The clearest signs that the legislative session is almost over are increased activity to reach a budget compromise and a flurry of activity in Senate committees. Those signs were evident on Friday as budget negotiators shuttled back and forth between the House and Senate sides of the Legislative Building and almost every Senate committee met, clearing numerous bills for consideration in the waning days of the legislative session.
Budget Negotiations. House Speaker Tim Moore (R-Cleveland) and Senate President Pro Tem Phil Berger (R-Rockingham) were at the center of budget negotiations last week with the leadership of both chambers debating budget issues into the evening on Friday night. Today, the full Appropriations Chairs from both the House and Senate met to go line-by-line through the budget to make sure that it reflects the various compromises and decisions made last week. Legislative leaders expect adoption of a budget before the end of the week.
Technically, House Bill 1030 [2016 Appropriations Act] is unnecessary; since the legislature passed a two-year budget in 2015, HB97 [2015 Appropriations Act]. As a practical matter, HB1030 is critical, because there are always new problems that need to be addressed and predicting one’s revenues is an art, not a science. HB1030 is a shorter document that the 2015 bill, and in some ways is simply an amendment of the earlier two-year budget.
Since the conference report on HB1030 is not yet public, a description of the specifics of the budget deal will have to wait. However, a description of how two conflicting visions of a budget and tax policy are squared might be interesting. [UPDATE: The conference report for House Bill 1030 was made public after Representative McGrady’s update was posted. It can be found here.]
After the House and the Senate passed different versions of the budget, which included different tax reform proposals, each body appointed “conferees” to negotiate a compromise. While many legislators were appointed to the Conference Committee, the key legislators are the full Appropriations Chairs [Senators Harry Brown (R-Onslow), Brent Jackson (R-Sampson), Kathy Harrington (R-Gaston) and Representatives Nelson Dollar (R-Wake), Linda Johnson (R-Cabarrus), Chuck McGrady (that’s me), and Donny Lambeth (R-Forsyth)]. In addition to the full Appropriations Chairs (the so-called “Big Chairs”), all of the chairs of the various subject-matter Appropriations committees are conferees.
The process involves winnowing the differences between the House and Senate budgets. The subject-matter Appropriations Chairs are given budget targets, and they negotiate among themselves, reporting back to the Big Chairs. If compromises cannot be reached, those issues are kicked up to the Big Chairs to resolve. The Big Chairs may take issue with a compromise proposed by the subject-matter Appropriation Chairs, and any such issue is “flagged” and ends up being discussed and often decided by the Big Chairs. Some issues are clearly only going to be resolved as between the “Corner Offices,” meaning the Speaker and the President Pro Tem.
Some sets of issues — mostly overarching issues like state employee and teacher compensation or the lottery — are left with the Big Chairs, recognizing that ultimately some issues will have to be resolved by the Corner Offices.
While negotiations were going forward on how to spend money, negotiations were also proceeding on tax issues. The State shouldn’t adopt a budget if one doesn’t know what the revenues are likely to be. While changes to the tax laws can be made in a separate bill, this year tax reform changes were incorporated into the budget bill. This meant that a different group of people, the House and Senate Finance Chairs were negotiating the tax package. In the end the tax decisions affect the revenue projections, and those revenue projections relate to how much money is appropriated in the budget.
By late last week, the full Appropriations Chairs and the Finance Chairs had done as much as they could do, and Speaker Moore and President Pro Tem Berger met to resolve some overarching compensation and tax reform issues. Additionally, there were numerous smaller issues that got decided by Moore and Berger — issues involving disputes between commercial and recreational fishermen, policy differences over the cleanup of Jordan Lake, and a myriad of education funding and policy issues.
Once the revenue and compensation issues were decided, staff calculated how much money was still available within the spending cap that had been previously agreed upon. At that point, Speaker Moore and President Pro Tem Berger could go back and fund projects, some of which may have been cut from the chambers respective budgets.
Leadership’s goal is to fund the State’s needs while garnering members’ support for the budget. Some number of projects or programs that didn’t make it into the earlier draft budget get funded if the money is available. What drives people crazy is that some number of projects or programs that weren’t even apparently being considered may also make it into the budget.
Flurry of Activity in Senate Committees
The House went home on Thursday, while a majority of Senate committees met on Friday. Senate committees reported out a large number of bills, and those will appear on the Senate Calendar for today. While many of the bills are local bills and apparently noncontroversial, some of the bills are quite controversial.
Of local interest to western North Carolina are bills to create districts for Asheville City Council seats, Senate Bill 897 [Asheville City Council Districts], and to make elections to the Transylvania Board of Elections partisan, HB1133 [Partisan Election/Transylvania Bd. Of Ed.]. One of my bills dealing with property taxes owed by someone who donates land to a nonprofit that is subject to present use valuation, HB533 [Modify PUV Exception to Disqualification], passed with a new section added to deal with a tax appeal issue.
My expectation was that the substance of HB533 would make into an omnibus tax technical corrections bill before the end of the session, but I never expected to see the bill actually move. HB533 became what is known as a “vehicle” — a way of moving some time-sensitive issue. HB533 probably wouldn’t have come out of the Senate Finance Committee except that it was a convenient vehicle for moving the tax appeal issue.
Another bill of mine, HB3 [Eminent Domain], became [Omnibus Constitutional Amendments]. The original HB3 was a bill to propose an amendment to the North Carolina Constitution to prohibit condemnation of private property except for a public use; require the payment of just compensation for the property taken; require the compensation to be determined by jury trial, if requested by any party; and change the statutory purpose for which property may be taken by eminent domain from “public use or benefit” to “public use.” As it came out of the Senate Committee it became three constitutional amendments.
Included in the Senate Committee Substitute for HB3 were two constitutional amendments proposed by senators: SB817 [Const. Amd.—Max Income Tax Rate of 5.5%] and SB889 [Right to Hunt and Fish]. In other words, what the Senate committee did was take the original House bill that passed early in 2015 dealing with eminent domain and attached two other proposed constitutional amendments.
Clearly, the eminent domain bill has strong support in each body, and there has been little debate over the Right to Hunt and Fish amendment. Putting a maximum income tax rate in the state constitution is clearly controversial. Assuming the new HB3 passes the Senate on Monday night, my guess is that the House will either vote to not concur because of the tax rate amendment or will put the bill in the House Rules Committee to die a quiet death at the end of the session.
Predictions as to when the General Assembly will adjourn range from as early as next weekend — just before the July 4th holiday — to a few weeks later. With the 2016-17 budget likely to clear this week and increasing legislative activity, everyone expects adjournment in July.
A number of likely-to-pass bills still remain to be completed, including potential passage of a farm bill, some resolution to the standoff over cleanup of coal ash basins, and compromises over several regulatory reform bills. Most speculation revolves around whether the legislature will take up any changes to HB2 [Public Facilities Privacy & Security Act], the controversial bill that passed during a special session in March caused by Charlotte’s passage of an ordinance dealing with, among other things, the use of bathrooms by transgender persons.