Battle lines drawn between House and Senate over state budget


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No easy comprises on the horizon, as conferees get down to business

general-assembly-buildingBy Joe & Henri McClees

RALEIGH – Tuesday, June 23, was a steamy afternoon as the NC House of Representatives voted 112-0 not to concur with the Senate’s version of the proposed budget for the 2015-2016 fiscal year. Now, hard core negotiating begins. The House passed its 329-page budget, in which it proposes to spend $22.15 billion. This marks a six percent increase over the current year.

The Senate spends $685 million less—for a three percent increase.  In the Senate’s 508-page budget, it outlines $21.47 billion in expenditures. The House and Senate must now negotiate a settlement between the vastly different spending plans. They will eventually vote on a compromise Budget and present it to the Governor.

North Carolina’s fiscal year ended June 30. Look for a “Continuing Resolution” to be passed so state government can continue operating under the current budget spending projections.

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Legislators appointed as “Conferees” to work on the “Conference Report” will meet in private to negotiate every aspect of NC’s budget, including, but not limited to: Agriculture, Commerce, Education, Environment, Health & Human Services, Information Technology, Justice & Public Safety, and Transportation. 

There are massive disagreements between the chambers on spending, tax reform, Medicaid reform, and transportation planning.

One easy-to-understand difference is the Senate’s decision to set aside $500 million into the State’s Rainy Day Fund, compared to only $200 million by the House. The Rainy Day Fund, currently empty, is a savings account, and can be used for disaster relief, such as hurricane damage. For example, we attended a special session in January 2000 to watch the Legislature spend the entire contents of the Rainy Day Fund to help pay for coastal damage inflicted by Hurricane Floyd in the fall of 1999 (estimated to have caused $6 billion in damages to coastal NC).

Some critics of the House budget point to new spending projects in the House budget, with an increase of 6.3 percent spending over the amount of projected actual spending in the current budget year. Some critics of the Senate budget point to specific cuts and Senate provisions that could potentially cost coastal residents more to ride ferries and jeopardize ferry service in rural areas.

Highlights of Controversial Coastal Issues:

Taxes

Sales Tax Redistribution: The Senate plan to redistribute sales tax on an ultimate “80%-20%” plan generally helps rural counties by sending back to them sales taxes calculated by population.  Most coastal counties benefit from this plan.  But, Currituck and Dare Counties and the largest urban counties, lose under this plan. The House budget has no such sales tax redistribution plan. 

Many members of the House are opposed to this redistribution of sales tax. They do not like the “80%-20%” concept, in which 80 percent of the sales tax is distributed by population and 20 percent by point of sale.

The Senate tax cut plan broadens sales tax base to include some services such as repair and maintenance of personal property and veterinary services. It reduces the franchise tax on businesses. 

The Senate plan reduces personal income tax rate, while increasing the standard deduction.

Transportation

The Senate transportation budget plan includes many proposed changes to ferry funding that are not included in the House version of the Budget. We oppose all these changes, and have spoken with House leaders, who also oppose the following Senate proposals:

Page 412 “Set Fee for Priority Boarding on Ferry” An annual priority boarding pass would cost $150.00 in addition to any applicable ferry toll. No fee priority passes would be allowed.

Page 412-413 “RFI and Study/Privatization of Ferry System” (RFI=Request for Information). This provides the opportunity for private businesses to provide information to the State about how they would privately operate the NC Ferry System if given the opportunity to do so. 

We are monitoring these budget negotiations on a daily basis. There are many other budget items to watch, in addition to ferry-related items. 

The Senate budget eliminates the $216 million transfer from the Highway Fund.  It increases DMV fees by 20 percent, while the House budget increases DMV fees by 30%. 

Senate budget, page 411: Toll proceeds and commuter pass proceeds will be used to pay for replacement ferries.  We do not oppose funding ferry replacements in a more stable income stream, but we do not support ferry commuter pass costs of $150.00 per year.

We have been assured by House transportation leadership that the House is firmly opposed to ferry tolls, increases in the cost of using ferries, and ferry commuter passes.

The Senate budget provides $316 million to begin road building projects, rather than borrowing $1.4 billion for transportation projects as proposed by the Governor and the House.

House budget Page 264: the “Bonus Allocation for Mid-Currituck Bridge Project” would have allowed a specific parcel of needed funding for the Mid-Currituck Bridge Project to be potentially lost to other transportation projects. This language, opposed by proponents of the Mid-Currituck Bridge, was deleted by the Senate. We will work to keep this destructive provision out of the final version of the budget. 

Education

Both House & Senate budgets raise teacher pay. Senate budget raises education spending by $453 million, and an additional $270 million over biennium to reduce teacher-student ratios, especially in K-3.

Medicaid Reform

Senate plan would create a new state agency called “Health Benefits Authority” to oversee Medicaid program, and replace the current fee-for-service program with a program that pays entities on a per patient basis.

The House re-established the historic preservation tax credit, but the Senate did not include this tax credit in its budget.  Senate maintains $10 million for film incentives, though the House wants $40 million for film incentives. Senate budget increases by $4 million funding for the Rural Economic Development Grant programs, bringing the total to $17.5 million. Senate budget extends the sunset of JDIG program, adding $5 million in funding, and provides for additional funding for larger investment projects.

Editor’s note: Based in Oriental, the McClees couple are veteran lobbyists in the General Assembly who represent the interests of several eastern North Carolina counties.