Wednesday, May 30 marked three weeks since the convening of the North Carolina General Assembly's 2012 Short Session; the same day that House of Representatives gave final approval to budget legislation. In their second session of the biennium, the new majority is proving once again that they intend to move quickly and will likely adjourn the session around the start of the state's next fiscal year on July 1.
House members approved a $20.3 billion state spending plan in a bipartisan 73-46 vote this week, a margin large enough to override a gubernatorial veto if necessary. The same five Democrats who voted to override the veto of the budget bill last year voted with the majority to approve this budget. Based on actual revenue and other data, the short session budget bill aims to adjust the second year of the two-year spending plan passed in 2011. The measure is now in the Senate, who will likely begin official budget proceedings next week. When the Senate passes their budget, which is virtually guaranteed to differ from that of the House, the two bodies must hammer out the differences in a conference committee before it will be sent to the Governor for approval. If budget-adjusting legislation does not pass, the state will operate as the two-year appropriations plan passed last year dictates. Unlike Governor Perdue's budget proposal, the House adjustments do not include a sales tax increase, however, actual revenue collections are about $215 million over the revenue target as projected by state fiscal research.
Health and Human Services
The first item tackled by the legislature this session was filling the $200 million shortage in the current year's Medicaid budget. SB 797 was passed by both chambers and signed by the governor within about a week after their convening, and allows for funds to be appropriated as necessary to fill the gap. The bill additionally includes protective language to ensure this situation does not occur in the 2012-13 budget, mandating that no federal money may be accepted by the state if doing so would cause a financial obligation in the next fiscal year.
Bills have been filed in both chambers that address statutory barriers to the changing mental health care delivery process in North Carolina. As a result of a measure passed in 2011, the state is expanding a program that has proven success in delivering appropriate levels of care to larger numbers of mental health patients who require it. The bills aim to set up a flexible framework for the future Managed Care Organizations to develop workable and inclusive governance models. The legislation is a product of the work of the LME Governance Subcommittee, a temporary legislative/stakeholder group formed to study the issue.
Tax & Finance
Two bills affecting various tax code provisions are on the move this session. In anticipation of comprehensive reform of the tax structure in 2013, various tax credits and exemptions that are set to expire soon were extended for one year only in HB 1025. In HB 142, various tax changes would be implemented. While most parts of the bill are largely technical, one provision sets a cap to the state gas tax at 37.5 cents. There is currently no cap in place.
Companion bills S 824 and H 1003 address operational efficiencies to the process that was set forth in legislation last year to define and clarify the process of mandatory combined reporting of income for multi-state corporations with the Department of Revenue. The measure mandates the Secretary of Revenue utilize rulemaking authority in the combined reporting process and provides an abbreviated time period for their issuance, outside of the normal timetable for rulemaking.
H 951 and S 816, Banking Law Modernization act, seeks several largely technical updates to North Carolina's banking law, which hasn't seen changes since 1931. S 816 has passed the Senate and was heard by the House Banking Committee.
Other comprehensive modernization measures, H 949 and S 806, aim to update North Carolina's mortgage regulations. Among the provisions, these bills would make changes to the process of annual assessments of mortgage bankers, brokers and servicers. This bill is the product of study committee recommendations and stakeholder work based upon loan volume. S 806 has passed the Senate and is to be heard by the House soon.
Property insurance rate making is another issue that was underwent careful scrutiny in an interim study committee. Legislation filed that seeks to encompass the recommendations of the study, H 1053 and S 836, would address several issues including the process of rate modeling for catastrophes, the rate filing process, and powers and flexibility of the Commissioner of Insurance within the rate setting process.
A bill that aligns state regulations of certain air toxin emissions with the existing federal regulations under the U.S. Clean Air Act passed the House and awaits approval from the Senate. HB 952 aims to reform North Carolina's Air Toxics program by reducing this duplication and making other changes so there is clarity and efficiency around compliance.
The extraction of natural gas from formations of shale rock is addressed in two different measures introduced this session. One bill, SB 820, would legalize the extraction process known as hydraulic fracturing or "fracking," while establishing a system of regulations, checks and balances. In another bill, H 1064, the Department of Environment and Natural Resources would be authorized to further study the issue, recommend necessary regulations and establish an oversight element for future energy exploration initiatives.
The articles published in this newsletter are intended only to provide general information on the subjects covered. The contents should not be construed as legal advice or a legal opinion. Readers should consult with legal counsel to obtain specific legal advice based on particular situations.