1st, 2nd and 3rd grades
• Reduces funding for the Department of Public Instruction by 10%
• Increases community college tuition by $4 per credit hour or a total of $128 per year to a full-time student
  • Same as House
• Provides funding for certain out-of-state veterans to qualify for in-state tuition
  • Same as House
• Increases funding for textbooks and digital learning to $60 Million
  • $14.5 Million less per year than House proposal
• Provides $8 Million to stabilize the ailing Brody School of Medicine at East Carolina University
  • Same as House
• Eliminates the driver’s education program in public schools while also eliminating the requirement that those obtaining a learners permit have to take the course
  • House restored funding for program

From lottery to teacher pay Senate budget delves into big policy issues – WRAL

Natural & Economic Resources

• Moves NC Zoo, NC Aquariums, the State Parks System and the Museum of Natural Science out of the Department of Environment and Natural Resources (DENR) into the Department of Cultural Resources to form a new Department of Natural and cultural Resources and renaming DENR the Department of Environmental Quality as the Governor requested
• Provides $100,000 to the Department of Agriculture and Consumer Services to market beer produced in North Carolina
• Reduces funding to the Wildlife Resources Commission by approximately 21%
  • House reduced 23%

Justice & Public Safety

• Increases funding for the operating budget of the Court System by $3.3 Million
  • House increased by $6.3 Million
• Does not fund updating the technology the court’s filing system
  • House appropriated $11.9 Million
• Funds six new technician jobs for the State Crime Lab
  • Same as House
• Cuts $3 Million from the UNC Law School

Senate GOP docks UNC Law $3M – WRAL

Miscellaneous

• Creates Department of Information Technology as the Governor requested
• Creates a Department of Military and Veteran’s Affairs as the Governor requested
  • Same as House
• Provides $10 Million for film grants
  • House increased to $40 Million
• Provides $9.5 Million to replace the roof of the Legislative Building
  • House had approximately $4 Million

Tax and Incentives

The Senate budget also includes last the finance package leadership unveiled last week in the PCS to House Bill 117 the NC Competes Act. The Senate plan includes a number of tax changes as well as a reworking of the State’s economic development tools. No amendments were allowed to the finance portion of the budget during the Senate Finance Committee with leadership requiring they be held for the floor. Provisions of the proposed legislation include:

• Provides $15 Million per year to the Job Development Investment Grant (JDIG), the State’s primary economic development tool annually and increases it to $30 Million if there is a “high-yield ($750 Million investment and 2,000 jobs) project”.
• Changes the redistribution of sales tax revenues to counties from strictly a point-of-sale model, to have more emphasis on a per capita model with 20% of revenues allocated by point-of-sale and 80% based on county population, hitting populous and tourism based Counties harder and benefitting rural Counties
• Allows Counties to levy an additional sales tax by referendum not to exceed 2.5% with the exception of Durham and Orange Counties which would be able to increase theirs by to 2.75%
• Reduces the personal income tax rate from 5.75% to 5.25% in 2016
• Increases the standard deduction by 2020 to $18,500 for married filing jointly and $9,250 for individuals
• Restricts charitable deductions (currently unlimited deduction) to be included in the $20,000 total cap for itemized deductions
• Reinstates medical expense deduction but still falls under the $20,000 total cap for itemized deductions
• Has three-year phase in for a single sales factor method of taxation for corporations
• Expands sales tax to new services including installation, veterinary and pet care services, maintenance and repair services and advertising services
• Expands sales tax with a cap of $500 per article to the sale of mill machinery and parts and the sales of certain recycling companies, R&D companies, industrial machinery refurbishing companies and companies located at port facilities
• Imposes State sales tax on manufactured homes, modular homes, aircrafts (capped at $5,000, previously $1,500) and boats (capped at $1,500 which is the current level)
• Reduces the cap on sales tax reimbursements for nonprofits from $45 Million annually to $1 Million in 2020, aimed at hospitals and other large nonprofits

A group of nonprofits including representatives of hospitals, churches, universities and other organizations held a press conference on Wednesday to make their case against the proposed tax plan. Nonprofit leaders oppose the cap on the sales tax refund as well as including charitable deductions in the $20,000 cap for individuals’ tax returns.
Nonprofit leaders say sales tax, charitable deduction changes would hurt – WRAL
N.C. Senate amendment spares Wake County transit tax plan – TBJ
Proposed sales tax expansion could take bite out of pet owners' wallets – WRAL

Conflicting Medicaid Proposals

House leaders in the Appropriations Committee Thursday continued to work on their proposed Medicaid Reform plan which bill sponsors Rep. Dollar (R-Wake) and Rep. Lambeth (R-Forsyth) describe as Provider-led Entities (PLE’s) to manage Medicaid patients. The proposal is very similar to the House plan from last year that would have used what were called, Accountable Care Organizations (ACO’s). In the proposed system, doctors and hospital networks would form these entities and would be responsible for controlling cost and assuming the risk in a capitated system. The plan would phase in over five years but excludes mental health, pharmacy and dental altogether. Supporters of the bill include the North Carolina Hospital Association, N.C. Medical Society, and DHHS under Gov. Pat McCrory. There appears to be strong bipartisan support for this approach among House members. The bill is calendared for a hearing in the full House next Tuesday.

Meanwhile, the Senate debated the budget which includes their desired outcome for Medicaid Reform. The Senate plan would establish three statewide plans to manage the State’s Medicaid population with a mix of both private Managed Care Organizations (MCO’s) or PLE’s. It would also divide the State into six regions which could have up to two additional regional PLE’s each with an aggressive timeline of reaching full-capitation by August 1, 2017. In addition, it would remove Medicaid from under DHHS and establishing a new cabinet-level, independently appointed Health Benefits Authority to oversee the program. This plan is to be a whole-person approach with no exceptions. Senate leaders announced earlier that they would not adjourn session sine die until a solution had been reached for controlling Medicaid costs. To again paraphrase Rep. McGrady, it appears they could be here for a while.
N.C. lawmakers near familiar impasse on Medicaid – Star News
Health care reform divides GOP – Winston-Salem Journal
NC Senate budget would shift Medicaid to outside agency – N&O

In the News

Tom Apodaca: Senate’s enforcer uses muscle, humor to deliver GOP agenda – Charlotte Observer

Gannon: A loss for Democrats – Daily Reflector

‘Main Street’ Democrats look to the middle for pro-business NC voters – Charlotte Observer

NC has toughest Senate races in the country – N&O

Amid incentive uncertainty, renewable energy projects rush to benefit – TBJ

Surging dollar to blame for blip in 'Carolina Comeback' – WRAL

Court rules for DHHS in NCTracks case; keeps door open for providers – TBJ

N.C. governor holds steady on toll lanes – CBJ

Settlement reached in Bonner Bridge dispute – TBJ

It's official: $27.4B Reynolds-Lorillard merger complete – TBJ

Duke Energy, Norwegian fund in talks that could salvage $420M investment – CBJ

NC Senate defeats NC House in milk chugging contest – N&O

Thom Tillis, VA secretary working on agency problems – Citizen-Times