A week ago, the legislature was working on its budget. There was light at the end of the tunnel on the budget, but not a clear path forward on a myriad of other issues. This week, the budget has already passed the Senate with bipartisan support, and in votes late today and early Friday the House is expected to also pass the budget, probably with veto-proof majorities in both chambers.
A week ago, legislative leaders knew they needed to address issues like Medicaid reform, economic incentives, a bond package, election issues related to the early presidential primary, and tax reform. This week, one sees that tax reform was included in the budget, and House and Senate leaders have agreed to pass, in some form, all of the other legislation. Who would have guessed?
Major movement occurred late last week after about two dozen issues were kicked upstairs to the Speaker and the President Pro Tem, the leaders of the House and Senate respectively. Staff says it is unusual for so many issues to be negotiated at the top, and the negotiations on the budget went well into the evening last Friday.
As House negotiators filed out of the Senate conference room on Friday night after the budget deal was evidently struck, a comment was made by a senior Senate staffer that now we needed to get the tax reform package done since that needed to be included in the budget. Well, that wasn’t the House’s understanding, but not long after that, Senator Berger came by Speaker Moore’s office and reiterated that point.
That threw everything momentarily into an uproar, since the budget needed to pass this week and there was no way to get that done unless staff could begin to put all of the provisions together almost immediately. Speaker Moore rather calmly just dealt with the situation. He called the Governor to tell him about the impasse and then got all the House Finance chairs on a conference call and negotiations began on the tax package.
There is no doubt that legislative staff working on the tax reform issue were surprised to be running various calculations as to what the state’s revenues would be under different scenarios at nearly midnight, but shortly before 1am on Saturday, a deal was reached. By that time, the media had long ago headed home, and my thoughts went back to a year ago when a similar agreement was reached on teacher compensation issues late into the evening.
As part of the budget deal, legislative leaders also ensured that legislation dealing with Medicaid reform, economic incentives and the bond package would also pass. The budget includes some contingencies or “poison pills” that probably ensure a quick end to the legislative session.
The idea of a “poison pill” comes from the world of corporate law and finance. Companies sometimes adopt poison pills that trigger divestitures of assets if someone acquires a significant block of stock without gaining the approval of the corporation’s board. The idea is to make a corporate takeover unpalatable.
In an effort to ensure certain legislation passes after the passage of the budget, the budget negotiators included similar legislative poison pills. For example, in Section 32.21.(a), in a section called “ENACTMENT CONTINGENCIES,” there is an inducement for Senate action on the incentives package (House Bill 117) and the bond package (House Bill 943) in language that says that most of the tax package would be repealed if these two bills did not pass. The tax package is important to the Senate.
Since Medicaid reform was the highest priority for the Senate, it provided an inducement for House action by including a similar contingency in Section 12H.25.(a) which would enact some Medicaid-related provisions that were unacceptable to House leaders. The budget bill also reallocates money as between the Reserve for Repairs and Renovations and the Savings Reserve depending on whether the bond packages passes. [Section 2.2.(d)]
In the end, neither the House nor the Senate got everything they wanted. The Senate got tax reform, but it had to agree to restore the unlimited medical deduction and include no taxing of nonprofits. The House got full funding of teaching assistants and drivers education, but it had to limit funds for teaching assistants only for use for that purpose — in other words, no flexibility for school boards as to how the money can be reallocated.
The Senate will get a Medicaid reform package passed, but it will be a hybrid program providing for both managed care organizations and provider-led entities. The House, though, will see a $2 billion bond package put before the voters and its economic incentives package approved.
Governor McCrory is strongly supportive of the bonds and the incentives packages. He’s also generally supportive of Medicaid reform. His skepticism is with a portion of the tax package that will result in a different allocation of sales tax to counties and municipalities. To get a clearer picture of the concept please refer to the article, “Sales Tax Distribution Proposal Explained.”
So what’s next?
The big issues remaining for the remainder of the session are Medicaid reform, the bond package and economic incentives. With the poison pills in the budget, few doubt that those bills will pass. Most everyone recognizes that we need to make some decision as to when the primaries for state and local elections will be next year. With the presidential primary likely moving to mid-March, the question is whether the other primaries will also move. It is obviously costly to have separate primaries, although that is the way South Carolina does it.
There are several other bills that are likely to move. Regulatory reform is an issue that the legislature has addressed in each of the past two sessions, and some versions of House Bill 44 [Local Government Regulatory Reform 2015] and House Bill 765 [Regulatory Reform Act of 2015] will pass. Senate Bill 513 [NC Farm Act of 2015], is also a bill that is expected to pass.
I serve on both the conference committees for the regulatory bills. The conference report on HB44 will come up for a vote this week and, once it passes, the negotiations on HB765 will begin. On HB44, I worked to reconcile the differences between various provisions in different bills having to do with riparian buffers — vegetative buffers along streams used to keep pollutants out. To my pleasant surprise, my redraft of those provisions were included in the conference committee bill.
My other priority was striking a provision in the Senate bill prohibiting the reduction of travel lanes to accommodate bike lanes. Cyclists everywhere opposed this provision, and the conference bill will not include that provision. Aside from working on those provisions, I also helped craft provisions relating to advertising on fencing wrap at construction site and beehives on high rise buildings — really rather arcane subjects.
Yesterday, the Senate Rules Committee — where almost all House bills that have crossed over to the Senate reside — took up about ten bills, and Senator Apodaca moved the bills quickly through committee. Among those bills was House Bill 20 [Reegan’s Rule/Enforce Pharm. Ben. Mgt.], but that bill morphed into House Bill 20 [Rural Access to Health Care Act].
Among the wholesale changes to the bill is a repeal of the Certificate of Public Advantage (COPA) that allows Mission Health (formed by the merger of the old St. Joseph’s Hospital with the old Mission Memorial hospital) to operate free of antitrust scrutiny and possible liability if it does certain things or restrains from doing certain things. Park Ridge Health is the primary hospital (perhaps sole hospital) protected by COPA.
Senator Apodaca supports the repeal of COPA and offered a free-standing bill to repeal it. He also had the COPA repeal in the Senate’s version of the budget. I oppose repeal of COPA at this time, although I think after Medicaid reform legislation is fully functional that the repeal of COPA will occur.
The movement of legislation out of the chambers’ respective Rules Committees is another sign that the end of this legislative session is in sight. Senator Apodaca says he’d like to finish up next week, and Speaker Moore says the following week is more realistic. Either way, it appears that the legislature will be home by early October if not late September.