Winter weather was a big topic of conversation across North Carolina last week and affected us all in one way or another. The weather certainly affected the legislature. With some legislators having driving times of up to five hours or more, legislative leaders had a hard time getting committee meetings scheduled so that bills could be heard and come to the floor for debate.
Expecting bad weather and wanting to be prepared, I got to Raleigh on Sunday night. However, no committee meetings were held until Wednesday afternoon since the roads were covered with ice. Skeleton crews covered the required House and Senate no-vote sessions. Governor McCrory declared a state emergency and asked residents to stay off the roads and it wouldn’t have looked good if the General Assembly had ignored his plea.
The only substantive bill that was considered was Senate Bill 14. It is a bill that primarily provides funding for the Academic Standards Review Commission that is looking at the schools’ Common Core standards and for the Coal Ash Management Commission that is tasked with reviewing the plans for disposing of coal ash at Duke Energy’s coal ash ponds. It also allows the transfer of some funding to pay for litigation costs relating a lawsuit challenging the rule-making authority of the State Board of Education. Both of the committees need funding to continue their work and couldn’t wait until the passage of the new budget for the upcoming fiscal year. The State Board wanted to take action to divert some funding to cover the lawsuit costs.
The funding provisions were not controversial but, since it was a bill that was going to apparently pass rather quickly, the bill became “the vehicle” for the passage of some other provisions correcting laws that passed in the last session. It is fairly common for bills dealing with one, noncontroversial subject to become the vehicle for moving sometimes controversial matters. A simple have-to-pass bill is like a Christmas tree attracting all sorts of lights and baubles.
Senate Bill 14 became such a bill. I offered the first amendment to the bill to correct a provision in the Coal Ash Management Act (Senate Bill 729, SL2014-122) that would have required owners of high or intermediate risk impoundments to retain an engineer to submit an emergency action plan (EAP) by March 31, 2015. The provision was meant to apply to coal ash impoundments, and no one anticipated that the engineering licensing board would issue an opinion that an engineer needed to create or review any such plans.
Responding to an outcry from impoundment owners that they shouldn’t need to hire engineers and that the new requirement was being sprung on them too quickly, my amendment rolled back the time for submitting EAPs for non-coal ash impoundments until December 31, 2015, and it explicitly said the EAPs could be drafted and submitted without an engineer.
It might seem that one might want an engineer to work on a document that includes mapping of property downstream of an impoundment, but nothing in the new provision would prohibit the use of engineers in developing EAPs. However, some of these impoundments are nothing more than agricultural ponds, and it seemed like overkill to require an engineer to provide mapping for such ponds when a landowner could go on a website and pull down the information needed for the EAP.
The House Appropriations Committee also amended Senate Bill 14 to fund some expenses related to the North Carolina Health Information Exchange (NCHIE). The NCHIE is in the process of connecting some 23 hospitals across the state to a network, but the project needed additional funding for software improvements. As with the other appropriations relating to coal ash and Common Core, no one wanted to bring the project to a stop to await additional funding in the next budget, and Senate Bill 14 was the vehicle for getting the funding expedited.
Finally, the bill was used to specifically allow state officers to serve on the newly created Economic Development Board without jeopardizing state funding of the nonprofit. Evidently, some members of UNC Board who are deemed state officers were not going to be allowed to serve on the statewide Economic Development Board, and their participation in the state’s economic development work was desired.
Expected Legislative Action
I received multiple communications from constituents related to Senate Bill 20 [IRC Update]. While the bill title suggests that the bill relates to the Internal Revenue Code, the title doesn’t give one a clue that this bill, aside from addressing some noncontroversial tax provisions, also deals with the gas tax. The bill would reduce the gas tax rate from 37.5 cents to 35 cents beginning March 1, 2015, but then sets a floor of 35 cents on future fluctuations of the gas tax.
Currently, the gas tax is calculated based on the wholesale price of gas during a six-month period, but it is capped at 37.5 cents through June 30, 2015. Thus, the bill provides an immediate 2.5 cents reduction in the gas tax, but it would prevent the gas tax from falling below 35 cents — something it is predicted to do on July 1, 2015. Depending on the wholesale price of gas, North Carolina’s gas tax could drop approximately 6 to 8 cents in July.
Of course, all of the communications opposed any floor on the gas tax. In other words, no one supported keeping the gas tax from falling below 30 cents. Most argued that NC’s gas tax was among the highest in the nation and that it should be allowed to drop.
While that argument sounds good, it overlooks one fact: North Carolinians don’t pay for road and bridge construction with their property taxes. In other words, South Carolina’s gas tax is lower than North Carolina’s gas tax, but the reason for that is in South Carolina roads are also paid for by local governments who use property taxes to pay their share of the transportation costs.
In North Carolina, there are almost no local roads–meaning that local governments have very few roads for which they pay. A dirt road in south Henderson County is actually a state road and the state’s primary way of paying for roads is the gas tax. That makes North Carolina very different than its neighboring states in how transportation expenses are paid for.
Simply put, we could let the gas tax fall significantly based on the declining gas prices, but then we’d either have to stop building and repairing roads and bridges or find another way of paying for these transportation improvements.
My beef with Senate Bill 20 is the lack of transparency. The bill is being sold as a tax cut when it really doesn’t provide much of a cut — just a 2.5 cent cut in the gas tax from March through June. The reality is that the passage of the bill will result in higher gas taxes since an expected gas tax cut of 6 to 8 cents would occur after July 1, 2105, unless the bill is passed.
As a legislator, I’m caught between a rock and a hard place. Everyone agrees there is a large backlog of transportation projects and the gas tax isn’t keeping up with the state’s transportation revenue needs. However, the way the gas tax is calculated under current law means that we’ll be cutting this already inadequate funding source come July 1, 2015.
Rather than coming up with a new way of calculating the gas tax or just establishing a floor on the gas tax, the bill allows legislators to say they cut the gas tax when in fact the consumers will not get the tax decrease they could have come to expect this summer.
Looming Legislative Action
Prior to the start of the legislative session in January, the expectation was that the legislature would quickly take action on Governor McCrory’s request for funding of the Job Development Investment Grants (JDIG) program. McCrory and the state’s economic development officials, including Henderson County’s own Andrew Tate with the Henderson County Partnership for Economic Development (Henderson County PED), argue that the state legislature needs to quickly fund JDIG or the state will find itself at a disadvantage when competing with other states for new economic development projects.
As of yet, no bill has been filed to fund JDIG. In the last session, the JDIG reauthorization bill became one of those Christmas-tree bills with so many different provisions added that the bill collapsed under the weight of all of the controversial provisions. This year, the expectation was that we’d quickly see the legislature take action on a so-called “clean bill” — a bill simply providing an up or down vote on funding JDIG.
The debate has already started on the merits of JDIG. The NC Justice Center issued a report entitled “Picking Losers: Why the Majority of North Carolina’s Incentive Projects End in Failure,” arguing against JDIG. Henderson County PED was among those arguing for JDIG in an opinion piece entitled “Industry Recruiters: To be Competitive, NC Needs Job Grants“.
My guess is the introduction of JDIG legislation has been delayed because of the controversy. It is true that most of the JDIG incentives go for projects in already-prosperous areas of the state, but it is also true that North Carolina probably wouldn’t be competitive for these projects but for the JDIG incentives. No one likes providing incentives, but everyone wants more employers to locate their businesses in the state and the reality is that other states oftentimes provide economic incentives for businesses to relocate.