General Assembly: 6 big undecided issues on slow march to adjournment

In the last 40 years, only three sessions of the N.C. General Assembly have dragged out longer than the current one. And there’s still plenty of unfinished business.

Lawmakers have voted since January on hundreds of bills dealing with everything from abortion to zoning. Now the biggest roadblock to adjournment is the state budget. The House and Senate remain at odds over a spending plan that was due July 1.

Last week, lawmakers passed their second stopgap measure; it expires Aug. 31. The longest budget delay since 2002 already has cost taxpayers more than $1 million to keep lawmakers in Raleigh.

Like similar stalemates over taxes, Medicaid and bonds, the spending impasse pits Republicans against Republicans. It not only underscores tensions between urban and rural interests but also reveals two clashing views of government.

Some Republicans, particularly in the Senate, want to use the state constitution to shrink the size of government and rely on low taxes to attract business. Others want to invest some of the state’s $450 million surplus in areas such as education and economic development.

House Speaker Tim Moore said last week that the two sides are moving closer on the budget.

“Conversations are happening,” said the Kings Mountain Republican. “Hopefully the end is in sight.”

The deadlock is over a difference of about $500 million in a budget of over $21 billion. A budget deal would answer a lot of questions.

Thousands of teacher assistants, for example, aren’t sure they’ll have a job this school year. The House budget would save historic preservation tax credits.

But dollars aren’t the only issue to settle in what could be the closing weeks of the session. Here are six other matters to resolve.

Redistributing sales tax money

One of the year’s most contentious issues would mean a windfall for most N.C. counties and a likely property tax hike for people in Mecklenburg and 20 other counties.

Lawmakers from mostly rural counties want to redistribute sales tax revenues, which now stay largely in the places they’re collected – mainly big urban counties and tourist destinations on the coast.

There’s little doubt that poor and rural counties need help. Eastern Pamlico County, for example, has little tax-generating retail. It does have a growing drug problem and few law enforcement resources.

“It takes money to address those problems,” County Manager Tim Buck said after rallying in Raleigh for the tax redistribution plan.

But the plan would shift millions from more affluent counties. Charlotte lobbyist Dana Fenton has said it would cost the city $20 million over four years and Mecklenburg $65 million over four years.

Critics say the plan almost surely would force local governments to raise property taxes.

The legislation has passed the Senate and awaits a vote in the House, where it’s being opposed by a coalition of urban lawmakers and their allies.

“The problem is the sales tax redistribution is not an effective solution for a very real problem, which is how to make the poor counties more economically competitive,” says Rep. Bill Brawley, a Matthews Republican who co-chairs the House Finance Committee.

Passing a constitutional amendment

Last week, Senate Republicans passed a measure to put a constitutional brake on state spending.

Senate Bill 607, now in the House, would put a constitutional amendment on the 2016 ballot that would tie spending growth to inflation, set a lower ceiling on the income tax rate and make lawmakers set aside hundreds of millions of dollars a year into a special savings fund.

The measure passed along party lines.

Republicans argued the spending and tax limits would promote accountability and discourage out-of-control spending.

GOP Sen. Brent Jackson of Sampson County, who pushed the bill, said the changes “would strengthen the fiscal integrity of our state and protect our taxpayers from government overreach.” They would, he added, force lawmakers to “spend sensibly, save wisely and tax sparingly.”

But state Treasurer Janet Cowell, a Democrat, warned the measure would threaten the state’s AAA bond rating. Other critics say it would result in less spending for education and lead to unintended consequences, which is what they say happened in Colorado, which has a similar spending cap.

“This is the biggest bill of the year and (the final version is) being pushed through in less than 24 hours,” Democratic Sen. Jeff Jackson of Charlotte told colleagues. “We are locking the state on a set of train tracks that disappear around a corner. All we know is the last train that drove in that direction drove off a cliff.”

Issuing millions in bonds for roads and schools

Millions of dollars for new roads, university buildings, parks and other projects would be paid for through a bond package supported by Gov. Pat McCrory and passed by the House.

But its fate in the Senate is unclear.

After the House voted to put a $2.85 billion bond referendum on the ballot in next year’s presidential primary, the Senate referred it to a committee known as the “graveyard” that hasn’t met in years.

The House plan would direct nearly $2.5 billion toward projects such as university and school construction and $400 million toward transportation. House leaders say an additional $1.3 billion in transportation projects would be paid for through budget allocations without borrowing.

McCrory has urged lawmakers to issue bonds while interest rates are low. But leading senators have said there’s little appetite in the Senate for borrowing, especially for transportation bonds.

Republican Sen. Bob Rucho of Matthews, who co-chairs the Finance Committee, said roads could be financed through budget allocations and new driver-related fees.

“If you have a pay-as-you-go (system), all the money goes into projects, not paying debt,” he said.

Deciding how to run Medicaid

Both the House and Senate want to change the way North Carolina manages its health care system for the poor. They just disagree on how.

A measure passed by the Senate would take the program out of the Department of Health and Human Services and create a new Cabinet-level Department of Medicaid. The department would contract with insurance companies and provider groups to manage Medicaid services.

The House plan, supported by the governor, leaves Medicare management to networks led by regional hospitals and local doctors.

Critics such as the liberal N.C. Justice Center say the current system can be improved without turning management over to insurance companies.

“Private Medicaid managed care companies have a long history of delaying and denying care as a way to cut costs and increase shareholder profits,” wrote Adam Linker of the center’s Health Access Coalition.

Whoever prevails, health care advocates are braced for change.

“There’s going to be a dramatic change in the way health care is delivered for Medicaid (patients) in North Carolina,” said Connie Wilson, who lobbies for some medical groups.

Battling for economic incentives

In a year when South Carolina has dominated the headlines for job recruitment, the Senate passed a bill that would extend the state’s Job Development Investment Grants and other economic development incentives.

But the bill also contains the sales tax shift. That’s a poison pill for many House lawmakers.

McCrory has said his administration lacks the tools to compete with states such as South Carolina, which this year won a new Volvo manufacturing plant.

He and Commerce Secretary John Skvarla have made replenishing JDIG a top priority.

Republican lawmakers such as Rucho say low taxes are the best economic incentive.

Trying again to stop I-77 tolls

Critics of Interstate 77 toll lanes might have one more chance to stop the project – though it may not be a popular one.

A draft bill in the House Rules Committee would terminate the state’s contract with I-77 Mobility Partners. Lawmakers have faced heavy lobbying from residents and businesses in north Mecklenburg County to drop the contract and use state money or bond funds to widen the road between Huntersville and Mooresville.

The draft bill would end the contract and pay the penalty – estimated as high as $100 million – by withholding sales tax revenues from Mecklenburg County, Cornelius, Davidson, Huntersville and Mooresville, whose governing boards all passed resolutions against the toll lanes.

The draft bill would still have to be introduced in committee, passed, and then clear the full House and Senate. Even then, it would do nothing to widen the interstate.

The Associated Press and staff writer Colin Campbell of The (Raleigh) News & Observer contributed.

This story was originally published August 15, 2015 at 4:00 PM with the headline "General Assembly: 6 big undecided issues on slow march to adjournment."