After a one-week session devoted exclusively to COVID-related legislation — primarily appropriating funding from the federal CARES Act — it felt a bit like the start of the normal Short Session this week, except things weren’t totally normal. Still in place were the temperature checks for everyone entering the legislative buildings, including legislators and their staffs. Masks were still in evidence. Committee meetings occurred, but were short with little debate. Usually the legislative buildings bustle with lobbyists and ordinary citizens visiting legislative offices, but not many lobbyists were patrolling the halls, and almost no ordinary citizens made visits to their legislators’ offices.
The House completed action on three bills: House Bill 1067 [Modernize Debt Settlement Prohibition], HB1079 [Various Sales Tax Changes], and House Joint Resolution 1152 [Extend Certain Filing Deadlines]. In an unusual process, the bills were approved by voice votes. Had any of these bills required a roll call vote, proxies could have been used by Members not wanting to appear on the House floor, but these bills didn’t require roll call votes required by either the North Carolina constitution or House rules.
With impetus provided by the pandemic, HB1067 reforms debt settlement practices to provide more protection for debtors. HB1079 makes some very technical tax law changes relating to auctioneers and estate sale companies, expansion of a sales and use tax exemption for equipment purchased by a large “fulfillment facility” (aka: “a facility used primarily for receiving, inventorying, sorting, repackaging, and distributing finished retail products for the purpose of fulfilling customer orders”), and tax clarifications and exemptions for certain digital property. Unlike the other bills, HJR 1152 was only procedural. It extended a bill filing for House and Senate appropriations bills for an extra week until May 26.
Veteran legislators, staff, or lobbyists noted the session was different in ways that casual observers might not recognize. Ordinarily, one would see a lot of interaction between legislators, staff and lobbyists on the floor and in committee meetings; Much of the work is done when conversations occur and questions get answered or deals or compromises are struck.
There was very little in the way of sidebar conversations this week, and there were not the usual number of informal meetings. Key legislators and staff worked on legislation, but committee meetings via Zoom or Webex just don’t allow the back-and-forth communications that usually characterize the drafting of legislation. No one is excluded from asking questions in committee meetings, but the conversations are truncated because it is difficult to deal with the logistics. My sense is the lack of connection between legislators in these computer-facilitated meetings means that even more of the real decision-making as to what goes into a bill is left to a smaller set of Members and leadership staff.
As a relatively senior Member of the House, I don’t need a lot of mentoring to do my job, but more junior Members might find it difficult to figure out how to actually impact legislation since they don’t know all of the people. Clearly, lobbyists are having a difficult time. Newer lobbyists may not yet have relationships with legislators, the challenge is how does one nurture a relationship when one has almost no direct contact with policymakers. Unless one already has a relationship, it is hard to develop one via phone calls.
Lobbyists provide a useful function for legislators. They watch and monitor legislation and can serve as an early warning system when some complicated bill is moving quickly. They advocate for their clients, and their advocacy can help legislators sort out what the real impact of proposed legislation might be. Several lobbyists mentioned to me how hard it was to know what was happening. While notices still went out via the internet, often they didn’t get a verbal understanding of scheduling until a formal notice was sent out, making it difficult to research the impact of the proposed legislation and try to garner access to policymakers. This makes lobbyists jobs much harder and makes it more difficult for some legislators to familiarize themselves with the details of the bills.
With the need to limit committee meetings and sessions, the role of the House leadership has expanded. Until the pandemic, Members could easily affect the pace and the substance of the flow of bills to the House floor. That isn’t really true anymore. Social distancing requires that committee meetings be limited and have led to meetings of shorter duration. While House leaders have always possessed the ability to control the flow of business, they now are really controlling everything because of the difficult logistics of holding committee meetings and sessions.
The Budget Process
Until this year, North Carolina has had a fully adopted two-year budget. Sometimes the budget was delayed, but in no one’s memory has the State gone without a two-year budget. Because of Governor Cooper’s veto and the inability of the legislature to override the veto, North Carolina has been operating under a pieced-together one-year budget which included parts of the budget for FY 2018-19 and some mini-budgets passed last year. Normally, the Short Session is the time when adjustments are made to the second-year of the budget reflecting changes in revenue projections or priorities, but this Short Session will likely be one in which the legislature attempts to pass a one-year budget for FY 2020-21.
If this wasn’t a difficult enough task, that budget will be drafted during the pandemic. The pandemic has changed tax filing deadlines, so that income tax revenues for FY 2019-2020 have been shifted into FY 2020-21. While those revenues coming in July rather than April are likely to be similar, the pandemic has shut down businesses, created a sharp increase in the unemployment rate and will clearly affect everything from income tax revenues to sales tax revenues to gas tax revenues. The bottom line is we’re in uncharted territory and, even if Governor Cooper and legislative leaders are able to put aside past differences as to spending priorities, it will be hard to make the cuts necessary to balance the budget.
How much of a hole is there? Well, that number isn’t clear yet, and is likely to change. Estimates range up to $4 Billion, and there is agreement that it is at least $1 Billion. On Friday, legislators and the Governor are expecting the consensus revenue forecast compiled by the Governor’s and the legislature’s staff. Both the Governor and the legislature will be working from that forecast in putting forward their proposed budgets.
As recently as three months ago, the budget writers were expecting another budget surplus and there were monies for potential funding ranging from teacher pay raises to capital projects in a budget for the upcoming fiscal year. Now, the expectation is we will be okay in the fiscal year ending June 30 of this year, but have a multi-billion dollar deficit in the next fiscal year. So rather than looking to put more towards a range of priorities, budget drafters are going to look to make cuts — cuts that could equal a ten to fifteen percent cut of the total budget package.
One example of the budget pressures illustrates the problems budget writers face. While the NC Department of Transportation was expecting budget challenges caused by cost-overruns on projects as reflected in a State Auditor’s report, the pandemic resulted in people traveling less. Taxes charged on gas sales have plummeted, and reacting to the revenue drop has forced the Department to delay a range of road construction and repairs. The Department has started a rolling furlough of its employees that will ultimately furlough every employee for some length of time as it attempts to bring its expenses into line with its revenue projections. Similar problems, although probably not as severe, can be identified in other departments.
One unknown is whether the monies flowing from the federal government to the state can be used to backfill revenue losses. If they can, those monies will make it easier to balance the budget while funding the programs and projects that were expected to receive funding. If they can’t, then very hard decisions will need to be made.
As for the schedule, legislative leaders expect to pass a budget by the end of June. The House and Senate will start their work next week, culminating in a series of budget bills. Senate budget writers have already filed several bills addressing various programs or parts of the budget which are indicative of the approach that House and Senate budget writers will take in the coming weeks. The expectation is the process will move very quickly.
Besides the Budget
Of course, the usual Short Session is about completing work on bills started in the previous year. Usually, it includes working on local legislation or new issues that have arisen between sessions. Not all committees will be meeting during the Short Session, but some, for example, the State and Local Government Committee, will be very active moving what are clearly noncontroversial, local bills.
In that category is HB1154 [Greater Asheville Regional Airport Authority], a bill I introduced to spread out the appointments made by Henderson County, Buncombe County, and the City of Asheville to the airport board. Requested by the airport board, all members of the local legislative delegation — Republicans and Democrats, senators and House members — support the bill.
Several bills vetoed by Governor Cooper included provisions that everyone supports. For example, the Department of Environmental Quality had various technical changes in both last year’s budget and a regulatory reform bill. The Department still needs those changes made, but legislative leaders will need to run some sort of technical corrections bill to pick up provisions that got caught up in the budget fight with Governor Cooper last year.
In summary, legislators expect to conclude the business of the Short Session by the end of June. As in the past, the session is expected to be primarily dominated by the budget. This year presents, however, wholly new challenges; the legislature will not be simply amending a second year budget but instead a budget will have to be crafted to address a myriad of fiscal issues caused by the lack of 2019-20 budget and the pandemic’s impact. There will be less time devoted to other legislation. Noncontroversial bills, including many local bills, will move but once the budget is completed in a piece-meal fashion in late June, the intention is to adjourn and head home.