Weekly Legislative Update
Overview
Lawmakers returned to Raleigh Monday to convene a joint session and receive the first State of the State address of Governor Bev Perdue (D-Craven). The Joint Session began a busy week of committee meetings and action on legislation. Many of these meetings and the legislation is impacted by the economic news and the state budget picture that continue to dominate the landscape of State politics. The Senate has begun working on a plan to save the State Health Plan from insolvency. Members of the General Assembly learned that they will be forced to redistrict the House District Plan under a ruling by the US Supreme Court issued this week.
Governor Perdue's first State of the State address was received with positive reviews in the press and, for the most part, a similar reception by legislators. The Governor opened her address with an expression of gratitude for the nation's service men and women and military families. As expected, most of the Governor's address focused on the State's stalled economy and souring job market. She told lawmakers that her budget would include cuts to programs that she does not want to make, but that tough decisions were required as part of "our job and our responsibility." Governor Perdue identified education as "the engine that propels North Carolina's future" and promised that education "cannot-and will not-be sacrificed." With that she told lawmakers that together they would increase per pupil spending in public schools. Her remarks closed with a reference to the words of Depression era Governor Max Gardner in whom Governor Perdue finds guidance for the present economic challenges, and a renewal of her pledge to "move North Carolina forward even in these challenging times." The Governor's bleak assessment of North Carolina's economic state was underscored by the announcement later in the week that the State unemployment rate reached 9.7% in January.
Editorial pages and political analysts praised Governor Perdue's candid remarks on budget cuts. While Republican lawmakers' response to the address expressed a desire for more specifics on budget cuts, Perdue has promised to deliver those details on Tuesday in the publication of her proposed budget. By far the most surprising line of the speech, and the line that has elicited the most reaction from all corners, was Governor Perdue's pledge to raise per pupil spending in public schools at a time when the Administration is working to fill a projected $3.6 billion budget deficit next year. The biggest applause line came when Perdue vowed to aggressively pursue Federal Stimulus opportunities to help repair the State Budget. Perdue's two sons and her husband, North Carolina's first first-Gentleman looked on from the gallery of the House Chamber as did many leaders of State Government.
By the end of the week, Governor Perdue had offered a more detailed preview of her budget recommendations. At a conference in Asheville focusing on economic development, Governor Perdue said she wants lawmakers to increase the size of the Earned Income Tax Credit from 5% to 6.5% of the federal credit and to exempt the first $25,000 of profit for businesses earning less than $100,000. Also, the Governor said she wants to invest $17 million in worker training, $8 million for encouraging green businesses and expanding the states defense and aerospace industry, $7 million in aid for local government economic development, and $2 million for the One North Carolina Small Business Fund. These items are anticipated to be a part of the Governor's recommended budget when it is released on Tuesday.
In meetings this week, lawmakers continued a review of the State Budget. Review of reports and the structure of State Government is the focus of the various Appropriations Subcommittee meetings. The budget process will begin in earnest when the Governor's budget arrives next week. A joint meeting of the House and Senate Appropriations Committees is scheduled to review the Governor's budget proposal on Tuesday afternoon. Governor Perdue dispatched her chief budget analysts to press conferences this week to affirm her position that $3.6 billion will need to be cut from current spending in order to balance the State budget that runs from July 1, 2009 to June 30, 2010. Still unknown is Governor Perdue's stance on new taxes or elimination of tax credits that reduce revenue available for funding programs, but that too should be revealed upon release of the proposed budget. Also this week, Governor Perdue marked $787 million of the Rainy Day Fund reserve account and another $88 million from the lottery fund for different spending proposals. Among the expenses to be paid from the Rainy Day Fund is a one time appropriation of $250 million to fund a deficit in the State Health Plan.
The Senate began work on legislation (Senate Bill 287) that will make an identical appropriation and other longer term changes to benefits and premiums that are hoped to return the State Health Plan to solvency. Senate Bill 287 was approved by two Senate Committees this week and then, in a rare occurrence, reviewed by the Committee of the Whole at a Thursday meeting. The Committee of the Whole, made up of all the members of the Senate, allows the Senate to operate more informally, but is rarely used. This meeting lasted more than the scheduled two hours and brought numerous questions from members about the legislation to fix the State Health Plan. Opposition to the bill comes from Pharmacists who object to provisions that encourage mail ordering of prescription drugs and from governmental employees and retirees who object to increased costs that would occur under the plan. A vote on Senate Bill 287 is expected at the Senate session on Monday night.
A ruling handed down by the US Supreme Court will force the General Assembly to enact a revised district plan for the State House of Representatives. In a 5-4 plurality decision, the court ruled that a minority voter population in House District 18 was not protected by the Voting Rights Act because the population was less than 50% of total district voting age population. The General Assembly had drawn the district under the assumption that because the minority voter group in District 18 consistently elected its candidate of choice, it was due protection under Section 2 of the Voting Rights Act. Monday's ruling affirmed a decision issued by the State Supreme Court in 2007 which required redrawing District 18. That decision was stayed until after the 2008 elections. Now, the General Assembly must redraw the House District plan to conform to State Constitutional requirements that Districts not divide Counties. Those requirements, known as the Whole County Provision, would be superseded if the drawing of a district was required by the Voting Rights Act. The newly redrawn districts will be used in 2010 and then the entire State Senate, House and Congressional District plans must be redrawn in 2011 when the results of the 2010 census are returned.
In other action this week, the House gave final approval to a resolution that will confirm Brian Beatty and Susan Rabon as Commissioners of the Utilities Commission (Senate Resolution 90), and to legislation that will allow a continuing permit for crossbow manufacturers and distributors (Senate Bill 5). Other legislation approved by the House this week would make changes to the Uniform Trust Code and enact the Uniform Prudent Management of Institutional Funds Act (Senate Bill 127). The changes in Senate Bill 127 will allow large institutions to access funds held in investments that are currently inaccessible because the funds are below the value threshold prescribed by law or otherwise dedicated to now-defunct purposes. The House version of Senate Bill 127 now goes to the Senate for a vote on concurrence in the House changes.
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.