2009 LEGISLATIVE SESSION MEMO #27

On Monday, after last week’s finance package meltdown the members slowly returned to Raleigh. The House Democrats caucused before Session on Monday to discuss what they needed to do to complete their work and who should stay and who could go home and return when they were closer to finishing. After much debate the members agreed they should all stay and continue to work to end the Session.

On Tuesday, there were very few committee meetings except for Senate Finance. In April, the Senate Finance Committee rolled out their tax reform ideas, but never drafted a bill or included it in their budget. When the Senate Finance Chairs began working with the House to draft a finance plan I think they thought the House would be able to agree to tax reform, but that was not the case. The House had their own finance plan that members had agreed to support and which they included in the budget. On Tuesday, afternoon Senate Finance met for more than one and a half hours in committee. They had a series of speakers touting tax reform everyone from Richard Vinroot (former Mayor of Charlotte) to the former CEO of Wachovia bank. All agreed to the need for fiscal modernization of our current tax system (set in place in the 1920’s and 30’s). North Carolina is changing; we are growing bigger, growing older, and becoming more diverse. Our economy is no longer dominated by tobacco, textiles, and furniture.  These changes have resulted in a “structural deficit”- tax revenues are not able to keep up with a growing economy and basic expenditures. The most volatile of our state taxes, individual and corporate income tax, accounts for between 4 and 8 percent of the general fund revenues. We need to broaden our sales tax base by extending the tax to include previously exempt goods and services. In addition, we need to lower our tax rate. The State needs to create a tax system that is competitive, stable, adequate, and fair. The time is right to make the change. The House budget Chair, Mickey Michaux, who sat in on part of the meeting, said he wanted to see a bill.

On Wednesday, it was quiet around Jones Street as many members were headed to Broughton High School to hear President Obama, who was coming to talk about his Health Plan. House Finance did meet early and handled several bills. Of interest was a Senate Bill 269 which was gutted and retitled, “Work/School Zones-Speed Camera Pilot Program. NCSBA had decided to take a bill that had crossed from the Senate into the House and put language into the bill on their plan to get the fines and forfeiture judgment, issued by Judge Manning, to public schools. The bill was being carried by Rep. Glazier. The bill sets up a fund and then allows DOT to use Driver Training Funds to implement the new cameras in work zones and school zones. The bill calls for 75 percent of the fines to go into the fund to accrue to pay off the judgment and 25 percent is set aside to cover the driver training needs in public schools ($32 million budgeted this year). The bill becomes effective October 1, 2009 and sunsets in fifteen years. There were numerous questions from committee members, several amendments and the bill was carried over to Thursday. It did pass on Thursday. The Senate passed another Continuing Resolution (# 3) around 4:30 PM to keep the State funding in place. After the House adjourned the Democrats, caucused because the word around the building was they thought they might have a finance deal with the Senate. The package had not changed much though the 2 percent surcharge on income taxes was gone. Now, they were suggesting keeping funds from cities and counties to handle the money needed. This resulted in a major problem for many of the members. They could not agree so the finance chairs had to start again. The Governor is still threatening not to sign the budget if the class size increase is in there. She wants it changed to a discretionary cut. All superintendents and school systems are opposing a discretionary cut and superintendents began pressing hard on Thursday to let their members know their position on this issue. The drama continues on this front.

On Thursday, the House and Senate both convened at 11:00 AM to pass the CR and to see if they had found a way to finance the budget. The House voted not to concur and appoint conferees on the CR. They had decided to make a few changes. Each Chamber met briefly, and then recessed until 1:00 PM. The Democrats caucused again on the finance package of $940 million plus. The Insider afternoon edition was reporting the details; a 1 cent sales tax increase, a 3 percent income tax surcharge to married couples earning over $250,000 and 2 percent income tax surcharge for couples earning between $100,000 and $250,000. When the Senate and House reconvened they both passed the CR and finished their calendars. The CR had three changes to note:  1) it allows those receiving state funds to use funds that are in agreement in the original Senate and House budget recommendations, 2) it provides LEAs with the flexibility to use ARRA funds to employ teachers, school personnel, and others, and 3) it has no sunset. House and Senate Appropriations members met until 5:30 PM and then left for the day. The Appropriations and Finance Chairs are meeting Friday to see if they can finish and vote on the budget next week. A few flies in the ointment, so to speak, may occur as three Democratic members in the House will not be here next week. The other problem brewing with House Democrats was a meeting of some members late Thursday afternoon opposed to the excise taxes being considered in the finance package. The Speaker will need to shore up his votes if the budget is going to pass next week. It’s still too early to say they will be able to pull this thing out next week and possibly adjourn by August 14th. The House Democrats will caucus again on Monday at 6:00 PM and I am sure they will count heads at least once or twice to get the vote count. Hang in there we may actually be getting close to ending this, yet again.

House Committees:

Appropriations Subcommittee on Education

HB 1140 Education Assistance for Minimum Wage Workers Favorable Report to PCS.

Appropriations Subcommittee on Transportation

HB 1117 Sex Offenders Can’t Drive Bus with Children Favorable Report.

Finance

SB 894 UI/School Teachers Related Amendments Favorable Report to PCS.

SB 269 Delegate Authority RE: Stamp Tax Overpayment Name changed to Work/School Zones –Speed Camera Pilot Program Favorable Report to PCS as amended.

SB 1006 Withholding on Contractors Identified by ITIN Favorable Report

Energy and Energy Efficiency

SB 960 Ensure Accountability RE: Stimulus Funds Favorable Report to PCS.

Judiciary I

SB 859 Tort Claims Act/Local Government Opt-In Favorable Report as amended. Title changed to remove the words “ 500,000” and added “ a certain population threshold” to add the opportunity for amendments on the House floor to include other cities in the bill.

SB 220 General Statutes Commission Technical Corrections Favorable Report to PCS. This is the true technical corrections bill. According to the Judiciary Chairman, it is not the “sneaky one.”

Senate Committees:

Appropriations

HB 102 Budget Code Technical Correction Favorable Report as amended. Name changed to Continuing Budget Authority.

Judiciary I

HB 209 Sex Offenders Registry/Liberties w/Students Favorable Report.

Judiciary II

HB 1261 Protect Our Kids/Cyber Bullying Misdemeanor Bill was not heard. PCS was not available. Bill sponsor did not come to committee.

Health Care

HB 1297 Provider Credentialing/Insurers. Name Changed to Provider Credentials/Insurer/Provider Contractor Favorable Report as amended and sent to the Senate Floor.

Employee Hospital and Medical Benefits

HB1274 State Health Plan Blue Ribbon Task Force Favorable Report and sent to the Senate Floor.

House Floor:

HB 412 Advisory Council on Indian Education Passed second and third reading and sent to the Senate.

HB 1433 Clarify Volunteer Immunity/AED House Concurred and Ratified.

HB 1452 Local Government Code of Ethics House Concurred as amended and Ratified.

SB 708 Amend the Compulsory School Attendance Law House Concurred and Ratified.

HB 1140 Education Assistance for Minimum Wage Workers Passed second and third reading and sent to the Senate.

SB 894 UI/School Teachers Related Amendments Passed second and third reading and sent to the Senate for Concurrence.

HB 102 Continuing Budget Authority House did not concur.  Conferees Appointed. Conference Report Adopted and sent to the Governor.

Senate Floor:

SB 509 Revenue Laws Technical, Clarifying and Administrative Concurred second reading and remains on the calendar.

SB 708 Amend the Compulsory School Attendance Law Conference Report adopted.

SB 931 Commercial Drivers License Changes Senate Concurred and Ratified.

SB 1028 Volunteers to Support Academic Success in Schools Concurred and Ratified.

SB 929 No Set Aside of Bond Forfeit/Actual Notice Concurred and Ratified.

HB 102 Budget Code Technical Correction Passed second and third reading as amended and sent to the House for Concurrence. Name changed to Continuing Budget Authority

HB1274 State Health Plan Blue Ribbon Task Force

HB 1297 Provider Credentials/Insurer/Provider Contractor Passed second and third reading as amended and sent to the House for Concurrence.

Bills in Committee Next Week

Hearing on State Purchasing and Contracting Practices

HB 1292 Employment of Noncertified School Personnel

HB 1474 Credit Education required /High School Students

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