Overview
Lawmakers returned to Raleigh after the 4th of July weekend to continue the business of the legislative session and with hopes that a compromise version of the State Budget would be near. That optimism was misplaced, however, as by mid week all the key negotiators on the budget expressed doubt that the July 15th deadline would be met. Governor Bev Perdue (D-Craven) released a tax proposal on Tuesday this week that would raise $1.6 billion, but the proposal was received with skepticism by legislators. Outside of the budget negotiations, work continued on bills of all types as the General Assembly moves closer to the end of the session.
Leaders of the House and Senate have been unable to break the standoff over tax policy again this week. That standoff pits a Senate tax reform proposal against a more traditional House tax increase proposal and is the primary impediment to passage of a State Budget. Tuesday Governor Perdue called chief tax law negotiators to her office for a meeting in an effort to advance negotiations to a compromise. Her proposal would raise $1.6 billion by adopting some of the tax law changes from both the House and Senate plans. For example, the Governor's plan would adopt the Adjusted Gross Income calculation for personal income taxes and expand the base of the sales tax although not as broadly as proposed by the Senate. The Governor's plan would also raise the sales tax rate, upper income tax bracket personal income tax rate and require unitary combined reporting for multi-state corporations as proposed by the House. However, the full 1% "emergency increase" the Governor proposed is so much larger than that proposed by the House that it lacks support with leading House tax writers and the Senate has long held the position that comprehensive reform was needed rather than the limited options endorsed in the Governors plan. Interestingly, questions remain as to how strongly the Governor supports the proposal because on Wednesday a spokesperson for the Governor characterized the $1.6 billion tax plan as a menu of options for lawmakers to choose from rather than a directive to include all the items.
With two days perspective on the Governor's plan, it is unclear how much, if at all, the action this week advanced the budget negotiation process. Most budget negotiators seemed less than impressed with the plan when their comments were published in media reports this week. The Governor's involvement may have actually set the negotiations back, and evidence of this can be seen in the fact that leaders of the General Assembly are making plans to extend the temporary budget authority enacted last week. That authority authorizes State spending through July 15 in the absence of a formal state budget and will have to be extended if lawmakers fail to reach a compromise by Wednesday. The only item of consensus out of this week's budget negotiations is that there will be no deal by the 15th and an extension of the budget authority will be needed.
Despite setbacks on the budget front, the House and Senate were active in moving legislation through the legislative process. The Senate has accepted House changes to legislation (Senate Bill 584) that amends the Private Protective Services Act, a statute that regulates security personnel. Also in the House this week, changes to the Certificate of Need (CON) law have advanced through committee and has been calendared for consideration by the full House next week (Senate Bill 804). The House has rejected Senate changes to legislation (House Bill 1523) that would enact the S.A.F.E. mortgage licensing act and the bill now moves to a conference committee between the House and Senate. Legislation (House Bill 1134) that would allow award of attorney's fees for a prevailing party in a public information suit against local governments has passed the House on the first of two votes this week.
Measures related to eminent domain powers (House Bill 1268) and to annexation authorities (House Bill 524) of governments reached the House floor, but were returned to Committee prior to votes by the full House. House Bill 1268 would amend the State Constitution to prohibit governmental takings for economic development purposes. The bill comes in response to the US Supreme Court's Kelo decision that would allow for such takings under the US Constitution. As the debate began, the bill was returned to the House Judiciary II Committee for further review. House Bill 524 is a more controversial measure that contains a comprehensive re-write of the State annexation laws. The bill has been the subject of study and debate for several years, but questions about the costs of the bill brought a motion to return the bill to the House Appropriations Committee. The vote on the motion was tied and House Speaker Joe Hackney (D-Chatham) cast the deciding vote to send the bill to Committee. This report contains a brief sampling of the dozens of bills acted on by the House and Senate this week.
Committee Meetings
Committees of the General Assembly were actively meeting this week and moving legislation on a variety of topics.
The Senate Agriculture/Environment/Natural Resources Committee approved legislation (Senate Bill 1068) that creates a permitting and regulation scheme for wind power generation facilities. The latest version of the bill only affects the coastal region of the State, and avoids controversial provisions that would have banned wind power generation equipment on mountain ridges. Both North Carolina's coast and mountain regions have been identified among the most potentially beneficial wind generation regions in the nation. The location and development of these facilities is a part of the implementation of landmark Renewable Energy Portfolio Standard legislation enacted in 2007. Senate bill 1068 now goes to the Senate Finance Committee.
In related action, the House Public Utilities Committee approved revised legislation (Senate Bill 1004) that would extend by one year a deadline for sulfur dioxide emissions reductions under the Clean Smokestacks Act. Clean Smokestacks, a landmark environmental and utility regulation measure, contains numerous environmental goals and deadlines for power companies to comply with. Senate Bill 1004 amends only one of those deadlines and received unanimous support from the Committee. The bill now awaits calendaring before the full House.
The House Finance Committee spent the better portion of Thursday debating legislation (House Bill 1305) to reform the North Carolina Beach Plan, an underwriting plan that insures coastal properties. During the day long meeting, the plan was described as a delicate compromise between insurance companies', agents', and consumers' interests. Insurance Commissioner Wayne Goodwin (D-Rockingham) was on hand to champion the bill and he was aided by the efforts of House Majority Leader and primary bill sponsor Representative Hugh Holliman (D-Lexington). The changes in House Bill 1305 are designed to help North Carolina's insurance industry prepare for and cope with a catastrophic hurricane. House Bill 1305 addresses the problem of increasing liabilities and the potential of insurers insolvency by requiring the Beach Plan to retain its $800 million surplus rather than make refunds to member companies, reducing the maximum coverage limits from $1.5 million to $750,000, and lowering the coverage for the contents of the property from 40% to 10% of the building's value. These provisions would only be activated if a major storm hits the state. Also, the Beach Plan would be renamed the Coastal Property Insurance Pool. House Bill 1305 now awaits calendaring before the full House.
In other insurance law action, the House Insurance Committee has approved legislation (Senate Bill 877) that would alter the procedures under which health insurers can amend the terms of contracts with their insured customers. Promoted as a consumer friendly measure, Senate Bill 877 now awaits calendaring for a vote by the full House. In further action on insurance related legislation, the House Judiciary III Committee began work on legislation (House Bill 1166) requested by the Department of Insurance that will amend the laws governing insurance producers and brokers, premium finance companies and collection agencies. House Bill 1166 is under consideration by a sub-committee of House Judiciary III, with additional work on the bill expected next week.
The House Commerce Committee approved legislation (Senate Bill 405) that would aid property tax assessors in valuation of real property by requiring the recordation of certain specified information about a sales transaction. At the same meeting, the Committee began work on legislation (Senate Bill 882) to enact a statute of repose for product liability actions. Senate Bill 882 would simultaneously repeal the current statute of limitations on such actions and provide for a six year statute of repose. Although generally statutes of repose tend to reduce potential liability, these changes provide for a broader opportunity to bring suits for product liability by incorporating other jurisdictions' limitations when the product was manufactured or designed in whole or in part out of state. The Committee is expected to continue debate on Senate Bill 882 at its next meeting.
The battle over a Federal license to the right to use and control the waters of the Yadkin River was rejoined in the House Water Resources and Infrastructure Committee this week. The discussion centers on Senate Bill 967 which would allow for the creation of the Yadkin River Trust, an entity to be completely owned and operated for the benefit of the people of the State. The Trust would be empowered to compete for the Federal license currently up for renewal by the Federal Energy Regulatory Commission (FERC). That FERC license has been held by aluminum manufacturer Alcoa for the last fifty years. Alcoa is seeking a fifty year renewal of that license. During the relicensing process and debate on Senate Bill 967, allegations that Alcoa has polluted the waters of the Yadkin River have prompted the interest in creation of a Trust to compete for the license and, if successful, to operate the hydro-electric facility and manage the waters for public benefit. The Committee deferred action on Senate Bill 967 and plans to have multiple meetings in the coming weeks to resolve the issue.
North Carolina employers would be required to use the Federal "E-Verify" system to ensure that their employees are legal residents of the United States under legislation (Senate Bill 32) approved by the Senate Commerce Committee this week. Bill sponsor Senator John Snow (D-Cherokee) admitted that the bill needed continued revision, but asked that the Committee advance the measure in order to preserve the possibility of passage during the short session. The bill must pass the Senate before adjournment of the 2007 session in order to be eligible for consideration during the 2008 "short session."
